Insolvent New York City OTB Urges Legislative Changes7th December 2009 9:41 am GMT
With declining wagering revenues and losses of $45 million over the past five years, New York City Off-Track Betting Corporation (NYC OTB), operator of 68 betting parlours in New York, has filed for Chapter 9 bankruptcy protection, calling on the New York State Legislature to make statutory revisions to reduce the amount it pays to the state's racing industry.
NYC OTB said its insolvency was a result of a significant monthly structural deficit which is no longer sustainable and the unfavourable current legislative scheme governing distribution of funds to the state's racing industry.
The company said it had filed for bankruptcy as the best alternative to ceasing operations after one creditor initiated action in the NY Supreme Court to obtain a judgment that could bring NYC OTB's operations to a halt.
"NYC OTB took the serious step of filing a chapter 9 case, after careful deliberation, with three principal objectives in mind€”creating a sound basis for future operations, using the business model to access capital in the financial markets without any taxpayer support and paying all its obligations," said Meyer Frucher, Chairman of NYC OTB.
NYC OTB will ask for changes to the racing laws, including a modification of the current legislative distribution scheme which at present require the company to calculate and pay the state, the City and the horse racing industry a percentage of gross wagers placed with NYC OTB.
The company proposes instead to make payments to the horse racing industry based on wagering commission revenue it actually receives after allowance for costs of its functions have been met.
NYC OTB said it will develop a transformational business plan to position the company for future growth. The company said the new plan was critical to its ability to adjust its debts under Chapter 9 and will significantly reduce NYC OTB's costs, providing for improved operational efficiencies.
The business plan contemplates the receipt by NYC OTB of approximately $250 million in financing in order to pay its existing obligations and to fund current operations and the plans for growth. If successful the business plan will reinvent the company, although without necessary statutory amendments, NYC OTB warned that the company would close and have an adverse impact on the New York horse racing industry and the state economy.
"NYC OTB generates hundreds of millions of dollars annually for the region, but it has been hobbled by statutes that make it impossible for the corporation to cover its own operating expenses," Frucher said. "We just require the common-sense legislative changes that will allow this important state asset to grow."
NYC OTB said it will continue day-to-day operations without interruption as it develops its new business plan and will continue to provide its customers with the same horse racing wagering services as before either in person, by phone, or online. Funds held on account by wagering customers will remain safe, secure and available for wagering.
Since its inception in 1971, NYC OTB has provided New York City with over $1.4 billion in cumulative revenues, New York State with nearly $600 million and the New York horse racing industry with nearly $2.2 billion. According to the NYC OTB approximately 7% of the $13.6 billion handle generated annually in North America is processed by the company.