So Boyd reported earnings this morning. They went from a $0.16 per share, or $13.8 million total, loss in Q1 2009 to a $0.10 per share, or $8.4 million total, profit. So how did they do it? Apparently they've been cutting costs rather aggressively, as net revenue actually fell 8.4 percent to $398.4 million from $434.8 million in Q1 2009.
Still, Boyd stated in its report that there's good reason to be more bullish on Las Vegas these days.
Keith Smith, President and Chief Executive Officer of Boyd Gaming, commented on the quarter: "We continue to be encouraged by improving trends in our business, which clearly reflect the signs of an emerging recovery. Our Las Vegas Locals market reported the best year-over-year comparison in nearly two years, and business levels are returning to normal seasonal patterns in this region. Given the positive developments in our business, combined with continued improvement in the national economy, we expect to generate year-over-year growth during the second half of 2010."
Looking at the internals, it seems like the locals' casinos are starting to recover their footing. Boyd's locals' casinos' Q1 2010 EBITDA was off only 10.8% from Q1 2009, compared to Boyd's Downtown casinos' EBITDA dropping 37.3%. No wonder why Boyd isn't pursuing any more Downtown casinos, but is still aggressively going after Station Casinos.
During Tuesday’s conference call, Smith said Boyd is still aggressively pursuing the acquisition of Station Casinos’ assets.
In December, Boyd made an offer to purchase Station Casinos’ assets in an effort to expand its locals market. The offer was $2.45 billion for the company’s 18 casinos and casino-hotels in Southern Nevada.
“We welcome the opportunity to compete for Station [Casinos] assets so long as the process is competitive, open and fair and as long as the assets have not been devalued to a point where it no longer makes financial sense,” Smith said.
So the picture is becoming clearer now. Boyd seems to have found the "magic formula" of expense cuts and travel/gaming promotion to return its locals' casinos to profitability (thereby taking the entire company back to black), so it thinks it can make money off Station's casinos. But wait, can they negotiate a deal with the Greenspuns on GVR and Aliante? And can they run these and the other "OpCo" properties without Station's Boarding Pass (players' club program) feeding locals and non-Strip travelers into the casinos? Apparently so, or so Boyd execs think.
In court papers filed Monday, attorneys for Station charged that Boyd has been meddling in the case -- claiming to be a creditor but actually acting as a potential buyer for Station. Station specifically objected to Boyd's insistence that its representative attend depositions in advance of the key reorganization hearing set to begin May 4.
"Boyd had sought to act as the stalking horse bidder in the auction ... but was not successful in negotiating for that position," Station's filing said. "As a result, Boyd’s true status is that of a disappointed bidder for the stalking horse position and a potential competing bidder in the ultimate auction.
"Equally important, Boyd is the debtors’ primary competitor, which means that regardless of the outcome of the auction process, Boyd has every incentive to try to disrupt the debtors’ efforts to preserve and maintain their business operations in a manner consistent with the debtors’ place at the top of the locals gaming market. Thus, Boyd’s posturing has nothing to do with its holdings of insignificant amounts of out-of-the-money bonds and everything to do with Boyd’s effort to try to gain access to debtor’s confidential documents and to attend the depositions in order to disrupt the bankruptcy process and the debtors’ business and obtain sensitive competitive information that it would then use to the detriment of the debtors’ estates.
"Boyd clearly views this as a 'free shot' to harm Station Casinos and gain a competitive advantage; such an agenda is not an appropriate use of creditor standing in these cases and should not be permitted," the Station attorneys charged, adding Boyd has failed to turn over documents related to the case sought by Station and Boyd violated a non-disclosure agreement by working directly with OpCo lenders on competing restructuring proposals.
