This time, the house is down.
Las Vegas-based Station Casino Inc. has been bleeding cash, reporting losses of over $3 billion at the end of 2008. What’s to blame for the absence of those happy "ka-ching!" sounds? Largely the recession, which has people keeping their money in their wallets instead of at the Blackjack tables.
Bankruptcy may be the only solution for Station Casino. The company has rejected a $950 million offer made by Boyd Gaming Corp. to buy most of its assets, citing concerns about sharing confidential information with a competitor if the deal ultimately fell through. Instead, Station has prepared a bankruptcy plan in anticipation of filing its case, but needs its bondholders to sign off. The plan being considered would force bondholders to reduce their $2.3 billion stake in the company by half – or even less. Station’s owners, the Fertitta family and Colony Capital, would then pump $244 million into the company in order to rehabilitate it.
One of the bondholders, S. Blake Murchison, sued Station in order to prevent it from filing for bankruptcy. In explanation of his position, Murchison quoted this line from Leo Tolstoy: "A gentleman is a man who will pay his gambling debts even when he knows he has been cheated." Murchison recently dropped his suit, which helps clear the path to Station’s bankruptcy filing.
Station may not be the only casino company to throw in the chips. Harrah’s, the world’s largest casino resort company, may be headed toward bankruptcy as well. Harrah’s, which owns numerous properties on and near the Las Vegas Strip, such as Caesars Palace, Harrah’s Las Vegas and the Imperial Palace, has been entering into debt deals in order to stave off a bankruptcy filing. The good news, according to analysts, is that Harrah’s may have secured for itself enough cash to get through 2010. The bad news is … what happens in 2011?