09/23/2004 11:00PM

Fair Grounds plan approved

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A federal bankruptcy court judge on Friday in New Orleans confirmed a plan of reorganization filed on behalf of Fair Grounds Corp., paving the way for Churchill Downs Inc. to take control of Fair Grounds Race Course in the coming weeks.

Churchill Downs Inc. is scheduled to close on a $47 million asset-purchase agreement on or before Oct. 15. The asset-purchase agreement was the key part of the amended reorganization plan, giving Fair Grounds Corp. the necessary finances to pay its creditors. As part of the deal, Bryan Krantz, the president, general manager, and majority shareholder in Fair Grounds Corp., will remain as chairman of Fair Grounds for three years at an annual salary of $400,000.

But the Krantz family's 14-year reign at the storied New Orleans track has effectively ended, and CDI has picked up a coveted winter racetrack. CDI has conspicuously lacked a major winter racing venue, while its main competitor, Magna Entertainment, operates winter powerhouses Gulfstream Park and Santa Anita Park.

Fair Grounds Corp. now is nearly out of Chapter 11 bankruptcy, the federal law under which it filed for protection in August 2003. When CDI closes the deal, Fair Grounds Corp. will pay the Louisiana Horsemen's Benevolent and Protective Association, its largest creditor, $25 million, the amount of a settlement between the two parties that ended an 11-year-old lawsuit that essentially brought down the Krantz ownership group. The LHBPA's lawsuit contended that Fair Grounds was taking improper deductions from video poker machines and shortchanging purse accounts. The suit went to the Louisiana Supreme Court, which voted unanimously in favor of the horsemen's group, and a court later awarded the horsemen more than $89.9 million.

CDI was set to head a bankruptcy court auction in August, but seemed to have lost out on acquiring Fair Grounds when Krantz accepted a bid from Thoroughbred owner Mike Pegram. In a sudden reversal in late August, CDI jumped back into the fray, and Pegram was out. Pegram has filed a claim in bankruptcy court seeking to recoup more than $373,000 in expenses. The claim has yet to be litigated, but Douglas Draper, a bankruptcy attorney working for Fair Grounds, said Pegram's claim wouldn't impact CDI's closing.

CDI also has agreed to purchase Finish Line, the Krantz-owned company operating offtrack betting parlors, for $2.2 million. Another provision of the deal has CDI buying up the company Video Services Inc., which ran Fair Grounds's video poker parlor.