S&P assigns ‘B’ credit rating to Station Casinos

Las Vegas locals gaming leader Station Casinos LLC spent two years reorganizing the company to emerge from bankruptcy with ownership of most of its properties and a more manageable debt level.

Standard & Poor's ratings service on Tuesday seemed to approve of the efforts, assigning a "B" corporate credit rating to the reorganized company. The rating outlook for the company was "stable," the bond-rating firm said in a report.

"The stable rating outlook reflects our expectation ... that the company will use moderate levels of free cash flow to repay debt over the next several years," said Melissa Long, primary credit analyst with Standard & Poor's.

Long warned that a downgrade could occur if the company's performance is meaningfully weaker than S&P's expectations. She said weaker than expected earnings would only be a result of a continuing weakness in the Las Vegas locals market.

"The rating reflects our assessment of Station's financial risk profile as highly leveraged," Long said.

She said Station Casinos benefits from its leadership position in the locals market, relatively high barriers to entry and management's experience operating in Southern Nevada.

Station Casinos emerged from Chapter 11 bankruptcy in June with $2.5 billion in debt.

The company now owns 17 properties, including Green Valley Ranch, Red Rock Resort and Palace Station. It only manages Aliante Station, having passed the property to a group of lenders including TPG Capital and Apollo Global Management LLC.

At the same time, Standard & Poor's also assigned Station Casinos' senior secured credit facilities a "B" issue-level rating, with a recovery rating of "4." The recovery rating indicates a 30 percent to 50 percent recovery for lenders in the event of a default, the ratings agency said.

The senior secured debt comprises a $125 million revolving credit facility, a $200 million term loan and a $750 million term loan, both of which mature on June 17, 2016. The company can request extensions of two additional one-year periods, the report said.

The senior secured debt also includes a $625 million term loan, which matures on June 17, 2018.

Station Casinos filed for bankruptcy protection in July 2009 after the company had difficulty servicing $5.9 billion debt.

"We believe that the Las Vegas locals market reached bottom in 2010 following three years of revenue declines and that the market will be generally stable in 2011 and modestly grow thereafter," Long said.

For the first quarter of the year, Station Casinos reported a loss of $11.8u2007million, compared with $53.5 million for the same period last year. The company earned $247.7 million in the first quarter.

The privately held gaming company is scheduled to release second-quarter earnings on Monday.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.