Station Casinos' 6.625% Senior Subordinated Notes Lowered To 'D'

March 20, 2009

NEW YORK, March 20, 2009–Standard & Poor’s Ratings Services said today that it lowered its issue-level rating on Las Vegas-based Station Casinos Inc.’s 6.625% senior subordinated notes to ‘D’ from ‘C’. The rating action reflects the missed March 15, 2009 interest payment on the notes. A payment default has not occurred relative to the legal provisions of the notes, because there is a 30-day grace period to make the payment. However, we consider a default to have occurred, even if a grace period exists, when the nonpayment is a function of the borrower being under financial stress–unless we are confident that the company will make the payment in full during the grace period.

This rating action follows our Feb. 4, 2009 research report in which we lowered our corporate credit rating on Station and our issue-level rating on its 6.5% senior subordinated notes to ‘D’ following the missed Feb. 1, 2009 interest payment on the 6.5% senior subordinated notes. At that time, Station also announced a solicitation for votes from eligible institutional holders of its senior unsecured and senior subordinated notes for a restructuring plan under Chapter 11 of the U.S. Bankruptcy Code. We also subsequently lowered our rating on Station’s 7.75% senior notes and 6.875% senior subordinated notes to ‘D’, following missed Feb. 15 and March 1 interest payments on those notes, respectively.

In connection with the missed interest payment on the 6.875% senior subordinated notes on March 1, 2009, Station also announced that it has entered into forbearance agreements with holders of its five notes issues and its bank group. Under the terms of the forbearance agreement, noteholders have agreed to forbear from exercising remedies with respect to certain events of default, including the company’s failure to pay interest due, until the earlier of April 15, 2009 or the date on which the forbearance agreement terminates pursuant to the terms of the agreement. Under the terms of the credit facility forbearance agreement, lenders have agreed to grant a limited waiver with respect to the Dec. 31, 2008 covenant violation and have agreed to forbear from exercising their default-related rights against the company through April 15, 2009 and against certain subsidiaries of the company that guaranteed the credit agreement through Oct. 10, 2009.

We expect Station to miss the April 1 interest payment on the 6% senior notes. If and as this interest payment is not made, we will also lower the issue-level rating on these notes to ‘D’. Issue-level ratings on these notes and on the company’s credit facility currently remain on CreditWatch, where we placed them with negative implications on Dec. 15, 2008.

Station Casinos' Notes Lowered, Enters Forbearance Agreements

March 3, 2009

NEW YORK, March 3, 2009–Standard & Poor’s Ratings Services said today that it lowered its issue-level rating on Las Vegas, Nev.-based Station Casinos Inc.’s 6.875% senior subordinated notes to ‘D’ from ‘C’. The rating action reflects the missed March 1, 2009 interest payment on the notes. A payment default has not occurred relative to the legal provisions of the notes, because there is a 30-day grace period to make the payment. However, we consider a default to have occurred, even if a grace period exists, when the nonpayment is a function of the borrower being under financial stress — unless we are confident that the company will make the payment in full during the grace period.

This rating action follows our Feb. 4, 2009 research report in which we lowered our corporate credit rating on Station and our issue-level rating on Station’s 6.5% senior subordinated notes to ‘D’ following the missed Feb. 1, 2009 interest payment on the 6.5% senior subordinated notes. At that time, Station also announced a solicitation for votes from eligible institutional holders of its senior unsecured and senior subordinated notes for a restructuring plan under Chapter 11 of the U.S. Bankruptcy Code. We also subsequently lowered our rating on Station’s 7.75% senior notes to ‘D’, following a missed Feb. 15 interest payment on those notes.

In connection with today’s announcement that Station has missed the interest payment on the 6.875% senior subordinated notes, the company also announced that it has entered into forbearance agreements with holders of its five notes issues and its bank group. Under the terms of the notes forbearance agreement, noteholders have agreed to forbear from exercising remedies, with respect to certain events of default. These include the company’s failure to pay interest due, until the earlier of April 15, 2009 or the date on which the forbearance agreement terminates pursuant to the terms of the agreement. Under the terms of the credit facility forbearance agreement, lenders have agreed to grant a limited waiver with respect to the Dec. 31, 2008 covenant violation and have agreed to forbear from exercising their default-related rights against the company through April 15, 2009 and against certain subsidiaries of the company that guaranteed the credit agreement through Oct. 10, 2009.

