After six hours of arguments, a federal bankruptcy judge advised Station Casinos and unsecured creditors to hold negotiations over a $2.3 billion debt, rather than face legal action.
U.S. Bankruptcy Judge Greg Zive withheld a ruling on the petition by the unsecured creditors to be allowed to sue over the arrangement of the 2007 leveraged-buyout deal that took the casino company private.
Susheel Kirpalani, attorney for the creditors, told the judge the creditors “were left holding the bag” while “insiders and fat cats” got big payouts in the $8.9 billion buyout by Colony Capital and the Fertitta family.
“The unsecured creditors were harmed by the transaction,” Kirpalani argued. He called it a fraudulent transfer.
But Thomas Kreller, attorney for Station, said a suit would result in “acrimonious litigation” and would disrupt the chances of coming up with a plan for the company's reorganization.
He said denial of the unsecured creditors' right to sue wouldn't extinguish the money owed. But permitting a suit, Kreller said, would result in “significant and irreparable harm” to Station. [...]
Zive said he didn't see any evidence of fraud in the buyout by Colony and the Fertitta family in taking the company private.
Zive advised Station Casinos to allow the unsecured creditors to be a “meaningful participant” in the talks toward reorganization. He said he believed there would be “unintended consequences” if he permitted a suit go forward at this time.
“I find people negotiate when people have a little bit of risk,” in advising the two sides to talk, Zive said. “The creditors deserve to be heard.”
If there are no negotiations, Zive said “I’m willing to rule. It may not be in the best business interest but it will be on the law.”
So reading the tea leaves, it seems the judge thinks the creditors are making some sort of legitimate claim, but they're overplaying their hand and Station isn't helping by not even wanting to listen to them. And who knows, maybe a judge ordered "mediation" can do the trick? Nah, they're all still bickering and more law suits are being threatened every day.
So the creditors won't be getting their new law suit, but it looks like they'll be getting something out of Station soon... And Station remains in a precarious situation as they teeter on the edge of fading out of existence. I'm sure Boyd Gaming is loving every minute of this...