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Friday, November 03, 2006

NYRA Gets Cash Call

- NYRA limps on with an $8 million loan, at 4% interest, from the State Comptroller's office.

Scott Reif, a spokesman for Gov. George Pataki, said the state's bankruptcy lawyer advised it was "the most prudent course to take to protect the state's assets and its taxpayers and insure the continued racing in New York State." [Albany Times Union]
NYRA said that the money will keep them operating through the end of the year. Bill Nader told the NY Post: "They've already wired the money into our account." Now there, that wasn't so freaking hard, was it?

NYRA was attempting to get the court to approve a $50 million credit line at above-market rates; Matt Hegarty of the Daily Racing Form identified the prospective lender as SB Capital, a New York hedge fund. Just speculating here, but it seems to me that NYRA must have done some kind of selling job to the hedge fund if they are indeed willing to lend them the money. Without at least a reasonable prospect that a) the courts would rule that NYRA owns the land, or b) NYRA retains the franchise and thus, gets the racino built, why would they make such a loan? It's pretty clear at this point that NYRA will never see a penny of casino revenue by December 31, 2007 since everyone agrees that will take a year to build the racino and get it up and running. How would any lender recoup its investment if NYRA goes out of existence with no claim to the land, and with no casino? Hedge funds are prone to take risks to be sure, but they're not in the business of giving money away.

In order for the court to approve that loan, it's quite possible that it would have had to make a ruling on the land as one of the first orders of business. So perhaps the state, despite its insistence that it owns the land, is still hesitant to have that determined by a judge, and stepped in with its loan instead.

Eliot Spitzer, who will become the Governor-elect on Tuesday, reiterated his belief that NYRA's land claim is a sham. "The bankruptcy action and the effort to claim the state does not own the tracks is a canard," said Spitzer spokesman Paul Larrabee. Hearing statements like that certainly do not bode well for NYRA's chances to retain the franchise, considering that Spitzer will ultimately approve the new operator. Nor are statements like this from Senate Majority Leader Joseph Bruno.
"There's $19 million in cash flow that we legislated, available to them, so what they did I believe was unnecessary and disruptive...The people that made that decision made a bad decision for the people of this state." [Saratogian]
But in the meantime, racing will go on uninterrupted. NYRA officials met with horsemen at the Big A, and trainer Richard Violette told the Form: "It was a short and sweet meeting....The assumption is that it is going to be business as usual. That's the hope." Violette is a VP of the New York Thoroughbred Horseman Association, and a staunch supporter of Empire Racing. Bill Nader had a somewhat different take on the meeting: "We got a very warm reception....Everybody seemed to be behind us."

A spokesperson for the state's Lottery Division told Newsday that the filing prevents the agency from making a decision on the video lottery deal; but they've had the agreement between NYRA and MGM since June without acting on it. And though we reported the other day that bankruptcy lawyers feel that the filing prohibits the state from terminating NYRA's franchise prematurely, some critics believe that NYRA's contract should be ended.
"The governor has every right to take away the franchise right now because of malfeasance," said state Sen. John Sabini (D-Jackson Heights). "The NYRA situation is so broken, I don't see how it could be fixed." [Newsday]
And, while all this transpires, Yonkers Raceway's casino rolls on, even as fire code violations persist, and the November 3 date to resume the racing that is required by law came and went without a sulky in sight. Not only that, the casino will unveil 500 new machines this weekend. Nov 10 was given as the new date to start racing. I wouldn't bet on it. Unbelievable.