03/26/2010 11:00PM

New York OTB to shut down after bailout fails

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The New York Off-Track Betting Corp. plans to shut down operations on April 11 after negotiations for a potential 11th-hour bailout with legislators in Albany fell through on Friday, the company said in a press release.

According to the OTB release, the board of directors of the company on Friday "authorized the sending of 14-day layoff notices to all employees for a shutdown of operations on April 11, 2010 and a termination of their employment on that date. It was hoped that there would be a resolution by close of business on March 26, which would make it unnecessary to send the notices. However, no such resolution occurred and the New York City Off-Track Betting Corporation has mailed the notices." The notices went out to all 1,300 of OTB's employees.

According to a published report, legislative leaders were discussing several scenarios on Friday as to how to keep OTB afloat for the next few months. One plan, according to Blood-Horse.com, was for the legislature to allow OTB to delay more than $1 million in some of its statutory revenue sharing distributions, such as to the New York Racing Association. OTB owes NYRA more than $15 million, according to OTB's Dec. 3 bankruptcy filing.

Following Friday's session, the legislature was scheduled to break for 11 days, not returning until April 7.

NYC OTB filed for bankruptcy under chapter 9, claiming it was $95 million in debt. The company claimed it needed several legislative changes to be made in order to remain solvent, including a controversial change that would allow it to pay the industry from net revenues as opposed to gross. But the legislature would not approve OTBs plan which was widely criticized by all facets of the racing industry.

OTB's reorganization plan included a shutdown of two-thirds of its 61 parlors, a 65-percent reduction in workforce along with the creation of five "super-parlors" throughout the five boroughs of New York and the creation of 1,100 to 1,300 self-betting machines, or kiosks, at licensed outlets throughout the city.

Another key component to the plan was the floating of bonds to make available some $250 million NYC OTB could use to pay debt, severance packages to laid off employees, and for capitalization projects.

Earlier this year, the NYRA said it was working on a restructuring plan that would consolidate some of what it perceives as duplicative services between it and OTB, including account phone and internet wagering, tote system, television production and broadcast media, and marketing. It was unclear if NYRA ever submitted a plan to the legislature for review.