10/29/2009 11:00PM

Hoosier Park owner defaults on loan

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Centaur, the gambling company that owns and operates Hoosier Park in Indiana, failed to make scheduled interest payments on its debt Oct. 27 and is in default, and two units of the company seeking to build a harness track and casino in Pennsylvania have filed for Chapter 11 bankruptcy, the company said Thursday.

Centaur officials said the company is negotiating with its senior lenders in order to restructure its debt, and that Hoosier Park will continue to operate without interruption. Hoosier owed its senior lenders $13.4 million in debt payments.

In October 2007, Centaur reached a deal for $1 billion in financing with MH Equity, a private-equity company headed by Stephen Hilbert, the former head of Conseco, an Indiana insurance company. While at Conseco, Hilbert directed the company to purchase a 10 percent equity interest in Hoosier, but Conseco sold the stake to Centaur in 2001, one year after Hilbert resigned following the collapse of Conseco's stock.

Centaur applied more than $400 million of the $1 billion financing package to the Hoosier casino project. Under a law passed in 2007 allowing Indiana racetracks to operate casinos, Centaur was required to pay $250 million for Hoosier's casino license, and it spent $150 million to build the 92,000-square-foot casino at the track.

Since the casino has opened, however, Centaur officials have lobbied state legislators to change the casino's obligations to the state and local horsemen. Centaur currently retains 53 percent of the net revenue from casino operations; riverboat casinos in the state retain about 65 percent. Centaur officials have said the difference in rates is unfair.

A legislative committee in Indiana is studying whether the rates should be changed.

Late in 2006, Centaur reached an agreement to purchase a majority stake in Hoosier from Churchill Downs Inc. The company was previously a minority partner. Though terms of the deal were not disclosed, Churchill officials said on a conference call Thursday morning that Centaur has missed a $15 million payment due to Churchill in the third quarter of this year.

The two affiliated companies that filed for bankruptcy are associated with Valley View Downs, a harness track that Centaur hoped to build in western Pennsylvania. Though the companies received a racing license to build the track, the companies did not receive a slot-machine license. In a release, Centaur said the bankruptcy filings would allow the companies to restructure and continue to pursue the slot-machine license.