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Monday, March 16, 2009

Not Just Magna

- Rounding the first bend in its path to auction (as described on the website; its a pay website, but they let what has to be the best line in the story go in the preview blurb), Magna got approval from bankruptcy court to borrow the first $13 million of a $62 million credit line from MID Developments. "Good cause has been shown for this order," wrote the judge, who disallowed a challenge by MID shareholder Greenlight Capital, which has been battling the real estate company over the racetrack company for years.

The Delaware court is next scheduled to hold a hearing on Magna's bankruptcy on April 3. At that time, the court will hear from any other parties who may be interested in bidding on the assets covered by the agreement between Magna and MI Developments. [Daily Racing Form]
While the Magna drama plays out on a larger stage, a smaller one is developing closer to home. Empire Resorts, the parent company of the Monticello harness track in upstate NY is issuing statements with an ominously familiar ring:
“We do not presently have a source of repayment for this credit facility or for these notes and our operations will not provide sufficient cash flow to repay these obligations...

“These factors, as well as continuing net losses and negative cash flows from operating activities as well as an uncertain economic environment, raise substantial doubt about our ability to continue as a going concern. [Times Herald Record]
Revenue is down across the board at the racetrack, which I last visited a couple of summers ago. Racino revenues are down 10% in 2008, a stark contrast to the remarkable trend of racino growth in the state; while racing revenues were down a depressing 22%.
Company officials said the decrease in video lottery machine revenues can be attributed primarily to more competition from similar facilities at Yonkers Raceway, which opened in November 2006, and new casinos opening in Pennsylvania in 2007. Economic conditions in the fourth quarter of 2008 also had an adverse effect on revenues, Empire Resorts said. And, patron visits decreased by almost 20 percent.

The decrease in racing revenue was primarily a result of reduced revenue allocations from OTB facilities, they said in their annual SEC report. [Mid-Hudson News]
Yeah, it's tough competition for the track at OTB. They tried 5 PM cards at one point to try and fill a gap between the NYRA races and the harness tracks at night. But there is no gap, really, with the OTB simulcasts from out-of-state. Now they race at 1:10, perhaps to save on electricity.

Of course, Monticello is supposed to move to, and be reborn at Louis Cappelli's new Concord complex. But that project has fallen victim to the times, with Cappelli unable to complete financing and construction therefore on hold. Meanwhile, Empire has an outstanding balance of about $7,150,000 from the Bank of Scotland on May 29, and $65 million of convertible notes callable come July 31. No wonder it's telling shareholders that it "might not survive the summer." And I doubt that this track company has any creditors willing to keep it in business.

- Slots revenue is also down at Mountaineer, and so, purses are going down too - 10% starting April 20.

Despite that, the purses sure beat those at Turfway Park in slot-less Kentucky. This is a rather sobering set of statistics I saw on the website.
England said a typical purse for a first-place finish in a $5,000 claiming race is $6,600 at Turfway Park, $14,100 at Mountaineer Casino Racetrack & Resort in West Virginia, and $15,000 at Philadelphia Park Casino & Racetrack.

The winning horse's owner gets 60 percent of the purse: $3,960 at Turfway, $8,460 at Mountaineer, and $9,000 at Philadelphia. The jockey and trainer each get 10 percent of that cut.

It costs about $24,000 annually to care for a racehorse. To break even, a horse owner would have to win 6.1 races per year at Turfway, 2.8 races at Mountaineer, or 2.6 races at Philadelphia.

"There's no horse anywhere that wins six races a year. So there's no way to make it," England said.
The speaker is Dave England, a formerly successful Turfway-based horse owner who got out of the business in January rather than move his operation elsewhere.

- If it's up to New Jersey citizens (the normal ones who don't play the horses), there won't be any racinos at that state's racetracks anytime soon. A Farleigh Dickinson poll shows that 70% think that casino gambling should be limited to Atlantic City. This report comes at a time when the casinos there are struggling, and thus only lends fresh ammunition to their already powerful political sway. The present subsidy agreement already bars racinos at the state's tracks through 2011. And Joe Carbo, the head of the Casino Association of NJ, took the opportunity to rub it in:
"Most New Jersey residents clearly understand that Atlantic City is an economic engine for our entire state, and are unwilling to jeopardize its future by unnecessarily expanding gaming." [AP]


Anonymous said...

The ship has sailed and NY missed the boat. Only Albany could be so greedy and stupid at the same time, costing taxpayers millions.

We will not see VLT's EVER at the Big A, all projections of daily handle per machine will need to be reduced to reflect today's new world, and when you run the numbers the revenue will simply not be enough to justify the investment.

Ship sailed, move on.

7 years we waited, costing taxpayers conservatively a half million dollars per day (half of projected amount).

Quick math approximates $1.2 BILLION forfeited simply to line some politicians' pockets.

Sure, there is plenty of blame to go around, but bottom line if Albany wanted this done it would have been done a long long time ago, but they chose to milk their contributions rather than do what's best for the State (surprise surprise) and now there is nothing for the taxpayers.

Anonymous said...

Look for Aqueduct VLT's to die off and the big dance at Belmont Park to start sometime after budget season. If the Big A wants a parlor and related development, Pheffer and Addabbo, along with Community Board 10 had better keep fighting, louder than they are to date.

Anonymous said...

anon 959, agree with you that Big A will never see their vlts.

But building a VLT parlor anywhere without true card games, is a losing proposition right now.

It was invevitable that all this competition would reduce per machine gross, and now that the economy has made financing near impossible, the combination of the two may preclude a VLT parlor at Belmont too. The numbers simply will not add up, at least not with a big up front payment to the government, and of course, the horseman getting shafted.

Of course, the politicians, addicted to the cash, will find some way to ignore the NYS constitution and allow true casino gambling soon, for which Belmont would be a prime location, but I fear that NY horsemens' share of the pie is lost forever.