Station Casinos Inc. Chairman Frank Fertitta III and his brother Lorenzo Fertitta want to keep the company they started in the family, so they are teaming with private equity firm Colony Capital LLC, to take the company private. The group known as Fertitta Colony Partners LLC convinced Station on Monday, Feb. 26 to accept a $90 per share cash offer, or about $5.4 billion, including the assumption of debt. The value of the total deal is $8.8 billion. But the acquisition could cost the Fertitta group more money in the future in the form of higher interest payments from a possible downgrade by credit rating agency, Standard & Poor's. The rating agency announced after the latest offer it would keep its speculative grade BB- corporate credit rating on CreditWatch with negative implications, where it was placed Dec. 4, 2006. The placement of ratings on credit watch with negative implications means that S&P would most likely downgrade its ratings on Station should the merger with Fertitta be finalized. S&P believes the the proposed leveraged buyout, or other leveraging transaction, "will significantly increase the debt burden and thus materially weaken Station's key credit measures." According to Bloomberg, Deutsche Bank AG and J.P. Morgan Chase affiliates have provided debt financing commitments to Fertitta to complete the transaction and assume or pay back Station's original $3.4 billion in debt. "We would expect a downgrade of at least one notch to occur at the conclusion of our analysis," an S&P analyst said in a press release. — Gerald Magpily
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