We expect Station to miss the upcoming interest payment on the 6.625% senior subordinated notes (due March 15) and the 6% senior notes (due April 1). If and as these interest payments are not made, we will also lower the issue-level rating on the notes to ‘D’. Issue-level ratings on these two notes and on the company’s credit facility remain on CreditWatch, where we placed them with negative implications on Dec. 15, 2008.

Ratings List

Station Casinos Inc.

Corp. credit rating D

Rating Lowered

To: From:

6.875% sr subordinated notes D/NM– C/Watch Neg/–

Station Casinos Inc. 7.75% Senior Notes Lowered To 'D'

February 17, 2009

NEW YORK, Feb. 17, 2009–Standard & Poor’s Ratings Services today lowered its issue-level rating on Las Vegas, Nev.-based Station Casinos Inc.’s 7.75% senior notes to ‘D’ from ‘CC’. The rating action reflects the missed Feb. 15, 2009 interest payment on the notes. A payment default has not occurred relative to the legal provisions of the notes, since there is a 30-day grace period to make the payment. However, we consider a default to have occurred, even if a grace period exists, when the nonpayment is a function of the borrower being under financial stress–unless we are confident that the payment will be made in full during the grace period.

This rating action follows our Feb. 4, 2009 research report in which we lowered our corporate credit rating on Station and our issue-level rating on Station’s 6.5% senior subordinated notes to ‘D’. The company announced on Feb. 3, 2009, that it did not make the Feb. 1, 2009 interest payment on the 6.5% senior subordinated notes. At that time, Station also announced a solicitation for votes from eligible institutional holders of its senior unsecured and senior subordinated notes for a restructuring plan under Chapter 11 of the U.S. Bankruptcy Code.

In addition to the missed payments on the 6.5% senior subordinated notes and the 7.75% senior notes, we expect Station to miss the upcoming interest payment on the 6.875% senior subordinated notes (due March 1). If and as this interest payment is not made, the issue-level rating on the notes will also be lowered to ‘D’.

All other issue-level ratings remain on CreditWatch, where they were placed with negative implications Nov. 26, 2008.

Station Casinos Seeks Restructuring

February 5, 2009

The Las Vegas Sun reports that the Fetitta’s and Colony Capital, owners of Station Casinos, have sought a reworking of their debt, which includes filing for bankruptcy, in order to better weather the economic storm tha thas affected the Las Vegas casino industry:

Under the plan, known as a prepackaged bankruptcy, Station’s parent company would file for Chapter 11 bankruptcy protection in court under a plan prepared in cooperation with lenders. Bondholders would vote on the plan before the bankruptcy filing, expediting the process.

The company could emerge from bankruptcy by summer.

The plan, which has received the support of senior lenders, would allow the company to continue operating as normal by requiring Station executives Frank and Lorenzo Fertitta and private equity partner Colony Capital to put up $244 million in cash.

The plan being hatched in coordination with the senior lenders to Station bodes well for the plan being accepted. Staion has been hit hard bu the Vegas downturn harde than others due to its’ core business in the locals market. Though these are touch econimice times for Station, the article does note that the company hasn’t sold any properties or shelved opportunities for new casinos already in the planning stages.

Bloomberg News: Station Casinos Near Default

January 30, 2009

As Zuffa has seen a uptick in business as the economy worsens, the performance of the Fertitta family business, Station Casinos, has be heading in a diametrically opposite direction. Bloomberg News today reports that the company may be teetering on the edge of bankruptcy:

Station Casinos Inc., whose Las Vegas-area properties include Red Rock Casino and the two-month old Aliante Station, may be on the brink of default, making its private-equity owners a casualty of the largest recorded decline in gambling revenue.

“From a liquidity perspective, they are on the brink of bankruptcy,” New York-based Holloway said in an interview. “It depends on their ability to negotiate with lenders and willingness to amend the debt.”

