Hawthorne bankruptcy hearings underway
by Neil Milbert
Leaders of the Illinois Harness Horsemen’s Association (IHHA) are cautiously optimistic heading into the Tuesday (March 10) third round of Hawthorne Race Course bankruptcy hearings scheduled to be held before Judge Timothy Barnes in U.S. Bankruptcy Court for the Northern District of Illinois Eastern Division.
The hearings began with a 6½-hour session on March 3 followed by a second session the following day.
“I hope that the horsemen can be encouraged that the court is looking after them,” Judge Barnes said. “I’m motivated to get the horsemen paid.”
The judge believes the owners, trainers, and drivers who are owed purse money dating back to last fall qualify as a “critical vendor” as do Hawthorne’s employees.
“This is a very encouraging development and an important step toward ensuring horsemen will be paid,” the IHHA said on its website.
With Judge Barnes’ approval Hawthorne is hoping to tap into a $16 million debtor-in-funding line of credit from the private equity lender JDI Loans.
The budget Hawthorne is proposing in bankruptcy court calls for the track to pay $1.4 million in returned checks to horsemen and another $2.4 million in unpaid purse money.
The Illinois Racing Board suspended the license of Hawthorne’s Suburban Downs harness meeting on Jan. 26 as a consequence of bounced checks in December and January. This year’s 14 programs at the Suburban Downs meeting that began last November all had to be cancelled.
Although both harness and thoroughbred racing are operated by the track that has been owned by the Carey family since 1909 the thoroughbred meeting is considered a separate entity by the Racing Board so it is unaffected by the Suburban Downs suspension.
Prior to the Feb. 27 bankruptcy filing it was generally believed Hawthorne had a sprinkling of creditors: members of the IHHA, the Illinois Thoroughbred Horsemen’s Association (ITHA), Churchill Downs, Inc. and a few other simulcast outlets and two Chicago area contractors for 2020 demolition work on a portion of the grandstand for conversion of the track into a racino.
But the bankruptcy filing reveals that diversified creditors stretch from coast to coast and the amount they are owed is staggering.
The filing showed assets of between $50 million and $100 million and debts between $100 million and $500 million.
The track’s real estate is estimated to be worth $95 million. The property and racetrack are owned by Carey Heirs Properties, LLC, 77 family members who are descendants of Thomas Carey, who bought the track in 1909 (18 years after it was built).
“Astounding!” said IHHA executive director Tony Somone, expressing the consensus after the extent of Hawthorne’s indebtedness came out in bankruptcy court.
The top 20 unsecured creditors are owed in excess of $37 million, of which more than $16 million is claimed by horse racing entities.
Hawthorne’s largest unsecured creditor is its former sports betting partner, Fanatics, which is owed in the neighborhood of $9 million.
Ariza Group Architects has a claim of more than $5.6 million and W.E. O’Neil Construction has one for nearly $5.1 million (that Hawthorne is disputing). Both are Chicago area firms that were employed to prepare for the proposed $44 million racino project that stalled after the teardowns.
Hawthorne also owes the Horse Racing Integrity and Safety Authority $971,208.
Included on the list of simulcast-related creditors are:
• Monarch Content Management (the Stronach group’s simulcast company) claim for $7.1 million
• Roberts Communications Network (expenses related to sending and receiving simulcast signals) claim for $1.5 million
• Woodbine claim for $1.2 million
• Churchill Downs, Inc. claim for $974,770
• Laurel claim for $875,287
• Caesar’s claim for $750,891
• The Meadowlands claim for $590,760
• Del Mar Thoroughbred Club claim for $509,442
• New York Racing Association claim for $502,500
• Penn National claim for $491,828
• Parx Racing claim for $448,268
• Tampa Bay Downs claim for $413,079
According to Somone, the IHHA is in jeopardy of “running out of money by August or September” unless it receives the funds legally earmarked for administrative and office expense.
“It cost us $6,000 to have legal representation at the hearings,” he said. “The non-payments go back to last year and the expenses keep mounting.”
Hawthorne’s Signature Bank account was frozen in December and January because of the bounced checks and its monthly simulcast revenue has fallen from $5 million to less than $1 million because in the last 18 months many unpaid tracks have stopped sending their signals for wagering.
Members of the ITHA also have approximately $1.6 million in purse accounts they can’t access.
The start of the March 29-Nov. 1 thoroughbred meeting at the Chicago metropolitan area’s only remaining track will be delayed because of the lack of funds to start the conversion of the racing surface.
Last week, Judge Barnes approved a release of funds to convert the track surface and ITHA president Chris Block anticipates the meeting will begin in early April.
If and when the harness owners, trainers, and drivers are made whole it is expected the Racing Board will lift its Suburban Downs suspension, enabling the track to conduct its Nov. 6-Dec. 27 standardbred meeting.
In addition to the thoroughbred and harness meetings, Post Time Catering, Inc. and 13 off-track betting locations in Illinois fall under Hawthorne’s financial umbrellas.
Hawthorne is the only track in the state conducting pari-mutuel harness racing and is the only dual-purpose track in the U.S. Downstate Fairmount Park, across the Mississippi River from St. Louis, is limited to thoroughbred racing.
