Indianapolis-based Centaur, which owns Hoosier Park Racing & Casino in Anderson, Ind., recently missed interest payments and has defaulted on loans in excess of $400 million.
In an Oct. 29, the company acknowledged it did not make payments, said to total $13.4 million, on Oct. 27. A release said Centaur is negotiating with lenders to “address its capital structure at the corporate level, reduce its debt load, and strengthen its future financial position.”
Centaur’s effort to restructure its debt comes as officials are lobbying for tax relief on slot machine revenue while coping with hefty loans secured to pay a $250-million slots license and $150 million in construction costs. During the 2009 fiscal year, slots at Hoosier Park generated about $200 million in revenue; however, 47% of adjusted gross receipts were earmarked for taxes and fees, including 15% designated for Indiana’s racing industry. Indiana’s riverboat casinos, by comparison, operate under a 35% tax rate.
While Hoosier Park and Centaur’s other property, Fortune Valley Hotel & Casino in Central City, Colo., are both healthy, they are failing to generate the revenue needed to cover the company’s capital structure. Officials have been negotiating with lenders since July in the hope of bolstering Centaur’s capital structure for the long-term.
“Our business operations at the property level are healthy and generate positive cash flow from operations,” Centaur chairman Rod Ratcliff said in a statement. “We remain committed to putting our capital structure on solid ground. Restructuring our corporate debt will place us in a position for long-term success and benefit our customers, employees, horsemen’s groups, host communities, and other stakeholders.”
In October 2007, Centaur closed on a $1-billion financing package for Hoosier Park and Valley View Downs, a racing and gaming project in western Pennsylvania. Despite being granted the last harness racing license by the Pennsylvania Harness Racing Commission, Centaur was unable to secure a slots license prior to a deadline stipulated as part of the loan.
As a result, funding for the Valley View Downs project was lost, but the license-holders are determined to continue on with the project. To do so, two Centaur affiliates—Valley View Downs LP and Centaur PA Land LP—have filed Chapter 11 bankruptcy petitions.
“This step in Pennsylvania demonstrates how serious we are in clearing the way to get the Valley View Downs project built and operating,” Centaur chief financial officer Kurt Wilson said. “It allows the application process to continue and reflects our deep commitment to the project. The reason for this filing is to preserve the status of the Pennsylvania project, advance the restructuring process, and safeguard our gaming application.”