Station has a bond payment due Feb. 1, according to Chris Snow, an analyst at CreditSights Inc. in New York. The payment is for $450 million of 6.5 percent notes due in 2014, Snow said. The securities now trade at 2.5 cents on the dollar, down from 70 cents in February 2008…

Zarnett recommended investors avoid Station Casino’s debt due to “deteriorating fundamentals, upside down balance sheets, lack of liquidity, high leverage and potential breach of covenants.”

Time and a “once in a century” economic downturn have contributed to present a scenario that would have been unfathomable of 5 years ago: a Fertitta portfolio where the UFC is business that is the cash cow, throwing off huge prfits and Station Casinos is debt riddled entity that is on shaky financial legs. The roles were reversed not that long ago in a Pre-TUF environment that saw the UFC continue on only because of the largess that a booming Station Casinos provided. One may wonder at what point a suite in the Zuffa offices is made ready for Frank III.

Station Casinos Draws $239M of Revolving Credit

December 23, 2008

Yesterday Station Casinos announced that it was drawing down $239 million of its revolving credit line. According to a filing with the SEC,  the casino asked for the remaining $257 million available under its revolving credit facility and as of last Friday $239 million of that had been funded. The money will be used for general corporate purposes.

Standard and Poor’s reported that Station’s bonds were “fairly active” relative to the rest of the high-yield market following the announcement. The company’s 7.75% notes due in 2016 were trading as low as 19.25 yesterday morning, down over three points from last week. The casino’s 6% notes due in 2012 were also down over three points from Friday at 20 according to the report.

The news come on the heels of the failure of the company’s proposed distressed-debt exchange last week. The deal failed to garner the necessary support of 60% of bondholders despite two extensions prior to cancellation. The deal offered bondholders the opportunity to exchange their bonds for new 10% secured term loans due in 2016 in order to reduce overall debt.

S&P Cuts Station Casinos Secured Debt Rating

December 15, 2008

NEW YORK, Dec. 15, 2008–Standard & Poor’s Ratings Services said today that its ‘CC’ corporate credit rating on Las Vegas-based Station Casinos Inc. remains on CreditWatch with negative implications, where it was placed Nov. 26, 2008. The ‘C’ rating on the company’s senior unsecured and subordinated debt issues also remains on CreditWatch with negative implications.

In addition, Standard & Poor’s lowered its issue-level rating on Station’s senior secured debt to ‘CCC’ from ‘B-‘, and revised the CreditWatch implications on this rating to negative from developing.

These rating actions follow today’s announcement by the company that certain of the conditions in its previously announced private exchange offer will not be satisfied, and that it is terminating the exchange offer. The lowering of the secured debt rating and revision of the CreditWatch implications reflect the termination of the exchange offer. We previously indicated that our preliminary expectation, in the event the exchange succeeded, was for a corporate credit rating of ‘B-‘. The current ‘CCC’ issue rating on the senior secured debt is now two notches higher than the ‘CC’ corporate credit rating, reflecting our notching criteria for a ‘1’ recovery rating.

“The continued CreditWatch listing reflects our concern that, absent completion of the exchange offer or an amendment to the terms of its senior secured credit facility, Station will violate its financial covenants in the current quarter,” said Standard & Poor’s credit analyst Ben Bubeck. “As we have previously stated, we are skeptical that any amendment to the credit facility that does not include a significant equity infusion will allow Station to meet debt service requirements over the intermediate term, given its extremely weak credit measures, including consolidated EBITDA interest coverage of just 1.2x as of Sept. 30, 2008. We will continue to monitor management’s efforts to avoid breaching its financial covenants in the near term.”

More Trouble for Station Casinos

December 4, 2008

Reuters reports that holders of Station Casinos’ bonds have rejected a proposed debt restructuring:

Station Casinos Inc, which is fending off bankruptcy, said on Wednesday it has a received a letter from a lawyer representing its bondholders saying they view terms in a proposed debt exchange as inadequate.

The statement leaves the casino operator in a precarious position and could result in the company tripping terms in its bank loans, which could lead the company to file for bankruptcy protection, said Barbara Cappaert, analyst at KDP Investment Advisors.

The news comes on the heels of the company’s announcement earlier this week that it was suspending its 401(k) matching contribution. That move has the potential to inflame what is already a tense labor environment for the company thanks to its staunchly open shop policy.

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