Churchill Downs Inc. has filed suit against the entities that have majority ownership of Kentucky Downs, contending the defendants breached their agreement with CDI by converting debt securities into equity.
The action by Kentucky Downs altered CDI's ownership share, the suit contends, and the suit is seeking to have the defendants buy out CDI's interest in the track in Franklin, Ky.
The suit, filed Sept. 18 in Jefferson Circuit Court and first reported by the Louisville Courier-Journal, outlines a series of financial dealings between CDI and Kentucky Downs Partners LLC, Kentucky Downs Management LLC, and Kentucky Downs LLC.
Along with Turfway Park, CDI is a minority owner in Kentucky Downs, which has seen its business and revenue soar following the introduction of Instant Racing, a form of electronic gaming in which the outcome is based on previously run horse races. Earlier this year CDI increased its ownership in Kentucky Downs by investing at least an additional $1 million in the track.
According to the suit, when promissory notes issued in 2007 were due to expire this year, Kentucky Downs' majority owners said they wanted the minority partners to convert the debt into a larger share of Kentucky Downs ownership. The CDI suit states that Kentucky Downs could only do that by agreement from the minority owners.
CDI claims in the suit it declined to have its debt converted to equity and retained its right to have Kentucky Downs' majority owners buy out CDI's ownership stake. The company is seeking a court judgment "requiring Kentucky Downs and/or KDP to purchase Churchill Downs' interest in Kentucky Downs pursuant to terms of the Kentucky Downs operating agreement."
Kentucky Downs president Corey Johnsen said the track has filed suit of its own in Simpson Circuit Court seeking a declaratory judgment interpreting the agreement between the two parties.