Rosecroft sale OK'd, pending appeal
Penn National ups bid to $11M for Fort Washington harness track
With a final bid of $11 million in cash and without any of its previous contingencies on gambling legislation Penn National Gaming on Wednesday received a federal bankruptcy judge's approval to purchase Rosecroft Raceway, pending appeal.
But officials at bankrupt track owner Cloverleaf Enterprises remain disappointed with the loss of a financial incentive to push for gambling legislation at the Fort Washington harness track. They also are wary of the potential for a drawn-out appeals process.
Penn National of Wyomissing, Pa., increased its original $10.25 million bid on Wednesday after another bidder, Landow Partners, filed an objection Tuesday that Chapter 11 bankruptcy trustee James J. Murphy failed to properly value the Landow bid during Friday's auction. Murphy OK'd Penn National as the winning bidder at the auction.
Penn National already co-owns Maryland's two thoroughbred tracks, Laurel Park and Pimlico Race Course in Baltimore. It also operates a slots parlor at Hollywood Casino Perryville, one of two new slots locations in Maryland.
Pending an appeal, the purchase goes to the Maryland Racing Commission, which approves any track acquisitions in the state.
Judge Paul Mannes granted the sale, despite Landow's objection, but said the court would consider a motion to stay his decision pending an appeal.
"I thought this matter would be over today," said Thomas Cooke, president of the Cloverleaf Standardbred Owners' Association. "The last thing we need is to have this dragged out."
At Wednesday's hearing in U.S. Bankruptcy Court in Greenbelt, Landow's attorneys argued Murphy failed to exercise appropriate business judgment and failed to obtain the maximum value for Rosecroft.
Landow Partners, led by Bethesda developer Nathan Landow, had bid $10.05 million at Friday's auction, with an additional $3 million promised within 10 days of slots or table gambling being offered at Rosecroft. That would require the approval of voters statewide.
Penn National's winning bid on Friday also included an additional $3 million, contingent on the legislature's approval of a $15 million operating bond for Rosecroft.
Landow argued its bid actually was more valuable than Penn National's, because Landow was better able to obtain a bond and gambling legislation.
Sen. C. Anthony Muse (D-Dist. 26) of Fort Washington testified to this claim on behalf of Landow, saying Landow had a better history within the community than Penn National and the Prince George's County delegation would agree. He referred to Penn National's withdrawal from a purchase deal for Rosecroft in 2007 after it became clear that slots would not come to the track. Muse also referred to industry representatives' claims that Penn National is not committed to Maryland racing.
"We want live racing above all else," Muse said, adding he thinks the community will get that if Landow owns the track.
Before the judge's ruling, Penn National and Landow continued to raise their bids, with Landow offering $10.25 million to match Penn National and Penn National promising $6 million within 90 days of operating slots at Rosecroft. Landow also included an exclusive agreement with the Maryland Standardbred Breeders Association and Cloverleaf Standardbred Owners' Association. Penn National eventually raised its bid to $11 million without the contingencies.
The judge ultimately sided with Penn National, saying much of Muse's testimony was too speculative for the court to factor into its ruling.
Penn National's final bid also won the approval of the Maryland Jockey Club, the largest creditors in the Rosecroft bankruptcy case, which proved to be a big factor in the judge's final decision.
"The bottom line is that instead of $10.25 million, it's $11 million," said Michael Lichenstein, attorney for the trustee, emphasizing that the judge's decision should satisfy the creditors.
"We're disappointed, but we honor the judge's decision and look to bigger and better things," Landow said. He said his attorneys had not decided whether to appeal.
Cooke also said he was disappointed with the ruling.
"My initial reaction is that both of this morning's offers were better than where we ended up," Cooke said. "I liked the contingencies. If they became a reality, we could pay off all our debt. Now, we're still at a deficit."
Rosecroft owes about $13.5 million, Cooke said.
Cooke said the new bid also removes the financial incentive to push for other gambling at Rosecroft and leaves Cloverleaf without a partner in obtaining legislative approval for a $15 million operating loan through slots revenues. Cloverleaf officials have pressed the need for more gambling for the track to survive.
Bidding results aside, Cooke said he has a lot of respect for what Penn National can develop, having visited its facilities in Charles Town in 2007 and hearing nothing but respect for the company from its employees. He said he considers Penn National to be a "successful" company.
Cloverleaf has been in Chapter 11 bankruptcy proceedings since June 2009. Rosecroft operated as an off-track betting site, without live racing for two years, before closing in July.
Penn National also is pushing for the judge to require any appellants requesting a stay to post an $11 million bond. The judge said he will decide on that if an appeal is filed.
In other racing news, Frank Stronach has given up ownership rights to M.I. Developments in order to transfer all of the company's horseracing and gaming assets to himself, according to a statement from M.I. Developments. This reorganization, which is set to close June 30, would make Stronach, and not M.I. Developments, Penn National's partner in the ownership of Maryland's thoroughbred racing tracks and the Maryland Jockey Club.