Odds On Racing - Harness Racing

NYRA Files Chapter 11

October 29, 2007

The New York Racing Association has filed a Chapter 11 plan in which it plans to surrender a claim of ownership over thoroughbred tracks in exchange for the right to run the tracks for the next 30 years.

The plan, submitted Tuesday to the U.S. Bankruptcy Court in Manhattan, is based on a memorandum of understanding that NYRA reached with New York State in September. The memorandum, which is subject to the passage of a bill by the state legislature, is aimed at avoiding a long, costly legal battle over who owns the race tracks.

NYRA has organized horse racing at the Aqueduct, Belmont and Saratoga ovals since 1955 under a state franchise, and has claimed that it owns the tracks.

In 2006, NYRA filed a lawsuit in bankruptcy court against state officials for asserting that the state owned the racetracks and that upon expiration of the franchise on Dec. 31, 2007, NYRA would lose rights or interests to the tracks. The lawsuit also alleged that the officials hindered NYRA's finances and drove the association into bankruptcy.

Under the memorandum of understanding and now the Chapter 11 plan, NYRA has agreed to "irrevocably relinquish" its claim that it owns the tracks.

In exchange, New York will award the reorganized NYRA a 30-year franchise starting Jan. 1, 2008.

According to the Chapter 11 plan, NYRA will give the state all net revenue it receives annually from racing operations as a franchise fee.

The Chapter 11 plan provides that New York State will choose, in consultation with NYRA, a gaming entity to run video lottery terminals at Aqueduct, in the New York City borough of Queens. With funds received from the gaming entity, the state will provide NYRA up to $75 million that it can use to repay creditors.

The state will also forgive debt NYRA now owes, provided the gaming entity is willing to reimburse the state for such forgiven obligations.

The bankruptcy court is scheduled to consider approval of the Chapter 11 plan disclosure statement on Nov. 20. The document summarizes the Chapter 11 plan in plain language and must be approved by the court before the plan can be sent to creditors for a vote.