"From the outset of these proceedings, Boyd has sought to delay, hinder, and obstruct the debtors’ reorganization, obtain access to Station Casinos’ valuable trade secrets, and harass Station Casinos' management. Simply put, Boyd has acted strategically to hurt Station Casino’s reorganization in order to further its own competitive interests. And, if at all possible, Boyd would like to poison the well for other potential bidders for OpCo, so that Boyd can obtain the OpCo assets at fire-sale prices," Station charged in its filing.
And not to be outmatched by Boyd...
But attorneys for Boyd, in denying allegations the company breached the non-disclosure agreement, said: "Boyd Gaming is a party whose involvement in these Chapter 11 cases as both a creditor and bidder already has brought substantial benefit to the debtors' estates, including by increasing the stalking horse bid."
Boyd attorneys also complained that Station attorneys have been making "vastly overbroad" discovery requests for Boyd documents.
"The majority of the debtors' document requests are directed to Boyd Gaming's development of its previous proposals to purchase the debtors' assets," Boyd argued. "Indeed, the debtors even have requested Boyd Gaming's competitive plans on competing with PropCo in the future.
"These topics -- what Boyd Gaming was willing to pay for the debtors' assets in the past, how it arrived at that decision and how Boyd Gaming will compete with PropCo in the future -- bear no relevance whatsoever" to current issues in the case -- amendments to the PropCo master lease between Station and lenders, Station's request that its exclusive period to file reorganizaztion plans be extended and the OpCo bidding procedures, Boyd's filing said.
"Rather, such demands only are designed in an attempt to gain insight into the amount that Boyd Gaming may be willing to bid in the future for the debtors' assets in an auction process in which Boyd Gaming will be bidding against the debtors' insiders," Boyd attorneys said.
Bondholders and other unsecured creditors, independent bank lenders and competitor Boyd Gaming Corp. have been attacking the Station plan as favoring the insiders and are likely to continue doing so during bankruptcy court hearings in Reno May 4 and 5. Billions of dollars are at stake in the case as the Fertitta/Colony proposals value the company at about $2.572 billion, while its debts and liabilities were last reported at $6.6 billion.
In a filing Monday, the bondholders asked Judge Gregg Zive to allow competing plans of reorganization to be filed so that creditors can recover more money than what is proposed by the Fertittas, Colony Capital and key lenders Deutsche Bank and JPMorgan Chase Bank.
"The debtors have been given several chances to put forth a good faith plan that benefits all creditors to whom they owe a fiduciary duty. The debtors have not used those opportunities to make progress through substantive negotiations with the vast majority of Station Casinos' creditors. Rather, they have offered sham auctions, one sided 'compromises' and conclusory, opaque rationales for their proposed actions," the bondholders' attorneys argued.
For instance, they charged: "Station Casinos has agreed to give the Fertitta brothers the opportunity to buy all remaining Station Casinos assets for a set price that all third-party bidders are required to top despite the fact that third-party bidders cannot buy the assets that are being stripped away from Station Casinos and handed to reorganized PropCo."
The controversy is swirling around Station's proposal to split up the 5 "PropCo" properties (Palace, Boulder, Sunset, Red Rock, Wild Wild West/Viva, and the Las Vegas Blvd./Cactus Ave. land) from the "OpCo" properties (everything else). PropCo won't be auctioned off while OpCo will... And a consortium of the Fertittas, Colony Capital, and JP Morgan Chase would be allowed to be the "stalking horse bid" in OpCo. And many of the technological tools needed to run OpCo would actually be included in the PropCo holdings. So when considering this, it becomes easier to see why the bondholders and Boyd are upset over Stattion's proposed plan to emerge out of bankruptcy.
It will be interesting to see what the courts finally think about this. Will Station be allowed to get away with it? Or will Boyd end up being in for a really sweet deal?
We know the Fertittas now want to keep everything together in Station world. We also know that the folks at Boyd are licking their chops over Station's assets. And in the end, it looks like we will ultimately still be dealing with a near duopoly on the Vegas locals' casino market. So the more things change with Station, the more they stay the same with locals' casinos?
