In the Station Casinos November 25th press release, “Station Casinos, Inc. Announces Private Exchange Offers of Its Debt Securities for New Secured Term Loans,” the most important passages are: “Concurrently with the issuance of the Term Loans, the Company would borrow between $450 and $500 million from entities affiliated with existing equity owners of the Company or institutions or persons who are investors in related entities that currently own an indirect economic interest in the Company (the "Sponsors").” And “The lien securing the Term Loans will be junior to the liens securing the Company's obligations under its senior secured credit facility and the $450 million to $500 million of Sponsor loans.” The Fertittas are 24.1% ”existiing equity owners” in Station Casinos and the Fertittas are the “Sponsors.”

One only has to go back to October 2007 when another financially struggling company received a similar funding of from a group of “existing equity owners” and “investors in related entities that currently own an indirect economic interest in the Company.” That company was Xyience Incorporated, the “existing equity investors” and “related entities” were the Fertittas and entities controlled by and related to the Fertittas.

In this instance, according to a press release issued on October 10, 2007 by Bill Bullard Secretary of Fertitta Enterprises, Dana White President of the UFC and Adam Frank CEO of Xyience, “Xyience announced that the company has received access to up to $12 million in a strategic funding effort from a group of investors. The company intends to use a significant portion of the investment to expand distribution of its Xenergy brand energy drink.” The group of investors, “Zyen LLC,” was headed by Fertitta Enterprises. The proceeds from the Feritta “Zyen” funding, which were controlled by Bill Bullard, did not go to expand distribution of Xyience products as stated in the press release. Instead, the funds went to pay entities controlled by the Fertittas, namely the UFC, Fertitta Enterprises and the Fertittas’ cronies, ARC Investment Partners, Adam Roseman, Kirk Sanford, Adam Frank and their attorneys, Eisner and Frank, Hunterton and Associates and Fennemore Craig. Similarly, the existing Xyience debt was made junior to the $12 million Fertitta “Zyen” funding, just as the existing Station Casinos Term Loans would be made junior to the Fertitta “Sponsor loans.”

In the Xyience case, after a majority of the funds went to pay entities controlled by the Fertittas, Bill Bullard, who controlled the use of the proceeds of the funding, did not make the first $150,000 November 2007 interest payment on the Fertitta “Zyen” loan. Bullard then foreclosed on the loan on December 4, 2007, two months after the loan was made, bankrupting Xyience and wiping out the Xyience creditors who had just subordinated to the Fertitta “Zyen” loan. Now Xyience is owned by ManZen LLC, an entity controlled by the Fertittas. The Xyience creditors and shareholders have been left with nothing.

Station Casinos creditors should be very wary of subordinating their notes to any debt instrument put forward by the Fertittas or any entities associated with the Fertittas. Leopards never change their spots. These leopards are waiting in the grass for the Station Casinos creditors to subordinate, ready to pounce on them with foreclosure and bankruptcy, just as they did to Xyience creditors one year ago.

Recent Station financial reports reveal that there may be trouble ahead for the heavily leveraged corporation. (see http://www.secinfo.com/dVut2.t26p.htm)The reports point the finger of blame at the state of the national economy, the credit and mortgage crises, and the conditions of the merger. Here’s a snippet:

“Our high leverage and debt service obligations could adversely affect our ability to raise additional capital to fund our operations, increase our vulnerability to general adverse economic and industry conditions, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations. As a result of the Merger, we are highly leveraged. Our ability to make scheduled payments on, or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to general economic, financial, competitive and other factors that are beyond our control. While we believe that we currently have adequate cash flows to service our indebtedness, if our economic performance were to deteriorate significantly, we may be unable to maintain a level of cash flows from operating activities sufficient to enable us to pay the principal, premium, if any, and interest on our indebtedness.”