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Buyout-Backed Busts: Station Casinos

#1. Station Casinos

The Las Vegas-based casino company was acquired by Colony Capital LLC and the Fertitta family in 2007 for $8.9 billion. The firm invested $2.7 billion in equity across Colony Investors VII and Colony Investors VIII.

What Went Wrong?
With more than $5.285 billion in debt, the company could not sustain the prolonged downturn in consumer spending related to the recession. Casinos are particularly vulnerable in downturns as they have fixed overhead costs which can cause dramatic shifts in profits if top line income declines. The company filed for bankruptcy on July 28.

The Aftermath
After months of disagreements between lenders over the company’s fate, the company’s lenders agreed it can borrow up to $150 million via a revolving credit facility. A study commissioned by the firm found its take-private transaction, which had a value oef $5.7 billion plus the assumption of $3.4 billion in debt, was not a fraudulent transaction, which will be used as ammunition against angry bondholders in court.

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