Fertitta owned Station Casinos file for Chapter 11
by Zak Woods on Jul 28, 2009 6:04 PM EDT
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Things are looking bad for the Fertitta's day job,
Station Casinos filed Chapter 11 in U.S. Bankruptcy Court in Reno today to restructure $5.7 billion in debt, most of which helped finance the company's buyout nearly 21 months ago.
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The filing covers the nearly $900 million in bank debt, $2.3 billion in bonds and $2.475 billion in a commercial mortgage-backed securities debt at the property level, Friel said.
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In November 2007, Station Casinos was taken private in a $5.4 billion buyout by the Fertitta family, the company's founders, and real estate investment firm Colony Capital.
Colony Capital owns 75 percent of the company and the Fertittas hold the remaining 25 percent
According to the Las Vegas Review Journal's report the decision to take Station Casino's private is the principle reason why the company is now filing for bankruptcy.
How does this affect the MMA community?
The Fertitta brothers, Frank and Lorenzo, are the majority owners of Zuffa which is the parent company of the UFC and the WEC.
In February 2008 Lorenzo Fertitta resigned his position with Station Casinos to take a more prominent role within Zuffa. This move was billed as a major announcement by the UFC though there was speculation that the once highly profitable Station Casinos were falling on hard times. The revelation that over half of the debt that caused the Chapter 11 filing came from mortgage-backed securities --the same securities that sank Bear Stearns and Lehman Brothers and were beginning to unravel in early 2008-- indicates that the Station Casinos were bleeding back when Lorenzo moved to the UFC.
It also tells us that Station Casinos and the Fertitta's relied heavily upon the housing bubble --which was particularly powerful in Vegas-- due to their reliance of mortgage-back securities. These securities were created from the sub-prime loan boom and are now commonly referred to as toxic assets.
To put the financial dealings of Station Casinos in perspective, Dana White recently claimed that the UFC was worth $1.2 billion. That would only cover a fifth of the current debt that saddles Station Casinos.
For the sake of comparison, the Fertittas own 25% of Station Casinos and 25% of the company's current debt is $1.475 billion. Again that is more than the value of the UFC as described by White.
Disclaimer: Zuffa is a privately held company and does not have to make its financial records public.
[Update: Note by Zak Woods, 07/28/09 6:13 PM EDT ]
Station Casinos filing for Chapter 11 had been discussed for some time.
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Station Casinos and the executives excessive salaries & options
I remember vividly the days prior to Palace Stations’ IPO (1994). I also watched as the Fertittas — assisted by Christenson and Warner — grew the company to its current size, and debt. If you go back over say, the last ten years prior to Colony’s private buyout, you will see where Frank, Glenn, Lorenzo, Bill, & Co. reaped hundreds upon hundreds of millions of dollars via salry increases, gifting of stock, and awards of very, very favorable stock option exercise rates/terms. The whole thing with their taking it private has been to accomplish a few things yet I believe, only in their favor. By having an immediate “stocking horse” shadowing the scene, it allowed for a better negotiating stance if and when — as earlier threatened — the company filed for BK.
Now with the announcement of today’s filing, Colony & the various Fertitta relatives will shed possibly billions in their debt weight from the various vendors, bondholders, banks, etc. and will then proceed to a whole new IPO. As a past stockholder in STN, I had questioned the company’s practice of the various awards and the salaries only to see these guys make it on to the “Highest Paid People in Nevada (if not the world)” year after year. Oh well. . .
by neocon on Jul 28, 2009 7:20 PM EDT reply actions 1 recs
Excellent comment
Unfortunately I feel that this is the state of many businesses in the U.S. today. Not the creation of value, products or a successful company but the creation of wealth for a few individuals.
I fear that the same practice exists with the UFC.
Correct me if I am wrong but Station Casinos does not have a union?
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