Centaur bets on risky plan
Indianapolis Business Journal, Apr 12, 2010 by Schnitzler, Peter
Bankrupt Hoosier Park owner Centaur Inc. has offered its creditors a risky reorganization plan. For it to work, dozens of hedge funds must stay in the game, in return for a chance to buy a big chunk of the company later.
The downside for the hedge funds is Centaur’s payback method. It would use a form of security that gives Centaur the discretion to defer interest payments–upping the chance that the lenders will end up with losses.
Locally based Centaur is attempting to restructure $680 million in debt, most of it loans the company took out before the recession. Negotiations are focusing on such issues as how much Centaur stock the hedge funds eventually could get, and how many years they’d have to wait for their purchase options to mature.
“It is our intention and belief we can get through this process before the end of the summer,” Centaur Chief Financial Officer Kurt Wilson said in a telephone interview from New York, where he’s negotiating with lenders.
If Centaur’s reorganization fails, Hoosier Park almost certainly will be sold, along with the rest of its assets. Even if it succeeds, Centaur will emerge a much different company from the firm that confidently borrowed $1 billion just 2-1/2 years ago.
Privately held Centaur already has returned several hundred million dollars originally intended for development of a racino northwest of Pittsburgh that’s now in limbo.
Centaur was a minority investor in Hoosier Park when it opened in 1994. The company later increased its stake, and finally bought out majority partner Louisville-based Churchill Downs Inc. in 2007.
Soon thereafter, the General Assembly approved the addition of 2,000 slot machines at each of the state’s two horse tracks. Centaur ramped up debt to pay the state’s $250 million license fee and expand Hoosier Park. Centaur also hoped to move forward with Valley View Downs near Pittsburgh.
But Centaur’s Pennsylvania project stalled after regulators there failed to approve it. As the economy soured, Centaur found itself overleveraged. In October, it missed a $13.4 million interest payment and saw its credit rating slip into default status. The company filed for Chapter 11 bankruptcy in Delaware in early March.
Debt problems are an industry-wide problem now. In Indiana, both of Gary’s Majestic Star riverboats are in bankruptcy. Evansville’s Casino Aztar emerged from bankruptcy last month
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