The recent bankruptcy petition by the New York City Off-Track Betting Corp. should be tossed out of federal court, the New York Racing Association argues in a lengthy legal brief filed Jan. 4 in Manhattan.
NYRA, which is the second largest creditor of the NYCOTB, said the OTB failed to negotiate with any of its creditors before filing its Chapter 9 reorganization plan and is using the bankruptcy filing as a maneuver to try to get its way on its long-stalled legislative agenda at the state Capitol.
In a 23-page filing with the U.S. Bankruptcy Court in the Southern District of New York, NYRA’s lawyers argue that the OTB failed to meet the legal “good faith’’ provisions to seek bankruptcy protection.
The legal brief, continuing a long-running battle between NYRA and NYCOTB, states that the OTB over-stepped its legal authority to file the petition in the first place. It said an executive order from New York Gov. David Paterson permitting the Chapter 9 move was not enough, and that the filing needed authorization from the state legislature. NYRA also maintains that the OTB “strangely’’ left out of its filing some $200 million owed to other creditors.
Ownership of the NYCOTB was transferred from the New York City government to New York State last year at a time when New York City mayor Michael Bloomberg was threatening to shutter its doors over insolvency concerns.
The NYRA opposition to the NYCOTB bankruptcy petition bristles at OTB officials who acknowledged in court papers that a purpose of the recent court action was to help it to get state officials to change what they believe is an archaic and unworkable system of payments the OTB must make to various stakeholders, including NYRA.
“But NYCOTB’s parochial lobbying agenda is hardly a concrete ‘business plan,’ and NYCOTB is hinging the success of this case on the state legislature’s ‘swift and decisive’ action to modify the legislative distribution scheme – a subject that NYCOTB has ‘repeatedly petitioned’ the state Legislature to address, to no avail,’’ the NYRA brief states.
It accused NYCOTB of using the bankruptcy court as “leverage to further its previously unsuccessful legislative agenda.’’ Among those measures long sought by NYCOTB would be a dramatic change in the formula by which the OTB pays various entities, such as NYRA and other tracks; NYCOTB has wanted to change the way it pays its operating expenses to a calculation performed before mandatory distributions to racing entities and state and local governments are made.
The NYRA brief called the NYCOTB’s legislative agenda’s hopes “remote.’’
NYRA also questioned the chances of $250 million in debt financing NYCOTB is relying on as part of its reorganization plan.
The OTB last month said its financial problems were so severe it needed to take the drastic step of a Chapter 9 filing to keep the nation’s largest off-track betting corporation in business.
But the NYRA brief, filed the Manhattan law firm Weil, Gotshal & Manges, said NYCOTB had other motives. “The filing was merely a tactic to delay further payments to creditors,’’ the brief states.
NYRA president Charles Hayward and NYCOTB officials declined comment on the court filing.
