Station Casinos, owned by private equity firm Colony Capital along with Ultimate Fighting Championship (UFC) owners Frank and Lorenzo Fertitta, proposed filing for prepackaged bankruptcy in a deal with lenders as a failing economy and stingy credit market have stifled Las Vegas area gambling profits in a report by Bloomberg.com.

Publicly traded for 13 years, the Fertittas took Station Casinos private in 2006 after shareholders approved a $5.4 billion takeover bid. Station raked in $1.1 billion in revenue in 2005 and earned $309 million, more than 17 times what it made in 2002 and its stock was through the roof.

Fast forward to 2009, when Station missed a scheduled $14.6 million bond interest payment last Monday after fourth-quarter revenue fell about 19 percent from 2007 to $290 million.

Station is seeking to acquire $2.3 billion of existing bonds by offering investors 10 cents to 50 cents on the dollar in secured notes and cash.

The casino group currently has about $350 million in cash to fund operations. Colony Capital (the Los Angeles-based real estate investment giant run by billionaire Tom Barrack) and Frank Fertitta, Station’s chairman and chief executive and Vice Chairman Lorenzo J. Fertitta, will invest an additional $244 million into the company if investors approve the prepackaged bankruptcy plan.

From Fertitta:

"We believe the proposed restructuring plan is in the best interest of all of our constituents. It is no secret that current economic conditions in our country have had an adverse effect on Las Vegas in general and the casino business in particular. However, we believe that the steps we have taken and those we are proposing to take will result in our company being well positioned for the future."

Founded by Fertitta's father in 1976 as nothing more than a bingo hall, Station now operates 15 off-strip casinos designed for Las Vegas locals and employs roughly 14,000 people.

In addition to the decline in gambling revenue, Las Vegas home prices fell 41 percent through last November after peaking in August 2006. In addition, unemployment in Nevada, once far below the rest of the country, was a staggering 9.1 percent in December, compared with 7.2 percent for all of the U.S.

It's unclear at this time how -- if at all -- the UFC which the Fertitta brothers own a 90 percent share of, will be affected. UFC is a very profitable (and separate) business, achieving a market value that Forbes magazine estimates is upward of $1 billion.

In addition, UFC 91, 92 and 94 were all record-breaking events for the promotion, meaning it's likely safe to say that the UFC isn't going anywhere anytime soon regardless of the financial crisis that appears to be plaguing Station Casinos.

For what it's worth, Station isn't the only casino company feeling the squeeze. Tropicana Entertainment filed for bankruptcy last spring and rumors are swirling around the fate of the MGM Mirage and Las Vegas Sands.

Even Trump Entertainment Resorts Holdings, whose stock was down 94 percent, made a Yahoo Finance list of 15 companies that might not survive in 2009.

A vote is due by March 2 on the proposed Station bankruptcy plan.

Stay tuned.