Yep, you heard me right... MGM Mirage finally got some good news for CityCenter. Conde Nast Traveler has put both Aria AND Mandarin Oriental in its "2010 Hot List"! Apparently the rooms, the art, the restaurants, and the green touches all make Aria a winner in its book (even if Vegas Tripping and Rate Vegas' TWHT weren't as impressed initially). And since Conde Nast Traveler is quite revered as an authority on luxury travel, perhaps it can help encourage more of those high-end travelers needed to come and help CityCenter turn a profit?
Meanwhile in Harrah's territory, they may be considering (AGAIN!) selling The Rio. But unlike past rumors, which were just glorified gossip, this time it's getting press in Bloomberg Businessweek.
Harrah’s Entertainment Inc., the casino company owned by Apollo Management LP and TPG Inc., is seeking bids for the Rio All-Suite Hotel & Casino in Las Vegas, people with knowledge of the situation said.
Starwood Capital Group LLC and Colony Capital LLC are among the companies that are weighing bids for the resort, said the people, who declined to be identified because the talks are private. Some bids value the Rio at about $500 million, two of the people said.
Harrah’s, the world’s biggest casino company, is exploring a sale of the off-Strip property two months after buying Planet Hollywood Resort & Casino. Las Vegas is coming out of a two-year slump that took casino operators to the brink of bankruptcy. Chief Executive Officer Gary Loveman cut Harrah’s debt by $4.2 billion in 2009 by offering creditors new bonds at a discount. He extended maturities on another $5.5 billion this year.
Dave McKee has more on this, including his thoughts on who might be the early favorite to snatch The Rio. He thinks Colony Capital (which currently owns The Las Vegas Hilton, as well as a chunk of the possibly-soon-to-emerge-from-bankruptcy Station Casinos) is the frontrunner, followed closely behind by Starwood Capital Group (which currently owns Sheraton, Westin, St. Regis, and a number of other hotel brands). However someone in the comments there mentioned the constant rumor that Penn National Gaming (which came close to buying the bankrupt Fontainebleau, which ended up in Carl Icahn's hands) may get it, which is always a possibility considering how badly it wants to enter the Las Vegas market.
So will The Rio be banished from Planet Harrah's? We don't really know yet, since the company isn't saying anything... Yet. But since Harrah's has already tried multiple times to sell The Rio, I wouldn't be surprised if they finally let it go this year.
And finally, speaking of Station Casinos, its long, hot mess of a bankruptcy isn't over quite yet... Boyd Gaming and the unsecured creditors are challenging the reorganization plan! They specifically object to the proposed PropCo/OpCo plan to let Station keep Red Rock, Sunset, Palace, and Boulder along with the proposed "Viva" site and the Las Vegas Blvd/Cactus Ave. plot of land while putting all the other assets (or OpCo) into "auction". Boyd and the creditors are claiming that the "auction" process and PropCo/OpCo divide put Station and Colony at an unfair advantage over everyone else (including Boyd, which badly wants to buy as much of Station as the Nevada Gaming Commission will allow).
Oh, and a group of independent lenders is also objecting to Station's plan.
"By excluding OpCo assets of significant value, as well as the PropCo assets, from the proposed Station Casinos sale, the debtors are not allowing their assets to be shopped as their fiduciary duty requires," Boyd charged in court papers.
Boyd also noted that its offers to purchase Station assets in February and December 2009 were not accepted. The last offer for the entire company was for $2.45 billion.
"We now know that the debtors were only interested in pursuing an insider transaction at the expense of their creditors' interests in breach of the board's fiduciary obligations," Boyd's filing said. "The court should not sanction the debtors' ongoing blatant disregard for the creditors' interests by approving these one-sided bidding procedures."
Similar objections were filed Wednesday by the case's Official Committee of Unsecured Creditors, representing bondholders and others owed some $2.5 billion. The unsecured creditors charged that the Fertittas and Colony Capital have arranged to acquire a 50 percent interest in the PropCo properties at a 15 percent discount while arranging a lucrative 25-year management deal for those properties.
