Centaur Inc. spent years lobbying the General Assembly for permission to add slot machines to its Hoosier Park horse track in Anderson. In 2007, it finally hit the jackpot, winning approval to install 2,000 one-armed bandits there.
Now, the cash-strapped Indianapolis gambling company wants to move one-quarter of them to Fort Wayne, where it already operates an off-track betting parlor. A Centaur-backed bill sponsored by Rep. Terri Austin, D-Anderson, is pending in the Legislature.
"Impacted by the declining economy, Centaur needs additional revenue to compensate for an unprecedented $250 million licensing fee assessed by the state of Indiana for its limited gaming operations in Anderson," Centaur spokeswoman Susan Kilkenny said in an e-mail response to IBJ's questions.
Both Centaur and the owners of Shelbyville's Indiana Downs horse track paid the licensing fee, and amid fanfare they opened their so-called racinos last summer. Since then, Centaur has raked in $110.6 million in gambling revenue.
But Centaur is feeling financial strain nonetheless, in part because of a big setback in Pennsylvania, where the company hoped to build another racino.
Centaur in November 2007 raised $1 billion to fund gambling projects in three states. Of that, $400 million was for Indiana's license fee and Hoosier Park improvements. Most of the remainder was earmarked for the Valley View Downs racino, slated for outside Pittsburgh.
But last July, the Pennsylvania Gaming Control Board rejected Centaur's request for a license, saying the company hadn't adequately addressed all its questions.
Because Valley View's financing was contingent on the license, last fall Centaur returned the capital for the project. But it's still saddled with millions of dollars it invested in hopes of getting the project off the ground.
Now company officials are mulling what to do next. Options include trying to revive the project or selling the land and other assets.
"To date, interest expense has been reduced by the lower amount of debt outstanding," Kilkenny wrote. "The company expects its work with Credit Suisse on strategic alternatives for Pennsylvania will result in full retirement of the debt obligations associated with the project."
New York-based credit rating service Standard and Poor's isn't as confident. In January, it downgraded Centaur's debt to "CCC," only three notches above default.
"In the absence of a sale of its Pennsylvania property, we do not expect Centaur will have sufficient liquidity to meet its fixed obligations in 2009," S&P wrote.
In addition to Hoosier Park, Centaur owns Fortune Valley Hotel and Casino in Central City, Colo., as well as OTB parlors in Indianapolis, Evansville and Fort Wayne.
Lawmakers this session are focused primarily on writing a two-year budget amid the deepening recession, making the prospects for the Fort Wayne slots bill difficult to handicap, said Ed Feigenbaum, publisher of the Indiana Gaming Insight newsletter. If the bill dies, he said, Centaur likely will push it again next year.
The Legislative Services Agency estimates passage of the bill would generate $55 million to $65 million in additional annual gambling revenue, plus $6 million to $8 million in additional taxes.
In addition to trying to shore up its bottom line, Centaur may be attempting to gain the opportunity to one day open a full-blown casino in Fort Wayne, Feigenbaum said. Tom Henry, Fort Wayne's mayor, in January publicly launched an investigation of the city's gambling options.
"You can look at this as both an offensive and a defensive move," Feigenbaum said. "The cynics and skeptics will say this is being done because they aren't making the kind of money they wanted or expected to make in Anderson. And that may be the case. But it may also be a foothold or a way to get their nose under the Fort Wayne tent.