If history is any guide, Indianapolis Downs' bankruptcy will be a nonevent for gambling patrons and won't even result in a drop in revenues or tax payments to the state.
The state's top gambling regulator and others downplay the fallout from the bankruptcy filing Thursday by the parent of Shelby County's Indiana Live! casino and Indiana Downs horse track.
The Shelby
"As a regulatory agency, we don't have great heartburn" over the bankruptcy, said Ernie Yelton, director of the state Gaming Commission. "We don't have to. In all these (prior) bankruptcies . . . revenues have not been affected, not at all. In fact, they increased, all of them."
The only other combined track and casino in the state, Hoosier Park in Anderson, also is in bankruptcy, and its latest three-month tax payments to the state of $14.8 million are 14 percent greater than the previous three months.
Ed Feigenbaum, editor of Indiana Gaming Insight newsletter in Noblesville, said customers of the Shelby County "racino" also are unlikely to notice the fact that it's now in bankruptcy.
"For the average Hoosier, it's a nonevent," he said. "Nobody will notice anything if this follows from the other four bankruptcies. It's been totally seamless to patrons. Nobody sees any reduction, even in TV commercials."
Indianapolis Downs, owned by Oliver Racing LLC of South Bend, said it defaulted on its debt payments in November and couldn't restructure the debt with its lenders, forcing it to seek bankruptcy protection.
The debt is "significantly greater than anticipated and beyond its ability to service under current terms," the company said.
Half of the debt is the $250 million slots-licensing fee that the state charged to open the land-based casino in 2008 next to the racetrack, which dates to 2002.
"That fee drove a lot of that debt," but "we are not looking to roll back the fee that has been paid," said Gregory Rayburn, who has been hired by Indianapolis Downs to handle its bankruptcy as chief restructuring officer.
Hoosier Park also paid a $250 million fee to the state to open its casino. The state used the money from both casino operators for property tax relief for property owners statewide.
Feigenbaum said the upfront state-mandated fee proved a burden to Indianapolis Downs, but other factors contributed to its bankruptcy as well.
The company spent about $200 million on its Indiana Live! casino, twice as much as Hoosier Park spent on its casino, he said. Indianapolis Downs also "entered into a pretty one-sided management contract, which forced them to pay a lot of money each month" in management fees, he said.
In its bankruptcy filing, Indianapolis Downs asks for court permission to reject the management agreement it signed in 2007 with Power Plant Entertainment Casino Resorts Indiana, which calls for paying it 4.5 percent of gross receipts from gaming. Indianapolis Downs ended the management agreement in July, but Power Plant said ending its contract was unlawful. The two sides have been in arbitration over the issue ever since.
Feigenbaum said Indianapolis Downs failed in its initial strategy to lure young professionals from Indianapolis and other areas to the casino and track and "is now going after more of a middle-tier crowd" of gambling patrons.
"It was pretty costly to initiate and then change gears," he said of the marketing campaign. "They're still finding their niche."
Rayburn, who previously was hired to oversee bankruptcies for two other gaming companies, said Indianapolis Downs aims to restructure its debt with lenders to lower its payments, while working to boost revenues at the casino and horse track through better marketing and drawing more customers.
"The company continues to improve all the time," he said of sales, which increased 8.7 percent from 2009 to 2010, to $270 million. "We have nothing but upside."
About 80 percent of revenues come from the casino and its restaurants, he said. The rest comes from the track.
Indianapolis Downs isn't likely to significantly slash its workforce of 1,110 people, which rises to 1,300 during the seven-month racing season, Rayburn said.
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