Lawrence casino imperiled
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An Indianapolis company's long-delayed plan to build a $430 million racetrack/casino in Lawrence County has gotten some dire financial news and could be on life support.
A financial news service called Debtwire said yesterday that lenders for Centaur Inc. will "push to abort [the] Pennsylvania racino project [and] get repaid early."
The news service said that according to its unnamed sources, "tightening credit markets" had "pushed [Centaur] into a corner'' and as a result, its proposed Valley View Downs racetrack/casino west of New Castle may become a victim of roiled financial markets.
According to Debtwire, Centaur, which owns a racetrack in Indianapolis and a casino in Colorado, is having discussions "to pay back lenders early and to cancel its Pittsburgh-area casino development.''
In response, Centaur spokeswoman Susan Kilkenny said in a brief e-mail that the company is negotiating with lenders.
She said the "current uncertainty of the credit markets" and the state Gaming Control Board's decision not to give Centaur a conditional slots license in July "necessitated revisions to the original credit agreement."
She said more information would be forthcoming once talks with the lenders are over, but didn't say when that would be.
Lawrence County Commissioner Dan Vogler, who has traveled to Harrisburg several times to support the proposed racetrack/casino, said yesterday, "The three commissioners are watching this issue very closely. We are hopeful the end result will be a positive one for both Centaur and Lawrence County."
Andy Johnson, author of Debtwire's story on Centaur, said yesterday that he doesn't think the casino is completely dead.
But "they're feeling the pressure from the hedge funds involved. These hedge funds [are] proactive" in trying to negotiate the best terms for their investments, and the best term of all may be an escape hatch.
He said Centaur's backers began fidgeting after the gaming board decided in early July to deny Centaur a conditional slots license.
"Folks were surprised," he said, especially backers who might not have been familiar with the gaming board side of the equation. "That caught some lenders off guard, and gave them less confidence in the deal."
Centaur is suffering from the same credit anxieties that consumed Don Barden's casino project on Pittsburgh's North Shore and have hurt casino construction and expansion projects across the country.
In light of lenders' anxieties and stricter lending terms, Indiana observers were surprised the gaming board didn't move faster to approve Centaur's gaming license, said Ed Feigenbaum, publisher of the Indiana Gaming Insight newsletter.
"The delays by Pennsylvania regulators have raised eyebrows back in Indiana, given that this seemed to be a strong proposal that was fully financed and was ready to go," he said. "The only question seemed to be why the regulators were not willing to advance things."
Last year, Centaur closed on a $1 billion financing package that would pay for the $430 million development, as well as projects in Colorado and Indiana. Indiana-based MH Equity investment group supplied $200 million of that package, with the rest coming from other sources.
In May, Stephen Hilbert, the flamboyant former chief executive of Conseco Inc. and the head of MH Equity, asked the gaming board to withdraw his application for a casino license, a move that minimized the need for state investigators to dig into his personal and financial history.
Though he'd give up whatever equity control he'd hoped to have over the racetrack/casino, his line of credit to Centaur remained in place, as of May.
Centaur has received a harness racing license from the state Harness Racing Commission, the first step toward building Valley View Downs. But Centaur has not yet gotten a slots license from the gaming board, which it also needs for a racetrack/casino.
Centaur officials told the board they needed a conditional slots license by July 15 so as not to lose their financial commitments. But the gaming board said it was still working on its background investigation of Centaur.
Gaming board spokesman Doug Harbach said yesterday he had read the Debtwire report but didn't know when the board might hold a hearing on the slots license for Centaur.
That license would be the state's seventh and final racetrack/casino license. If it isn't issued by July 2009, it could be converted into a sixth stand-alone casino license. Currently, five stand-alone casinos are permitted in Pennsylvania, including the one in Pittsburgh.
One person who might have seen the writing on the wall -- and is rooting for the collapse of the Centaur deal -- is Gettysburg motorcycle dealer David LeVan, who two years ago wanted to build a controversial stand-alone casino just outside Gettysburg, and now thinks the Centaur failure may provide him another opening.
"This doesn't come as a surprise to me. It's one of the reasons I went public a couple of weeks ago," he said yesterday. He said he wanted to send a message to the Harness Racing Commission and the gaming board, letting both know there are other options.
Centaur won the rights to build a racetrack after coming to a compromise with the Carmen Shick family, which had wanted to build its own racetrack in Lawrence County but with another casino operator. Centaur initially had sought to build in Beaver County but later settled on Lawrence.
Mr. LeVan said the tumultuous lending market that is threatening projects left and right would be a thing of the past by the time he would be ready to build, in 18 to 24 months. He also told the Gettysburg Times that he has financiers in mind.
"I believe that I could secure a gaming operator that has already been through the feasibility process in Pennsylvania," he told the Times."In fact, I believe I could secure a gaming partner that is already licensed in another facility in Pennsylvania."
This time, he says he wants to build a casino or a racetrack/ casino farther from Gettysburg, at least seven to 10 miles away, to minimize complaints that a casino wouldn't be a proper fit close to Gettysburg's somber battlefields and monuments.
First Published August 8, 2008 12:00 am