11/20/2007 12:00AM

Court rules for NYRA

EmailA U.S. Bankruptcy Court judge on Tuesday dismissed a petition by a creditor of the New York Racing Association, allowing the association to pursue an amended reorganization plan, attorneys for the creditor and NYRA said.

Judge James Peck of the U.S. Bankruptcy Court for the Southern District of New York dismissed the claim one week after the creditor, Plainfield Special Situations Master Fund Limited - a company that purchased a debt held by one of NYRA's original creditors - argued that NYRA's reorganization plan was "illusory" and that other creditors such as itself should be able to submit reorganization plans.

On Tuesday, NYRA presented an amended reorganization plan to address concerns from creditors, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation. According to Brian Rosen, the attorney for NYRA, the judge continued the hearing on the amended plan until Dec. 2.

"He wants to give the other people the opportunity to weigh in with the court," Rosen said.

Bankruptcy courts typically give the debtor the exclusive right to submit reorganization plans until it is clear that the plans cannot be implemented. At that point, creditors of the business are allowed to submit plans.

NYRA filed for bankruptcy late last year. The association's franchise to operate Aqueduct, Belmont, Saratoga, and a casino at Aqueduct expires at the end of this year, and the bankruptcy filing and the court's decisions have become intertwined with a highly political process to award the franchise that is currently in stalemate.

Plainfield Special Situations Master Fund is wholly owned by the investment firm of Plainfield Asset Management, which is a partner in Capital Play Pty, one of the companies trying to take over the franchise. The company, initially set up by Australian bookmakers, purchased a $1,495 debt held by Wyoming Downs against NYRA in order to bring its petition to the court.

NYRA's reorganization plan is based on receiving legislative approval for a deal brokered with New York Gov. Eliot Spitzer that would extend the association's franchise for 30 years in exchange for the state taking title to the racetracks and providing $75 million in funds to help the association emerge from bankruptcy.

The plan is supported by the state assembly, but the state senate's majority leader, Joseph Bruno, has offered a competing proposal that would establish a state board to evaluate bids for each of the racetracks, a casino at Aqueduct, and, possibly, a casino at Belmont Park.

In its motion, Plainfield argued that NYRA's reorganization plan was "completely illusory" because of its reliance on legislative approval. The attorneys maintained that because the plan is opposed by Bruno, NYRA's franchise would not be renewed.

"Under the circumstances, the creditors of this estate, not to mention the State and its horse racing industry, are entitled to consider a viable alternative to NYRA's empty proposal," the petition said.

In court papers, NYRA argued that Plainfield did not have standing to make the motion because NYRA's debt to Wyoming Downs had subsequently evolved into a credit to NYRA because of accounting practices governing simulcast wagering and settlements. NYRA also maintained that Plainfield would be unable to implement a better plan for creditors and that the plan would undo the progress made by the state in negotiations with NYRA to settle the franchise issue.