08/29/2004 11:00PM

Deal would give Pegram control


The details of a proposed partnership between horse owner Mike Pegram and Fair Grounds Race Course have been made public through court filings, but late Monday afternoon there still was no word whether a bankruptcy court judge would approve the partnership and dismiss Fair Grounds's Chapter 11 bankruptcy case.

If the court approves the deal, Pegram would form a new company called MLD LLC and take control of 86 percent of Fair Grounds. The remaining shares would go to existing Fair Grounds shareholders. The president of Fair Grounds, Bryan Krantz, and his family currently own about 80 percent of the track.

The terms of the partnership agreement also call for Pegram to take control of Finish Line Inc., a Krantz-owned company that operates offtrack betting parlors. Krantz would sit on the board of directors of MLD with the title of vice-chairman, and receive an annual salary of $200,000 for five years. The partnership was formed so that Fair Grounds can pay off its creditors, including the Louisiana Horsemen's Benevolent and Protective Association, with whom Fair Grounds struck a $25 million settlement on Aug. 7. That settlement resulted from an $89.9 million legal judgment against Fair Grounds, stemming from a 1994 lawsuit filed by the horsemen's group against the state's racetracks. Fair Grounds filed bankruptcy in August 2003 to protect itself against the financial judgment.

Under the partnership agreement, MLD would pay $23 million of the horsemen's settlement and $4 million to other unsecured Fair Grounds creditors by Oct. 15, as stipulated in the settlement agreement between the track and the horsemen.

In a bankruptcy court hearing Friday, Judge Jerry Brown approved the settlement between Fair Grounds and the horsemen, but declined to dismiss the bankruptcy case, as Fair Grounds had requested and the Pegram partnership requires. Brown has insisted that Fair Grounds provide assurances that the horsemen and other creditors will be appropriately paid if the case is dismissed.

The partnership agreement gives Fair Grounds the opportunity to entertain third-party bids for the track under certain conditions, leaving a sliver of light for Churchill Downs Inc., which has been rebuffed in its effort to acquire the track. Churchill was to have been a stalking-horse bidder on the track in an Aug. 16 bankruptcy court auction, but the auction was indefinitely postponed when Fair Grounds and the horsemen settled.