"These series of transactions are structured, using New PropCo and Fertitta Gaming, to camouflage the conflicts of interest and self dealing that are at the heart of the ... plan," attorneys for the unsecured creditors charged.
"The proposed restructuring is simply a deliberate campaign by those controlling Station Casinos to benefit themselves, its equity owners, at the expense of Station Casinos' creditor constituents," the creditors charged.
Another objection was filed by a group of independent lenders, which also complained that assets crucial to the operation of the OpCo casinos would not be included in the OpCo auction.
"From the perspective of the OpCo creditors, the process makes no sense: It's like selling KFC without the Colonel's secret recipe, or selling Coke without the formula, because the seller fails to capture the full value of the enterprise and the buyer acquires a business crippled without its competitive advantage," the lenders charged.
So will all their objections be enough to derail the Fertittas' plan to take Station out of bankruptcy? We'll have to wait and see.
So last week, we found out about how Station Casinos will look once it emerges from bankruptcy reorganization. Basically, it will be a "leaner, meaner" company as it only holds onto Palace Station, Boulder Station, Sunset Station, Red Rock Resort, Wild Wild West (where its "Viva" casino/entertainment complex redevelopment plan has been on hold lately), and a plot of land at Las Vegas Blvd. and Catcus Ave. slated for a future casino. And the rest?
The plan, if approved, would lead to the sale of the remaining company assets.
The assets include Indian casino management contracts as well as Texas Station, Santa Fe Station, Fiesta Rancho, Fiesta Henderson, Wildfire Rancho, Wildfire Boulder, the Gold Rush, Lake Mead Casino and the company's 50 percent interest in Green Valley Ranch Resort, Aliante Station and the smaller Barley's, the Greens and Wildfire Lanes.
The assets to be sold include extensive land holdings in California (1,321 acres), the Reno area (200 acres) and at key gaming-entitled sites in the Las Vegas Valley at Durango Road and the southern Las Vegas Beltway, Town Center Dive and the Beltway and in Henderson's Inspirada development. The land holdings also include 52 acres south of Palace Station planned as a retail, entertainment and residential development.
So what does this mean for the future of Las Vegas gaming? Quite a lot, really. Station Casinos and Boyd Gaming were quite close to holding a "duopoly" over the locals' casino market. Almost all the casinos up here in Henderson are Station, and the same can be said of many other areas outside The Strip and Downtown. But with this shedding of assets, we will likely see a major game change... And this can go one of two ways.
If Boyd manages to buy most or all of these soon-to-be former Station assets, it will emerge as the new leader in locals' casinos. And what would that look like? Downtown is probably the best indicator (where Boyd dominates), along with the Coast Casinos scattered around the valley. I'd also be interested in seeing if their experience with Borgata in Atlantic City has prepared them for a more upscale Las Vegas locals' casino like Green Valley Ranch.
However, this doesn't have to be the case. If Nevada gaming regulators manage to show some concern over one company controlling so many casinos in town (and it's admittedly a crap shoot over whether they will care enough to do something), they may not allow Boyd to suck up all these casinos. If that happens, this will leave quite the opening for a "renaissance" of independent and small chain operators (like the Maloofs of Palms fame and Cannery Casinos) to emerge as more powerful players in town. Perhaps we'll see more M Resort like casinos in our future? Or maybe Tony Marnell himself will want to expand his empire? Or maybe Michael Gaughan (formerly of Coast Casinos, now running South Point) will reemerge as a big locals' market player? The possibilities are endless, and it would be quite the sight to see.
