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Hoosier Park owner misses $13.4M loan payment

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Indianapolis-based Centaur LLC, owner of Anderson's Hoosier Park horse track and casino, missed a $13.4 million interest payment due Tuesday on its more than $400 million in outstanding debt, putting the company in default with its lenders.

In response, New York-based debt rating service Standard & Poor’s immediately downgraded Centaur from CCC to D, or “default.”

Centaur CFO Kurt Wilson told IBJ on Thursday morning that his company hopes to roll the $13.4 million payment into a larger restructuring of its total debt. Centaur has been trying to negotiate new terms with its 30 lenders since July, he said. The company’s next quarterly interest payment, also for approximately $13.4 million, is due in late January. Centaur’s debt is scheduled to mature in 2012.

Wilson said Tuesday’s default will have no immediate effect on Hoosier Park’s operations. However, the default is another negative sign for the company, which has acknowledged concerns over the facility’s financial viability.

“This is really just an issue where cash flows from our current healthy businesses don’t support the [parent] company’s debt structure,” Wilson said. “We need to address that and make sure the problem is handled.”

“Our aim is to reduce the outstanding debt, and the cost of that debt, so the company can be on solid ground going forward,” he added.

Centaur announced the default Thursday morning via a press release. Centaur had previously revealed that it’s been negotiating for months with its 30 lenders for a restructuring of its crushing debt load.

After winning legislative approval in 2007 to install slot machines at Hoosier Park, the company borrowed $400 million to pay Indiana’s $250 million license fee and spent another $150 million on mandatory facility upgrades to its racino. Indiana used the license fee’s proceeds to help underwrite property-tax relief for struggling homeowners.

Centaur said the default also won’t have an impact on the company’s operations in Colorado, where it owns Fortune Valley Hotel and Casino in Central City, west of Denver.

Centaur announced it also has filed a voluntary Chapter 11 bankruptcy petition in Pennsylvania for two subsidiaries that hope to develop a racino there. Centaur has long pursued development of the project, called Valley View Downs and Casino, 55 miles northwest of Pittsburgh, but the project stalled when regulatory approvals and financing there fell through last year.

Wilson said Centaur still hopes to erect Valley View Downs once its subsidiaries emerge from bankruptcy in the Keystone State.

“Our focus is getting this done quickly,” Wilson said. “Get Chapter 11 behind us and take advantage of the thaw in the marketplace and interest in getting this [Pennsylvania] project done.”

The Indiana Legislature has been reviewing Centaur’s situation in its Interim Gaming Study Committee. Centaur has repeatedly argued that Indiana’s tax structure unfairly punishes racinos, which must fork over 47 percent of their gambling revenue to the taxman. Indiana’s riverboat casinos pay taxes of about 35 percent. Most of the difference comes from 15 percent in taxes racinos pay to subsidize the horse-racing industry.

Centaur has been pressing legislators to change Indiana’s gambling tax law. Hoosier Park General Manager Jim Brown said many have been responsive to Centaur’s complaints about “parity.”

“We believe this has been met with successfully in terms of the recognition that there is inequity for a segment of our industry,” Brown said. “And we remain cautiously optimistic that in the coming session, or a subsequent session, action will be taken in that area.”

Wilson said that Centaur’s ability to restructure its debt and remain a viable company is not dependent on changes to Indiana’s tax law. But S&P analyst Benjamin Bubeck, who follows Indiana’s gambling industry, is skeptical.

Centaur’s primary problem is a debt load that’s so large it can’t be supported by the company’s current cash flow, Bubeck said. Unless lenders agree to forgive some of that debt, or Centaur can increase its revenues, that problem can’t be solved by an extension of loan maturity.

But Brown pointed out that growing Hoosier Park’s sales would mainly increase the company’s tax burden. Centaur’s racino currently generates about $200 million in annual gaming revenue. Once that threshold is breeched, gaming revenue above $200 million in Indiana is taxed at 54 percent.

“It doesn’t seem likely, given the current debt balance, that they can remain viable without a change in tax structure,” Bubeck said. “The debt balance would make that a challenging proposition.”
 

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  1. Apologies for the wall of text. I promise I had this nicely formatted in paragraphs in Notepad before pasting here.

  2. I believe that is incorrect Sir, the people's tax-dollars are NOT paying for the companies investment. Without the tax-break the company would be paying an ADDITIONAL $11.1 million in taxes ON TOP of their $22.5 Million investment (Building + IT), for a total of $33.6M or a 50% tax rate. Also, the article does not specify what the total taxes were BEFORE the break. Usually such a corporate tax-break is a 'discount' not a 100% wavier of tax obligations. For sake of example lets say the original taxes added up to $30M over 10 years. $12.5M, New Building $10.0M, IT infrastructure $30.0M, Total Taxes (Example Number) == $52.5M ININ's Cost - $1.8M /10 years, Tax Break (Building) - $0.75M /10 years, Tax Break (IT Infrastructure) - $8.6M /2 years, Tax Breaks (against Hiring Commitment: 430 new jobs /2 years) == 11.5M Possible tax breaks. ININ TOTAL COST: $41M Even if you assume a 100% break, change the '30.0M' to '11.5M' and you can see the Company will be paying a minimum of $22.5, out-of-pocket for their capital-investment - NOT the tax-payers. Also note, much of this money is being spent locally in Indiana and it is creating 430 jobs in your city. I admit I'm a little unclear which tax-breaks are allocated to exactly which expenses. Clearly this is all oversimplified but I think we have both made our points! :) Sorry for the long post.

  3. Clearly, there is a lack of a basic understanding of economics. It is not up to the company to decide what to pay its workers. If companies were able to decide how much to pay their workers then why wouldn't they pay everyone minimum wage? Why choose to pay $10 or $14 when they could pay $7? The answer is that companies DO NOT decide how much to pay workers. It is the market that dictates what a worker is worth and how much they should get paid. If Lowe's chooses to pay a call center worker $7 an hour it will not be able to hire anyone for the job, because all those people will work for someone else paying the market rate of $10-$14 an hour. This forces Lowes to pay its workers that much. Not because it wants to pay them that much out of the goodness of their heart, but because it has to pay them that much in order to stay competitive and attract good workers.

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  5. It is sad to see these races not have a full attendance. The Indy Car races are so much more exciting than Nascar. It seems to me the commenters here are still a little upset with Tony George from a move he made 20 years ago. It was his decision to make, not yours. He lost his position over it. But I believe the problem in all pro sports is the escalating price of admission. In todays economy, people have to pay much more for food and gas. The average fan cannot attend many events anymore. It's gotten priced out of most peoples budgets.

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