Indiana Slots Deal Paves Way for Refinancing
Centaur Gaming and horse racing industry stakeholders have won approval for a long-term gaming revenue distribution agreement that will allow the company to refinance in 2014.
The Indiana Horse Racing Commission approved the "initial distribution agreement" of revenue from slot machines at its December meeting. The agreement is somewhat controversial in that it allows slots revenue to be subordinated to the claims of senior lenders in the refinancing should Centaur default, according to a petition submitted by the company and the stakeholders.
Representative horsemen's groups, after initial reluctance, all signed off on the deal. They are the Indiana Horsemen's Benevolent and Protective Association, Indiana Standardbred Association, and the Quarter Horse Association of Indiana. Those groups joined Centaur in petitioning the IHRC to approve the agreement.
A 2013 state law authorized racing industry stakeholders to negotiate long-term deals on the percentage of slots revenue that goes to purses and breed development. It also allows the groups flexibility when it comes to promoting the interests of pari-mutuel racing in Indiana.
The law states 10% to 12% of adjusted gross revenue from slots can be paid to horsemen. Centaur and the horsemen's groups agreed to the maximum for 2014; there is a chance that number could remain in future years.
In an interview in early October Centaur president Rod Ratcliff said the long-term agreement and subordination of funds would allow the company to make improvements at its two tracks, Indiana Downs and Hoosier Park Racing & Casino. The specifics were spelled out in the petition to the IHRC.
Centaur officials said Indiana Downs, which now offers only Thoroughbred and Quarter Horse racing, is in line for major racing surface improvements, renovated dormitories, construction of new dorms, and about 100 new stalls for Quarter Horses. Also planned is a "substantial rebuild" of the clubhouse and grandstand.
Capital improvements could total $36.5 million over the seven-year term of the agreement.
Attorneys with Ice Miller LLP, which prepared the petition for Centaur, said approval of the interim distribution agreement "does not mean the parties would immediately enter in a subordination agreement." They said there are "numerous other conditions that would have to be satisfied" in regard to regulatory and financial approvals.
The racing and breeding industry gets roughly $54 million a year in slots revenue from machines located at the two racetracks.
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