Station Casinos originally set out to tap the market for a credit facility to help build the Green Valley Ranch, a 50% owned joint venture, but extensive delays meant that the casino is now set to open in December and the loan will be primarily for working capital. Glenn Christenson, v.p., cfo and chief administrative officer, said "the loan was to be used for construction payments, but land-use issues with the local government held up the financing." Now, a revolver is the best instrument going forward for the casino since the 40-acre site is almost up and running.
Bank of America is the lead lender on the revolver for two reasons. B of A leads the Station revolver and is also the largest lender to the gaming industry. "It was a natural decision," Christenson said. All of the other lead lenders, Deutsche Bank, Lehman Brothers, Bank of Scotland and Wells Fargo, have previous relationships with the company, he added, commenting, "this group is also intimately knowledgeable of the gaming industry."
Even after Sept. 11 and fears over prospects for the gaming industry, the banks did not pull out. More due diligence was done, but the financing commitment was made some time ago, Christenson said. The total facility consists of a $90 million revolver and a $75 million term loan, both maturing at the end of 2006. Pricing is tied to the Eurodollar rate plus 21/ 2%. In addition to the credit, there is a $35 million equipment-leasing financing and the remaining costs of the $300 million project have been financed by $100 million in equity contributions. Station invested in excess of the required equity piece of $50 million and so $32 million of the proceeds of the new credit facility will go towards paying the excess investment. This will then pay off outstandings under the Station revolver explained Christenson.