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.