Posted: 6:19 pm Mon, April 5, 2010
By Liz Farmer
Daily Record Business Writer
A bankruptcy judge has denied the proposed sale of Rosecroft Raceway to developer Mark Vogel, calling it a “sell out” that’s unfair to the track’s creditors and the harness racing industry. The track’s owners must instead sell Rosecroft through a traditional Chapter 11 reorganization plan.
Meanwhile, Rosecroft owner Cloverleaf Enterprises Inc. notified its employees and shareholders Monday that if the track does not succeed with its legislative initiatives this session, which ends April 12, Rosecroft will close on April 19.
Cloverleaf’s notice portrayed the sale to Vogel as an option for the track’s immediate survival that had been eliminated. While Vogel remains an interested buyer, the notice said legislation, which includes legalizing poker at the track, is the remaining course for keeping the track open.
“Mr. Vogel is working with us and committed to providing the necessary dollars needed for our survival if we can obtain some help from the legislature,” Cloverleaf President Kelley Rogers wrote in a letter to Rosecroft’s roughly 200 full- and part-time employees.
“Rosecroft has several legislative bills pending before the Maryland legislature,” he wrote. “If these bills pass, Rosecroft will have a future. If they do not, Rosecroft will cease operations.”
But those who represent the thoroughbred industry question the timing of the notice in conjunction with the last week of the legislative session, saying the track’s financial struggles aren’t new.
“This is a ginned-up controversy by the current management at Rosecroft, and their wounds are self-inflicted,” said Alan Foreman, general counsel for the Maryland Thoroughbred Horsemen’s Association, a creditor that objected to the Vogel sale. “They haven’t conducted live racing since 2008 and they’ve had financial difficulties and been at death’s door [for years].”
The bills that could affect Rosecroft include SB 1035, which would put legalizing poker rooms at Rosecroft to a county voter referendum, and SB 1051/HB 1517, which propose a separate racing commission for standardbred and thoroughbred racing. The two bills also propose altering the money from slots that would be used to boost purses to a 70/30 split between thoroughbred and standardbred instead of 80/20 percent.
The poker bill has passed the Senate and is in a House committee; the other bills are still in their original committees.
A rift between the two breeds has been growing ever since they reached a standstill over a cross-breed simulcast agreement for Rosecroft, which would reauthorize the track to take bets on thoroughbred races. The Maryland Racing Commission voted to shut off Rosecroft’s signal nearly a year ago because Cloverleaf said it could not continue to honor its financial agreement with the thoroughbred industry.
The track is now essentially an off-track betting facility for harness and quarter horse races.
Rogers said Monday the denied sale to Vogel was not directly connected with the track’s ability to stay open, but Vogel was buying the track “in anticipation that the Legislature would work with him to save Rosecroft.”
Vogel would have been the financial backer for a portion of the nine racing days Rosecroft had planned for this fall, Rogers said.
“At some point you have to just make a decision that finally we’re here,” he said. “We wanted to stretch it out as long as we could reasonably stretch it out … but that reality is right on top of us now.”
Vogel said Monday if either of the proposals succeeded, he would continue to pursue the track.
“I can’t possibly see if [the bills are] not passed, how I can go forward,” he said.
Foreman pointed to Judge Paul Mannes’ opinion issued in the U.S. Bankruptcy Court for the District of Maryland denying the sale. Mannes portrayed Vogel as not interested in the promotion of standardbred racing “but rather of promoting a gambling enterprise, and the purchase of the Rosecroft facility provides him with a ticket to get into the game.”
Mannes noted many creditors were left hanging with Vogel’s purchase agreement to pay off Cloverleaf’s $6.7 million debt to PNC Bank, $100,000 for property and roughly $331,400 of unsecured debt.
Cloverleaf had more than $5 million in unsecured claims from the thoroughbred and standardbred industries.
“The sale to Vogel was basically buying the track for $100,000 with nothing in it for creditors,” Foreman said.
Rogers said if the track succeeds in one of its legislative pushes it would move forward with the Chapter 11 reorganization process, which includes putting Rosecroft up for auction. If the initiatives fail, he said Rosecroft would likely file a Chapter 7 bankruptcy plan for liquidating its assets.
Cloverleaf plans to assist its employees with filing for unemployment benefits if necessary, Rogers said.