09:29 AM EDT on Monday, August 9, 2004

Associated Press

NEW ORLEANS — Horsemen agreed to take $25 million instead of the $90 million a judge said the Fair Grounds owed them from video poker, and the track hopes to end its bankruptcy reorganization, an attorney says.

The track expects to ask a bankruptcy judge Monday to approve the settlement, dismiss its Chapter 11 filing and to put off auction of the track, said Douglas Draper, who represents the track in bankruptcy court.

"Honestly, I don't think the auction will happen," he said Sunday.

If the auction is held Aug. 16 as scheduled, Churchill Downs Inc. would open bidding at $45 million.

The settlement is "a big step in terms of resolving the future of the track," Fair Grounds president Bryan Krantz said Saturday. "I guess now we have to concentrate on what complete resolution of a new business will look like going forward," Krantz said.

Draper said the $25 million settlement, signed about 2 a.m. Saturday, includes a number of contingencies which could bring the horsemen more than $25 million.

"For instance, if the track is sold in a very short period of time for a ton of money, they may get more money," he said Sunday.

A state district judge ruled in March that the Fair Grounds had improperly withheld video poker revenue from racing purse supplements for more than a decade, adding up to $90 million.

The scheduled auction prompted the settlement, said Jim Gelpi, an attorney for the Louisiana Horsemen's Benevolent and Protective Association, which represents horse owners and trainers.

Steve Thompson, another attorney for the horsemen's association, said it "is fair and represents all that can be achieved, given the financial realities and economic circumstances of the Fair Grounds."

It calls for the track's other creditors to be paid in full, Draper said. They are owed about $12 million, according to court records. Also under the settlement, the Fair Grounds will commit $750,000 to improvements on the backstretch in the next two years.

The deal with the horsemen will benefit the track's other unsecured creditors, who are owed money through ordinary business transactions, Draper said. If the track was sold at auction, those creditors would receive about one-third of the money owed, he said.

"The accommodation made by the horsemen in the settlement with the Fair Grounds allows the little folks who got caught in the fight to be paid in full," Draper said.

To end the bankruptcy case, the Fair Grounds must convince the judge that the track can come up with money to pay the horsemen and other creditors, Draper said.

The Krantz family, which owns the controlling interest in the Fair Grounds, is trying to make a deal with a partner to raise the money.

On Friday, Fair Grounds attorney David Sherman said Churchill Downs and horse owner Mike Pegram are potential partners. Sherman said he expects a partnership deal to be completed before Aug. 16. "We will continue to pursue it all," Krantz said. "What we are trying to do is in the best interest of the current equity shareholders, the horsemen, the racing public and the whole industry."

Draper said the bankruptcy case can be dismissed before a partnership deal is completed. On Sunday, he said he would not comment on partnership talks until they were final.

On Saturday, Fair Grounds attorneys and Pegram's attorneys discussed a possible deal, and more talks are anticipated. Pegram declined comment Saturday.

Churchill Downs spokeswoman Julie Koenig said Saturday that company policy bars her from commenting on "impending business matters."