08/06/2004 11:00PM

Fair Grounds, horsemen settle lawsuit


Fair Grounds Race Course and the Louisiana Horsemen's Benevolent and Protective Association reached an out-of-court settlement of a 10-year-old lawsuit late Friday night in New Orleans, averting a bankruptcy court auction that could have led to the track's sale.

Under the settlement's conditions, Fair Grounds will pay the horsemen at least $25 million. The amount could increase if certain future conditions arise, such as a lucrative sale of the racetrack in the next several years. Also, Fair Grounds agreed to make $750,000 in capital improvements on the backstretch within two years.

The horsemen's group filed the lawsuit in 1994, contending Fair Grounds was improperly deducting revenue from video poker machines that was to be funneled into the track's purse account. The horsemen won the original case, but an appeals court overturned that ruling. The suit went to the Louisiana Supreme Court, which ruled 7-0 against Fair Grounds. Last spring, a judge used a mathematical formula to determine Fair Grounds owed the horsemen nearly $90 million.

The settlement gives the Krantz family of Kenner, La., an opening to maintain control of the racetrack, but that remains an uncertain issue. Besides the settlement amount, Fair Grounds, which declared Chapter 11 bankruptcy this past spring, must pay off other creditors, which will cost several more million dollars. Bryan Krantz, Fair Grounds' president and general manager, must either find a way to finance the repayment or take on a partner to share the financial burden. Krantz has at least two known suitors, including Churchill Downs Inc. Thoroughbred owner Mike Pegram also has persistently expressed interest in the track.

Douglas Draper, a bankruptcy attorney for Fair Grounds, said Fair Grounds had agreed to identify a partner or financial backer within seven days.

The Louisiana HBPA must be paid $23 million by Oct. 15, with another $2 million to be paid over time. Draper said the bankruptcy case might be dismissed outright. Alternatively, a plan could be filed in bankruptcy court that would include the settlement and a proposal to pay off other Fair Grounds creditors in full. There will be a bankruptcy court hearing at the end of August.

There will not, however, be a court auction, which was scheduled for Aug. 16. Churchill Downs was to have gone into the auction with a lead asset-purchase bid of $45 million. Now, CDI, which covets a winter venue, could be left out.

Draper and Jim Gelpi, lead counsel for the horsemen, were pleased with the settlement.

"Under the economic conditions of Fair Grounds, this settlement is right at the most we could get at auction," Gelpi said. "The money was right, and this way the outcome was certain. This brings finality to a 10-year procedure."