01/06/2010 1:00AM

NYRA, horsemen object to OTB bankruptcy plea


Objections filed to OTB bankruptcy

By Matt Hegarty

The New York Racing Association and the New York Thoroughbred Horsemen's Associations are seeking to dismiss a bankruptcy petition by New York City Off-Track Betting Corporation, according to objections the two groups have filed with the bankruptcy court.

The objections signal that NYRA and its horsemen are preparing for a drawn-out battle with New York City OTB as the company seeks to reorganize under a little-used section of the bankruptcy code, Chapter 9, which is reserved for municipalities. New York City OTB, which is owned by the state, filed for Chapter 9 bankruptcy on Dec. 3, listing NYRA as it second-largest creditor with a debt of $14.7 million.

In its objection, NYRA states that the court should dismiss the bankruptcy filing because the offtrack betting company did not obtain approval from the state legislature to file for Chapter 9 bankruptcy. In its bankruptcy filing, New York City OTB claimed that it qualified under the code because of authorization from Gov. David Paterson and its board of directors.

In addition, NYRA contends in the objection that OTB "failed to demonstrate in good faith over a plan of adjustment with its creditors" and that OTB is using the bankruptcy filing to put pressure on the state legislature to reduce its statutory obligations to the racing industry and other parties that have a share in the company's revenues.

The horsemen's association made substantially the same objections by filing as a joinder to NYRA's petition.

New York City OTB officials did not respond to requests for comment.

Although New York City OTB has yet to release a detailed reorganization plan, NYRA and its horsemen stand to lose tens of millions of dollars a year in direct payments from OTB if the company is successful in convincing the state legislature to overhaul the company's statutory obligations to the racing industry. Currently, New York's Thoroughbred and Standardbred industries, including breeders, receive approximately $100 million from the OTB's take of betting in New York's five boroughs.

Sandy Frucher, New York City OTB's chairman, did not immediately return a phone call on Wednesday, but he has said in the past that the company cannot survive unless the legislature amends the statutes governing its distributions.