08/30/2004 11:00PM

Fair Grounds deal up in air


A New Orleans bankruptcy judge gave final approval Tuesday of a settlement between the Fair Grounds Corp. and the Louisiana Horsemen's Benevolent and Protective Association, but by early evening the fate of the track was far from certain.

Although a motion was filed in court late last week outlining a partnership agreement between Fair Grounds and the horse owner Mike Pegram to solve the track's financial problems, the court has not yet approved the partnership. The partnership agreement with Pegram allows Fair Grounds to negotiate with a third party, and there were suggestions Tuesday that the track was searching for a better deal.

People involved in the negotiations declined to offer details Tuesday. Pegram would say only: "All I know is I signed a contract, and I was in bankruptcy court last Friday. I don't know what the legality of it all is. This has been a roller coaster ride, and I'm not ready to get off it yet."

Before Pegram became involved, Churchill Downs Inc. was the leading contender to acquire the track. In fact, a bankruptcy court filing last Friday included a memorandum from Tom Meeker, president and CEO of Churchill Downs Inc., citing CDI's frustration at its inability to acquire Fair Grounds and describing some of the terms under which it sought to gain control of the track.

At one point, CDI and Fair Grounds had agreed that CDI would go into a bankruptcy court auction with a lead bid of $45 million to purchase Fair Grounds' assets.

But the auction was precluded when Fair Grounds and the Louisiana horsemen's group hammered out a settlement for $25 million, a figure far less than an $89.9 million judgment a district court awarded to the horsemen last spring. The judgment stemmed from a lawsuit filed against the track contending that improper deductions of video poker revenue had shortchanged the track's purse accounts.

The settlement gave Fair Grounds seven days to find a financial partner to help pay off the horsemen and other unsecured creditors, and as negotiations intensified, and the horsemen granted the track a brief extension, the race boiled down to CDI and Pegram. On Aug. 14, CDI announced it had withdrawn from negotiations, and two days later, Fair Grounds and Pegram announced the partnership that was taken into court last Friday.

The settlement between Fair Grounds and the LHBPA must close on or before Oct. 15, but bankruptcy court actions are pending before that, and the Fair Grounds racing season, which begins Thanksgiving Day, is creeping ever closer.