Judge approves Penn National's purchase of Rosecroft

Jilted bidder could appeal the $11 million purchase

February 02, 2011|By Hanah Cho, The Baltimore Sun

A bankruptcy judge approved Wednesday the sale of closed Rosecroft Raceway to casino operator Penn National Gaming for $11 million in cash over the objection of a group led by former state Democratic Party Chairman Nathan Landow.

Wednesday's hearing essentially turned into another auction with last-minute maneuvering, as both parties upped their bids for the Prince George's County harness track before Penn National made its final $11 million offer.

The proceedings also included the testimony of Democratic state Sen. C. Anthony Muse, who said he supports Landow Partners as the track's new owner because it would have the backing of the community and local and state lawmakers, especially when it comes to expanding gambling at the facility. Muse's district in Prince George's County includes the track.

Besides resuming live racing at Rosecroft, Penn National plans to lobby for slots at the racetrack, which is not one of the five locations designated for slots under the state's gambling program. Such a change would require a voter referendum amending the Maryland Constitution.

Muse said he would not support Penn's effort, or any effort, to legalize slots at the racetrack. But Muse, whose bill that would have allowed card games at Rosecroft failed last year, said he would support efforts to try again if the matter were pursued by the Landow group.

Landow Partners, whose principals include a former Rosecroft chief financial officer and a racing executive at Hoosier Park in Indiana, have 14 days to appeal after U.S. Bankruptcy Judge Paul Mannes signs his ruling.

Asked whether the group plans to appeal, Landow said, "I have no idea."

Tom Cooke, president of Cloverleaf Standardbred Owners' Association, which owns Rosecroft parent Cloverleaf Enterprises Inc., said a possible appeal dampens the good news of having Penn as the track's new owner.

"An appeal takes time and there's uncertainty, and if we ever needed certainty, this is the time," Cooke said.

Rosecroft had been operating essentially as an off-track betting site for two years before it closed in July because of financial troubles. The track laid off about 200 workers and also closed its stables, where owners housed their horses.

At last week's auction, Penn National emerged as the winning bidder with its $10.25 million cash offer, plus $3 million if the General Assembly approves a bond issue funded by slots revenue to help finance the track's operations to resume live racing.

Landow Partners objected to Penn National's bid, contending that the Rosecroft bankruptcy trustee did not properly value two items that were part of its $10.05 million cash offer.

Landow Partners also offered $3 million for a similar bond issue and another $3 million if a referendum to expand gambling is approved in the state and slots become operational at Rosecroft.

At Wednesday's hearing, Landow Partners matched Penn National's $10.25 million cash offer and offered to pay an added $200,000 cash if the state does not approve the bond issue. The payment for slots remained the same.

Penn National restated its cash offer while matching the $3 million bond payment and adding a $6 million premium if slots become operational at the racetrack.

Attorney Roger Frankel argued that the Landow offer is worth more because the group has a better chance of getting the bond issue and a gaming license.

Frankel said Landow Partners has an agreement with harness horsemen and owners to ensure that live racing resumes at Rosecroft, a move that would garner legislative support. And Frankel used Muse's testimony to show that Penn would not have legislative support for its slots efforts.

Penn National's lawyer, Richard Mason, referred to the Landow group as "sore losers" and called Frankel's arguments highly speculative.

After a lunch break, Penn revised its offer to a cash-only bid of $11 million and took the $9 million bond and slots payments off the table.

The bankruptcy trustee as well as the Maryland Thoroughbred Horsemen's Association and the Maryland Horse Breeders Association, which are the track's largest unsecured creditors in the bankruptcy, supported Penn's new bid.

At the end, cash was king, said Michael J. Lichtenstein, the attorney representing the Rosecroft bankruptcy trustee.

"Instead of $10.25 million in cash, it's now $11 million in cash," he said. "Money talks."

hanah.cho@baltsun.com

twitter.com/hanahcho

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