Eurazeo writes down casino investment with Colony

The French private equity firm will “partially” write down its $200m investment in US casino operator, Station Casino. Station is majority-owned by Colony Capital. Another Eurazeo-Colony investment, Accor, has also been hit by the economic downturn forcing the firm to inject an extra €200m into the hotel group.

The listed French private equity firm, Eurazeo, has partially written down its $200 million investment in Las Vegas casino operator, Station Casino.

Eurazeo owns a 5.3 percent stake in Station Casino. Private equity real estate firm Colony Capital owns 75.9 percent of the casino operator. Colony declined to comment on whether it had also had to write down its investment in the group, which owns and operates 16 casinos in the Las Vegas area.

In a letter to shareholders, Eurazeo chairman, Patrick Sayer said the firm would have to partially write down its investment, but, in the long term, Station Casino was “protected by its real estate assets”.

Eurazeo, according to the firm’s website, invested $200 million in the Station group as part of a $5.5 billion deal. Eurazeo invested as part of a $1.27 billion co-investment vehicle. Colony, the website says, invested another $1.28 billion from its Colony Investors VII and VIII funds, on top of a $300 million mezzanine investment. The company’s founding family, the Fertitta family, also invested $902 million in the Station group.

Station’s owners are reportedly contemplating putting up to $500 million extra capital to help the casino group weather the storm.

In its letter, Sayer said Eurazeo had injected another €200 million into another Colony co-investment, Accor – Europe’s largest hotel operator – after it had also been hit by the economic downturn.

In May, Eurazeo and Colony increased their stakes in Accor to 30 percent. Colony increased its stake in the hotel owner to 20 percent from nine percent. While Eurazeo increased its stake to 8.5 percent, with plans to increase the stake to 10 percent by the end of the year.

Sayer said in his shareholders letter that before the collapse of Lehman Brothers, Accor’s share price was around €45. The hotel company has since lost around a third of its value, Sayer added. “Although this fall prompted us to protect our investment by temporarily injecting €200 million as collateral, the fact remains that the company has shown enormous resilience.”

Accor, which operates the luxury hotel chain Sofitel, the upscale Novotel and Pullman brands and the economy Ibis hotel group, was now in the process of cutting costs, he added.