Indianapolis Downs ruling on plan confirmation will wait till Monday

By Jim Witters

Wilmington, Del., Oct. 19 - Decisions on confirmation of Indianapolis Downs, LLC's amended plan of reorganization and its proposed $500 million asset sale won't come until Oct. 22, when closing arguments are presented by the company and an opposition group known as the Oliver parties.

During an all-day hearing in the U.S. Bankruptcy Court for the District of Delaware on Oct. 19, each side elicited testimony from witnesses and introduced more than 100 exhibits into evidence.

Indianapolis Downs is seeking approval of the sale of substantially all of its assets to Centaur Holdings, LLC affiliate Centaur Acquisition, LLC.

Centaur has agreed to pay $500 million plus $1 for the combination casino and racetrack in Shelbyville, Ind.

The bid met the minimum threshold established in a restructuring term sheet and restructuring support agreement entered into by the debtors, creditor and debtor-in-possession lender Fortress Credit Opportunity Advisors LLC and an informal committee of holders of pre-petition second-priority notes.

Centaur owns the only in-state competitor of the debtors, Hoosier Park, LP, in Anderson, Ind.

The motions seeking confirmation of the plan of reorganization and the asset sale are being heard simultaneously.

The hearing is scheduled to resume at 9:30 a.m. ET on Oct. 22.

Background on sale

Much of the cross-examination of witnesses by Oliver parties attorneys during the hearing focused on whether the Centaur bid was acceptable under the bid procedures.

The initial offers from Centaur and other bidders were contingent on a resolution of a tax dispute with the state of Indiana in favor of Indianapolis Downs. All those bids were rejected because of the contingency.

After a bill to change the tax treatment of casino revenue failed in the Indiana legislature this year, Centaur was able to work with the governor and the state attorney general to negotiate a settlement of the tax dispute with the Indiana Department of Revenue.

The agreement came to fruition just two days before the deadline for Indianapolis Downs bids, leaving Centaur as the only qualified bidder.

Oliver parties objections

The Oliver parties claim:

• The plan was not proposed in good faith and by legal means;

• The plan is not feasible, because the effective date is contingent on several factors, including regulatory approval.

Because of the need for regulatory approvals before closing on the sale, the effective date for the plan of reorganization is expected to be 14 to 18 months from plan confirmation, coinciding with the closing of the sale.

"The uncertainty of these contingencies and the potential for a lengthy time period between confirmation and the effective date creates a material likelihood that confirmation is likely to be followed by the need for further restructuring," the Oliver parties argued;

• Centaur cannot be deemed to have acted in good faith; and

• The debtors cannot reject the asset purchase agreement with Troon & Co.

The Oliver parties include: Ross J. Mangano, individually and as the trustee of the Jane C. Warriner Trust dated Feb. 26, 1971, the J. Oliver Cunningham Trust dated Feb. 26, 1971, and the Anne C. McClure Trust dated Feb. 26, 1971; Troon & Co.; John C. Warriner; Oliver Estate, Inc.; and Oliver Racing, LLC.

Creditor treatment

Under the proposed amended plan of reorganization, treatment of creditors would include:

• Each holder of a pre-bankruptcy second-priority note claim and second-priority guarantee claim will receive a share of all of a new second-lien term loan or all of the proceeds from alternative second-lien financing, as well as 95% of a new unsecured PIK term loan and 95% of new series A warrants;

• Each holder of a pre-bankruptcy third-priority note claim and a third-priority guarantee claim will receive 5% of the new unsecured PIK term loan, 5% of the new series A warrants and 100% of new series B warrants;

• All debtor-in-possession financing claims, administrative claims and priority tax claims will be paid in full;

• Other priority claims and other secured claims will be unimpaired; and

• Holders of general unsecured claims and interests will receive no distribution.

Indianapolis Downs, a Shelbyville, Ind., racetrack, off-track betting and gaming company, filed for bankruptcy on April 7, 2011. Its Chapter 11 case number is 11-11046.

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