By Karen Brettell

NEW YORK, Feb 4 (Reuters) - Station Casinos [STN.UL] may
need to sweeten some of the terms of its proposed debt
reorganization in order to persuade some bondholders to
participate in a prepackaged bankruptcy filing.

The casino operator on Tuesday proposed a debt
restructuring that would give its existing bondholders a
mixture of cash and new debt.

Station's owners, the Fertitta family and private real
estate investment firm Colony Capital, said they will put up as
much as $244 million to maintain their ownership stakes.

"One of the supports is that the sponsors are putting
equity in, having fresh capital certainly helps out the
situation," said Christopher Snow, analyst at research firm
CreditSights.

Station's 7.75 percent senior notes due 2016 rose 10 cents
on the offer to 25.5 cents on the dollar, according to
MarketAxess.

"Certainly that's an indication that bondholders like the
offer, I'm not sure if it's enough to get them to accept it
fully," Snow said.

In a bankruptcy, control of the company typically passes
to its lenders with the most senior debt holders having first
claim on its assets.

"For the subordinated noteholders, going through the
bankruptcy process isn't going to yield them a whole lot, so I
don't think they have much negotiating power," said Snow.

"The senior noteholders, they're going to be a part of the
new capital structure any way you slice it, so they have more
negotiating power," he added.

Station proposed the restructuring after breaking terms in
its bank loan agreements and failing to win support for a
proposed debt exchange in December.

The company has struggled under debt it took on to fund its
management-led buyout in 2007.

"We do not think this offer is enough but think it is a
good start," Barbara Cappaert, analyst at KDP Investment
Advisors, said in a report. "Bondholders held strong before and
we suspect a sweetener could be added to the offer."

Station is offering to pay senior bondholders $400 in new
secured debt and $100 in cash for each $1,000 in bonds held.
Senior subordinated bondholders are offered $70 in new notes
and $30 in cash for each $1,000.

"If Colony and the Fertitta family believe there is
sufficient upside in the equity, it would behoove them to offer
bondholders equity in addition to the cash and debt proposed to
be able to participate in any upside on this credit, no matter
how long term realization of that upside may be," said
Cappaert.

Station Casinos will reduce its unsecured debt by almost
$1.9 billion under terms in the offer, a loss borne fully by
bondholders, while interest payments would be cut by more than
$100 million, said CreditSights' Snow.

Owners Colony and the Fertitta family, by contrast, have
likely lost around $3.5 billion, but could benefit from future
upside.

"The value lost to bondholders would now be fixed, whereas,
the sponsors could potentially recoup a portion of their
initial investment with the new $244 million that they are
offering," Snow said.
(Editing by Leslie Adler)