Remember how Dana White was mentioning ‘that Ferrall thing’ during yesterday’s video blog? Here’s what he was talking about: Radio DJ Scott Ferrall had a guest on his show a few days ago who was only known as ‘T Shirt Guy’. Whoever it was, it wasn’t Tom Atencio unless Tom just ate several pieces of sandpaper. Most people are guessing it’s the other half of Afflction, Tom Beard, but who knows. What’s interesting is what he said:
“They threaten us personally which is hilarious. Dana White, Lorenzo Fertitta they’re tough guys. They’re old school mafia guys or wanna-be old school mafia guys. Their grandfather built their business. They’re nothing. They put (Station Casinos) $5 billion in debt. They’re in big trouble right now. They’re going out of business in February, guaranteed. Lorenzo Fertitta … kiss my fucking ass motherfucker.”
For those of you wondering where the fuck that kind of statement comes from, here’s where: Standard and Poor just put Station on their CreditWatch list:
On Sept. 17, 2008, following our review of the terms of a proposed amendment to Station’s bank facility, we lowered our rating one notch and cited concern that, despite the proposed loosening of the covenants included in the amendment, the company could face a covenant violation potentially as soon as March 31, 2009.
The conclusion of our review incorporated the assumption that Station would execute the amendment in the near term. However, the company has yet to announce execution of the amendment. In the absence of an amendment, we project that the company will violate its total leverage covenant on Dec. 31, 2008. In addition, more recent turmoil in the financial markets and continued weakening of economy are likely pressuring performance in the Las Vegas locals market more than previously contemplated.
The whole thing has to do with loan covenants, and the violation of them. If you’re wondering what the fuck that means, here it is in english:
A loan covenant is a condition in a commercial loan or bond issue that requires the borrower to fulfill certain conditions or which forbids the borrower from undertaking certain actions, or which possibly restricts certain activities to circumstances when other conditions are met.
Typically, violation of a covenant may result in a default on the loan being declared, penalties being applied, or the loan being called.
So long story short, S&P thinks that Station is going to be violating some of it’s loan covenants by as soon as the end of March. How bad that is really depends on the terms of the deal. We just saw Showtime calling in a 6.5 million loan due to ProElite violating it’s terms, and you saw what happened there. But trying to compare ProElite and Station is like comparing lemons and some kind of solid gold money making fruit. I personally doubt Station is in any real danger of closing shop, but something interesting might be going on behind the scenes. I’ll let you know more when I do.
**UPDATE** Here’s another interesting article on Station Casinos and it’s financial health. The gist: Station is bogged down in debt after ‘buying back’ control of their operations. But is it really buying back when it’s really all on loaned money?