And what will become of the Fertittas? Well, they will still hold 46% of the new, smaller Station while Colony Capital retains 4%. And while they will let go of most of Station's current assets, the remaining assets will still be quite the company with "crown jewel" Red Rock, "the original" Palace, and Boulder & Sunset in key parts of town. And by holding onto the Cactus plot of land, they'll at least keep their foot in the door for a possible future Station Casino in the still unfinished southern stretch of the valley near Silverado Ranch and Southern Highlands.
So whatever happens next, this will change Station Casinos and change the state of locals' casinos here in Vegas. It's like watching the fall of a great empire. We'll just have to wait and see whether it means the start of a new great empire (Boyd) or a return to a more decentralized and level playing field, as well as how the new Station fits into everything.
Yay! Happy b-day to me, I get to laugh at more Station-Boyd gaming. The Fertittas may have thought they were safe when they struck an agreement with their creditors last month to emerge out of bankruptcy wholly intact, but I guess Boyd Gaming thinks differently. This is what they said when they announced narrower losses than expected in their Q4 2009 earnings report.
During a conference call with investors and analysts today, Boyd executives reaffirmed the company’s commitment to acquiring Station Casinos’ assets and discussed the company’s view of the current condition of the Las Vegas locals market. [...]
“This offer stands and we are actively pursuing these assets,” [Boyd President & CEO Keith] Smith said. “We believe we can offer the greatest possible value to the majority of Station’s creditors. There is no one who is in a better position to manage those assets properly.”
And I guess there's still an opening with Boyd, especially with creditors still objecting about the Fertittas' spending habits of late... And even U.S. Bankruptcy Judge Greg Zive asking his own questions about possible overbilling.
U.S. Bankruptcy Judge Greg Zive told lawyers Tuesday he would look for overbilling and questioned expense accounts. He approved $12 million in interim fees and expenses for law and accounting firms.
The judge noted that progress has been made in an agreement with key lenders and the company in clearing the way for Station to emerge from bankruptcy. Attorney Paul Aronzon told the judge there has been "good progress" and a creditors meeting is set for March 5. [...]
Most of the hearing was taken up with the judge approving the request for interim payment of fees and expenses, but Zive had several questions.
For example, one accounting firm charged $19,500 in hotel bills. Zive pointed out that Station Casinos has hotels where the representatives of FTI Consulting Inc. can stay.
"I don't know if the hotels still comp, but we need to be careful," Zive said. "This is not a large amount of money but it doesn't have to be."
The judge approved $3.9 million in fees and expenses for one law firm where some 50 attorneys and legal assistants are working on the case representing Station.
The judge noted two lawyers in the firm of Milbank, Tweed, Hadley & McCloy are charging $995 an hour and a small group of others are billing at $900 to $950 an hour.
"When you bill at that rate, I expect a great deal of efficiency," he said.
The judge then threatened to hire a court-appointed fee examiner to investigate of Station's expenses keep spiraling out of control.
Don't like my Gaga? Too bad, bitchez! It's my birthday, dammit! Oh yeah, what was I talking about again? Oh, that's right, back to Station and Boyd. ;-)
I guess Station isn't really out of the woods just yet. As always, the Fertittas' wacky spending habits and self-enrichment schemes are coming back to bite them. And as long as they keep screwing with their own company like this, there will always be some kind of opening for Boyd.
Hundreds of workers from Station Casinos founded a union organizing committee last week and are meeting at the Culinary Workers Union, Local 226 today. The workers have called on the company to agree to a fair process for workers to form a union free from management interference, intimidation and harassment. The Culinary and Bartenders unions have informed the company’s owners, partners, creditors and the National Labor Relations Board of the committee’s formation.
Station Casinos answered the workers’ request for a fair process with threats and intimidation. Yesterday, the unions filed an Unfair Labor Practice charge against the company with the National Labor Relations Board alleging the company violated federal labor law in over 100 incidences by threatening, surveilling, physically assaulting and intimidating workers for their union activities.
