By David Grening
NEW YORK – While the clock continues to run on the viability of New York City Off-Track Betting as a going concern, a U.S. bankruptcy court judge on Wednesday delayed until Feb. 22 a hearing on the issue of whether the company is eligible to file for bankruptcy under Chapter 9, a little-used section of the bankruptcy code.
Judge Martin Glenn, of the U.S. bankruptcy court in the Southern District of New York, said he wanted to combine the evidentiary hearing with the legal arguments and gave both New York City OTB and the New York Racing Association – which filed an objection to OTB’s bankruptcy filing – additional time to depose witnesses. NYRA’s attorney, Brian Rose, said he wants to depose the offtrack wagering company’s president, Ray Casey, because of "contradictory statements" he believes Casey made in the company’s bankruptcy filing and its response to NYRA’s objection.
Casey, along with OTB’s chairman, Sandy Frucher, and NYRA’s chairman, Charles Hayward, were all present in court Wednesday and scheduled to testify. All parties will be brought back for the Feb. 22 hearing, during which both OTB and NYRA will be given three hours each to present their case.
"It’s not going to be a litigation-fest," Glenn said.
On Dec. 3, the offtrack betting company filed for Chapter 9 bankruptcy, a code reserved for municipalities. On Jan. 4, NYRA, joined by the New York Thoroughbred Horsemen’s Association, filed an objection, claiming OTB did not obtain approval from the state legislature. Further, NYRA claimed that the company "failed to demonstrate in good faith over a plan of adjustment with its creditors." NYRA is listed as the second-largest creditor of New York City OTB, with outstanding debt now in the range of $19 million.
In its response to NYRA’s objection, OTB – which was taken over by the state last summer – stated that it received approval from Gov. David Paterson to file under Chapter 9. Also, it said it planned to provide evidence at the bankruptcy hearing that it has negotiated in good faith with creditors.
Following the adjournment, Frucher said that OTB, since filing for bankruptcy, has made "all of our post-petition payments to the racing industry." Hayward confirmed that the company recently made a $1.1 million payment to NYRA.
Frucher said Wednesday’s adjournment bought OTB a "little bit of time" but he maintains that the company will run out of cash in mid-to-late March. Further, Frucher said he will soon be forced to send out "war notices" to employees that they will lose their jobs.
"At the end of the day, the real race is the cash race," Frucher said.
The offtrack betting company is seeking legislative changes that would enable it to make payments off the net rather than the gross handle it takes in. Meanwhile, NYRA is getting ready to submit a plan to the legislature that would focus on a consolidation of duplicative services provided by OTB and the racing association.