Hoosier Park owner seeks to reorganize $680M in debt

Indianapolis-based Centaur LLC, owner of Hoosier Park horse track and casino in Anderson, hopes to restructure $680 million
in debt through Chapter 11 bankruptcy reorganization, Chief Financial Officer Kurt Wilson said Monday morning.

The company filed the bankruptcy on Sunday.

In a telephone interview, Wilson said his company has total assets of $580 million and total liabilities of $680 million.
He said details of Centaur’s restructuring plan should be available next week, once the company nails down fine points
of its proposal with creditors.

As part of the reorganization, Centaur has put a for-sale sign on its Fortune Valley Hotel and Casino in Central City, Colo.
It acquired the property in 2003. Besides Hoosier Park, Fortune Valley is Centaur’s largest operating asset.

Wilson said Centaur has hired a consultant to help it market the Fortune Valley property, which is 39 miles west of Denver
and contains 37,000 square feet of gambling space and 118 guest rooms. Wilson declined to disclose Centaur’s asking
price for Fortune Valley.

Centaur has been struggling under a heavy debt load for some time. In October 2009, it missed a $13.4 million payment due
on more than $400 million in outstanding debt, putting Centaur in default with its lenders.

Through its bankruptcy, Centaur seeks to reduce the cost of servicing its debt load. Much of that debt was incurred to upgrade
Hoosier Park and add its slots parlor. After winning General Assembly approval in 2007 to install slot machines at Hoosier
park, Centaur borrowed heavily to pay Indiana’s $250 million license fee and spent another $150 million on mandatory
Hoosier Park upgrades.

Centaur plans to continue to hold and operate the facility, Wilson said. The company said the bankruptcy shouldn't interrupt
operations or lead to staff layoffs.

“The operating units of the company are successful. They’re generating more than adequate cash flow to meet their
operating needs,” Wilson said. “It’s the parent company’s financial structure that’s a problem.”

In January, state records show, Hoosier Park had $15.7 million in gaming revenue, and paid $4.6 million in taxes.

Wilson said Centaur has already reached agreement in principal with its first lien holder, Philadelphia-based PREIT Services
Inc. According to its bankruptcy petition, Centaur owes PREIT $28.7 million. PREIT is an affiliate of Pennsylvania Real Estate
Investment Trust, which has done extensive contract and development work for Centaur in Pennsylvania. In 2007, Centaur agreed
to pay PREIT $87 million for terminating a development and construction management contract for a racetrack and casino in
Beaver County, Pa.

The next-largest creditor is listed in the bankruptcy petition as Louisville, Ky.-based Churchill Downs Inc., which Centaur
owes $15 million. Churchill Downs was one of the original owners of Hoosier Park, which was completed in 1994, but sold its
remaining interest to Centaur in 2007. According to documents filed with the Securities and Exchange Commission, Centaur agreed
in December 2006 to pay Churchill Downs $15 million if Hoosier Park eventually operated slot machines.

Centaur is still pegging its future growth on the development of Valley View Downs and Casino in Pennsylvania. The company
has long pursued development of a “racino” similar to Hoosier Park 55 miles northwest of Pittsburgh, but the project
stalled when regulatory approvals and financing there fell through in 2008.

In October, Centaur filed a Chapter 11 bankruptcy petition in Pennsylvania for two subsidiaries attempting to develop Valley
View Downs. Wilson said Pennsylvania’s harness racing commission has granted Centaur a license to build and operate
its planned horse track. The company is still waiting for Pennsylvania gaming commission approval to build a slots parlor

“We intend to see the project developed,” Wilson said.

Centaur has complained that Indiana’s ongoing gambling taxes, not the $250 million license fee, have hurt its ability
to reduce its debt. Hoosier Park and its Shelbyville counterpart, Indiana Live, must fork over more than 47 percent of their
gambling revenue in taxes, compared with the 35-percent rate riverboats pay. Most of the difference goes to subsidize Indiana’s
horse racing industry.

But with the General Assembly’s 2010 session approaching the finish line, it appears unlikely legislators will agree
to provide Centaur substantial tax relief this year. Indiana Gaming Commissioner Ernest Yelton said he’s not aware of
any bill or conference committee report still alive that could impact Centaur, although he pointed out ideas can be resurrected
quickly in final negotiations.

Like Centaur, Yelton said Indiana isn’t expecting any change in Hoosier Park’s operations or its steady flow
of tax revenue to the state. He said Centaur has kept regulators regularly apprised of its cash-flow problems and its attempts
to shed debt. Indiana has been through bankruptcy reorganization several times with casino owners in recent years.

In each case, one of two scenarios plays out, Yelton said. Often, the owner maintains control of the process, and its bankruptcy
plan plays out as it expects. Occasionally, the bankruptcy runs its course, and the owner is ultimately forced to sell the
casino. In either case, Yelton said, the casino typically keeps its doors open.

Indiana would not be able to charge a new owner another license fee in addition to the $250 million Centaur paid, Yelton
said. But state regulatory approval would be necessary for any other entity to offer gambling at Hoosier Park.

“I think the key here is people should be reassured it will be business as usual, as far as the operation is concerned,”
Yelton said. “People need not fear for the safety of their jobs, or the flow of [tax] income to the locals, or the state.”

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