10/20/2010 5:29PM

New York City OTB and its creditors reach deal

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New York City Off Track Betting Corporation and its creditors' committee have reached an agreement that will transfer the company's account-wagering operation to the New York Racing Association and other state racetracks in exchange for $65 million in debt, according to state officials.

The deal was approved on Wednesday by the creditor's committee, which includes NYRA - the operator of Aqueduct, Belmont, and Saratoga - and other state racetracks. The deal would have to be approved by the judge overseeing the OTB company's reorganization under the protection of Chapter 9 bankruptcy.

Earlier this month, the union representing the majority of New York City OTB's 1,300 workers paved the way for the agreement by approving a deal allowing management to cut 550 jobs from the company. According to OTB officials, more than a hundred of those jobs are associated with the account-wagering operation, which competes with account-wagering platforms operated by New York's racetracks.

Also under the agreement, New York's racetracks will receive a smaller percentage of the revenue generated by the OTB company on its bets, according to state officials. Those changes will need to be approved by the legislature, because they are set by statute, and harness horsemen have already indicated that they will oppose the changes.
According to a release from Gov. David Paterson, the legislature will also be asked to approve changes to statutes that determine the distribution of revenue from slot machines at state racetracks so that tracks receive a slightly higher portion of the funds. Harness tracks had been pressing for the changes as part of the OTB deal following the passage of a budget measure earlier this year that reduced the tracks' share from the revenue by 1 percent.

New York City OTB filed for bankruptcy last year. A previous reorganization plan for the company failed to generate support from tracks or the union under the OTB company's former president, Sandy Frucher. The current president, Greg Rayburn, a reorganization specialist, was installed this spring.

New York City OTB is the largest bet-taker in the United States, though its annual handle has declined by nearly 20 percent over the past two years. The company had previously provided approximately $100 million each year in direct payments to tracks and horsemen, an amount that is expected to decline by approximately $30 million under the new agreement, according to officials with knowledge of the plan.

NYRA and Yonkers are New York City OTB's largest creditors, followed by Empire Resorts at Monticello Raceway and Finger Lakes, a Thoroughbred track in upstate New York. Shares of the account-wagering company are expected to be allotted based on the amount of pre-petition debt that is being forgiven by each entity in the transfer.

NYRA officials have been pressing the OTB company to transfer the account-wagering platform to reduce redundancies in the state's Internet and telephone betting operations and to capitalize on the one growing segment of the parimutuel market.