Centaur LLC, owner of Hoosier Park Racing & Casino, defaulted on a loan to senior lenders Tuesday, October 27 when it missed a reported $13.4 million interest payment. The Indianapolis-based company stated in a press release issued October 29 that the decision to forego the interest payment on a $400 million-plus loan was done as part of an effort to restructure corporate debt. Centaur used the loan to pay a $250 million casino licensing fee and spent a total of $150 million on grandstand renovation and construction of its 92,000 square-foot racino, which opened in June 2008.
“Our business operations at the property level are healthy and generate positive cash flow from operations. We remain committed to putting our capital structure on solid ground,” Centaur Chairman Rod Ratcliff said in the release. “Restructuring our corporate debt will place us in a position for long-term success and benefit our customers, employees, horsemen groups, host communities and other stakeholders. We are confident our steps will ultimately strengthen the company.”
While Centaur continues to negotiate with creditors, which has been ongoing since July, officials stressed that Hoosier Park and Fortune Valley Hotel & Casino in Central City, Colorado, will continue to operate “without interruption.” The company also announced Thursday that two Pennsylvania-based subsidiaries – Valley View Downs LP and Centaur PA Land LP – elected to file voluntary Chapter 11 bankruptcy petitions in order to keep a racing permit, the last license in the Keystone State.
“This step in Pennsylvania demonstrates how serious we are in clearing the way to get the Valley View Downs project built and operating,” stated Centaur Chief Financial Officer Kurt Wilson. “It allows the application process to continue and reflects our deep commitment to the project. The reason for this filing is to preserve the status of the Pennsylvania project, advance the restructuring process, and safeguard our gaming application.”
In September 2007, the Pennsylvania Harness Racing Commission granted Centaur a permit to build Valley View Downs & Casino, a harness racing and gaming venue located 55 miles northwest of Pittsburgh. One month later, the company closed on a $1 billion financing package for the Hoosier Park and Valley View Downs projects. Centaur lost funding for the Valley View Downs project when Pennsylvania’s Gaming Control Board failed to issue the company a slots license before a key deadline from lenders.
Subsequently, the faltering economy and frozen credit markets prevented Centaur from regaining funding for Valley View Downs. The Pennsylvania Harness Racing Commission has given Centaur until September 2010 to come up with financing for the project, which would feature a one-mile track. If Ratcliff’s group is unsuccessful in securing funding, the license could be awarded to another organization.
With Tuesday’s action, credit ratings agency Standard & Poor’s downgraded Centaur’s bond rating from CCC to D. The lower rating will make it even more difficult for Centaur to borrow the needed funds.
Centaur and Hoosier Park officials have aggressively petitioned Indiana legislators for tax relief to help keep operations viable. Currently, racinos at Hoosier Park and Indiana Downs pay 47 percent in taxes and fees on slots revenue compared to a 35 percent tax rate for the state’s riverboat casinos. The increased tax rate, combined with the $250 million licensing fee and a downturn in the economy, has made it hard for the facility to hit its desired performance marks.