04/12/2004 11:00PM

Churchill moves toward a buy


An agreement between Churchill Downs Inc. and the Louisiana Horsemen's Benevolent and Protective Association could pave the way for Churchill to acquire Fair Grounds, the embattled New Orleans racetrack. According to sources close to the negotiations, CDI would acquire the track for $45 million. But the prospective deal does not signal an imminent acquisition. Churchill and Fair Grounds, which is in bankruptcy, must reach an accord for the agreement to stick, with negotiations expected to intensify later this week.

Under the terms of the deal, Churchill would pay the Louisiana HBPA $33 million. Last month, a district court judge ruled Fair Grounds owes the horsemen's group $89.9 million because for about 13 years the track took improper deductions from video poker machines it operates. Last spring, the Louisiana Supreme Court ruled unanimously against Fair Grounds in the matter, and to protect itself from the scope of the judgment, Fair Grounds declared bankruptcy. The other $12 million of CDI's offer would be used to pay the track's other creditors.

Bryan Krantz, Fair Grounds's president and general manager, issued a statement Tuesday, emphasizing there was no deal yet.

"While there are reports of potential suitors, our main focus is to remain owners and operators of the business we have given so much to make a success," Krantz's statement said. "In regard to Churchill Downs Inc., we have not had any formal discussions. We continue to talk to many different organizations as it relates to our reorganization plan."

The Churchill deal originally set a Wednesday evening deadline for Fair Grounds's response, but that has been extended until Friday. Also, the track's deadline for submitting a reorganization plan in bankruptcy court was pushed back from Thursday to Monday.

This is Churchill's second reported offer for Fair Grounds. The first, made in March, was for a total of $28.8 million. Louie Roussel, a former Fair Grounds owner, made an offer of about $30 million. Several other groups, inside and outside the racing industry, are also interested.

The agreement between Churchill and the HBPA represents a significant move forward in the tenor of the offers, but as presented, might not be acceptable to Fair Grounds. Foremost among the potential sticking points is the requirement that Fair Grounds terminate its right to any existing claims and appeals concerning the judgment won by the horsemen. Fair Grounds has appealed the judgment amount, and also has made a legal claim against the state of Louisiana, asserting that the state bears responsibility for the improper deductions.