“I’ve worked at Palace Station for 18 years,” said Casino Porter and Organizing Committee Member Casiano Corpus. “I joined the organizing committee because I want a better future for myself, my family and my co-workers. Station Casinos may not want a union, but it is not their decision to make. It is our decision and they shouldn’t try to scare or intimidate us because of our union activity.”
Since a management-led buyout in November 2007 that paid Station Casinos insiders $660 million, the company has subcontracted out its coffee shops and its uniform department to outside operators. Hundreds of workers have lost their jobs with the company as a result. The company has also cut hours, made permanent lay offs, suspended the workers’ 401(k) match, and raised employees’ health insurance premiums. [...]
“These workers are standing up for themselves and their families,” said Geoconda Arguello-Kline, Culinary Workers Union President. “The company and the workers are in a very difficult position right now because the 2007 buyout increased the company’s debt and left it unable to weather the economic downturn. The company is making decisions that affect these workers lives and their ability to take care of themselves and their families. The workers didn’t create this mess, but they are suffering as a result. We are going to do everything we can so they can achieve the respect they deserve and take care of their families with dignity.”
It's already looking ugly with accusations of violent assault (FOX-5 video) now flying. So for now, the sordid soap opera that's become "The Station Casinos Bankruptcy Case" continues.
Boyd Gaming Corp. of Las Vegas today made another offer to buy Station Casinos Inc. -- this one for $2.45 billion for the company with 18 casinos and hotel-casinos in Southern Nevada.
With Station carrying $6.8 billion in debt and other liabilities and operating in Chapter 11 bankruptcy, acceptance of the $2.45 billion offer likely would cause creditors and investors to take billions of dollars in losses. [...]
Boyd, one of just a few gaming companies considered to be in sound financial shape and capable of buying Station without over-leveraging itself, has been persistent in pursuit of Station.
Boyd is on the prowl and ready for the kill!
"Combining Station with our current portfolio is consistent with our strategy of growing our presence in the Las Vegas locals market. The transaction contemplated by this proposal will allow us to leverage our 35 years of operating experience in the Las Vegas market to maximize the full potential of Station’s assets. Given this compelling strategic fit, and Boyd Gaming’s position as a licensed operator with strong financial capabilities, we continue to believe that the acquisition of the Station assets by Boyd Gaming is the optimal way forward for Station and will create the most value for Station’s creditors," Boyd said in a letter to Station.
"Importantly, Boyd Gaming is in the best position to execute a smooth transition of ownership and operate the Station properties efficiently from day one. We believe our proposal is in the best interests of Station’s employees, vendors, customers, and the Las Vegas community as it will help to strengthen the local economy and preserve thousands of jobs," the Boyd letter said. "We believe our offer price represents fair value to Station’s stakeholders and takes into account current market conditions, our deep knowledge of the gaming industry and Station’s publicly disclosed financial performance."
"Our proposal to acquire both the 'OpCo Assets’ and the 'PropCo Assets’ reflects the belief that there is more value in keeping these assets together rather than separating them. We believe that combining Station’s assets with Boyd Gaming will result in the greatest number of benefits for stakeholders," the letter [from Boyd Gaming] said.
Well, what else can I say? As I've said before, Station Casinos had it coming. So not only are the creditors furious, and not only is Culinary 226 ready for all out warfare against Station execs, but Boyd is now back in the game and ready to snatch them at a fire sale price in bankruptcy court.
Still, I must admit I'm conflicted about this possible Boyd acquisition of Station. On one hand, Station has been piling up reckless amounts of debt for years while continuing to treat their workers like crap. But on the other hand, I don't know if Boyd's really a better employer... And this deal will create a near-monopoly of Off-Strip casinos for Boyd. And as we've all seen with just two companies controlling so much of The Strip, it's dangerous to have so many casinos concentrated in so few hands.
So I guess we'll have to wait and see what happens next for Station. And if Boyd and/or some other "vultures" capture Station in bankruptcy court, the Fertittas only have themselves to blame for it.
