08/05/2004 12:00AM

Auction may be avoided

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Fair Grounds Race Course and the Louisiana Horsemen's Benevolent and Protective Association are negotiating a settlement of the video-poker lawsuit the horsemen have pending against the racetrack, and an agreement between the parties could preclude Fair Grounds being auctioned off in bankruptcy court.

Attorneys for the LHBPA and Fair Grounds confirmed negotiations between the two parties were ongoing as of late Thursday, but few details were offered.

"There's been no agreement yet, and that's all I can say," said Jim Gelpi, lead attorney for the horsemen's group.

Douglas Draper, a bankruptcy attorney for Fair Grounds, confirmed negotiations were opened a couple weeks ago, but he also emphasized the fluidity of the ongoing talks.

The negotiations come as something of a surprise, since Churchill Downs Inc. has signed on as a stalking-horse bidder to purchase the Fair Grounds's assets in a bankruptcy court auction scheduled for Aug. 16. Fair Grounds was judged to owe the LHBPA more than $89 million in purse supplements that were improperly deducted from video poker machines over a period of several years. That figure far exceeds the total value of the racetrack, and to protect the track from the legal liability, Fair Grounds declared Chapter 11 bankruptcy.

The bankruptcy process appeared to have moved into an end-game phase in July. After months of behind-the-scenes maneuvering, an auction of the track had tentatively been set for Aug. 16. Churchill, with a $45 million asset-purchase agreement, was to go into the auction as a so-called stalking-horse, the entity with the lead bid on the track, and Bryan Krantz, Fair Grounds's president and general manager, was running out of chances to retain control.

Now, Krantz apparently has another chance. Draper said it was premature to say whether Krantz could maintain control of Fair Grounds. An auction still remains possible, but Fair Grounds could also pay off a negotiated settlement itself, as well as its other creditors, or sell all or part of the track outside bankruptcy court proceedings.

Draper said the eleventh-hour settlement talks were a natural consequence of the lawsuit.

"Anytime attorneys can reach a settlement and avoid legal proceedings, they'll try to do it," Draper said.