Hawthorne Race Course, and its related companies, has filed for a Chapter 11 reorganization in Federal Bankruptcy Court in Chicago Friday.
According to a press release issued by the track, the “reorganization plan will prioritize paying accrued purses to the Illinois Horsemen as well as payroll for the track employees while restructuring the company's debt.
“The goal of the reorganization is to attract a buyer or investor willing to recapitalize Hawthorne and restart operations of the racecourse while maximizing recovery to the company's creditors. Hawthorne will be working with financial advisor Getzler Henrich & Associates, LLC and requests the Federal Court approve Debtor-in-Possession financing to assist with the restructuring process,” according to the press release.
Hawthorne president and CEO Tim Carey is quoted as saying, “This is a difficult day for Hawthorne and for my family which has owned Hawthorne for four generations over 117 years, but filing for reorganization is the right thing to do for the Illinois horsemen and for our employees and their families.”
The press release notes that Hawthorne aims to appear in Federal Bankruptcy Court in Chicago next week.
Reached Friday, Illinois Thoroughbred Horsemen's Association (ITHA) president Chris Block said the filing was made to help the track secure additional funding from a separate “entity,” and that the scheduled Thoroughbred meet at the track could still go ahead (though perhaps delayed), pending approval of the reorganization by the bankruptcy judge.
“The Thoroughbred meet will possibly go ahead, yes. They're going to be in front of a judge by Monday or Tuesday [of next week] with a 'debtor-in-possession' to show the financing to go forward for the next 120 days,” said Block.
The term “debtor in possession” refers to when a debtor “keeps possession and control of its assets while undergoing a reorganization under chapter 11.”
Block added, “they intend to take care of all the past debt to horsemen, pay their employees, and try to get the track converted back for Thoroughbreds. Then, they will try to hit a target date of either March 29th to start racing or push it back a little bit to give horses more chance to get ready. So, the Thoroughbred meet could still happen. It's just dependent on when it starts and if they'll be able to sustain it through the entire meeting.”
Tim Carey addressed leaders of the ITHA the Illinois Harness Horsemen's Association (IHHA) Friday morning with his plans.
Block said he was unaware of the identity of the separate funding entity. “They have an entity that's going to push the financing forward,” he said. “That entity will be with them at the [bankruptcy] hearing on Monday or Tuesday.”
In the meantime, the track will continue to work on finding a partner to help build and operate a “Racino” at the facility, said Block.
“If they can't get to that–this is just me talking, this is not Tim Carey–I'd say the chances of them going forward would be very slim. But this buys them more time. The only way that they can maintain going forward into the future is to get to a deal on something like that,” said Block.
As of Monday, there were an estimated 175 Thoroughbreds stabled at the track, under the watch of about ten different trainers. Other trainers are waiting to potentially ship in.
At the moment, the ITHA is telling its constituents to hold off on shipping until the outcome of next week's bankruptcy hearing.
“We're telling them to wait for next week to materialize and see what the bankruptcy judge does. We'll see at that point in time if Hawthorne gets the approval from the judge for the financing to be put in place so they can move forward, take care of the Harness horsemen and the Thoroughbred horseman that they owe, as well as their own in-house issues with their employees on paying them,” said Block.
Hawthorne's press release includes portions of Carey's court declaration in support of Hawthorne's bankruptcy filings.
According to the press release, Carey's declaration states “there is substantial interest from potential 'buyers and recapitalization partners' especially because of the opportunity to maximize Hawthorne's 'enterprise value' by completing the building and opening of the racetrack Racino. The Debtor-in-Possession financing can also help pay to reactivate simulcast signals for offtrack betting and online wagering which generates $4 million of revenue monthly.”
According to Hawthorne's initial bankruptcy filing, the company's estimated assets are between $50 million and $100 million, while the estimated liabilities are between $100 million and $500 million.
The list of creditors who have the 20 largest unsecured claims are led by Fanatics LLC, a digital sports platform licensed in Florida, which has an unsecured claim of $8.75 million, according to the filing.
The Stronach Group (TSG) owned Monarch Content Management is next up with an unsecured claim of $7.13 million, according to the filing.
Monarch is one of several entities that has stopped sending its simulcast signal to Hawthorne because of unpaid bills.
According to an ITHA press release Friday, “Carey also believes that Hawthorne will have the funds necessary to reacquire some, though perhaps not all, of its simulcast signals.”
At last month's Illinois Racing Board meeting, the extent of Hawthorne's financial troubles, and with it the enormous ramifications for industry stakeholders in the state, were made glaringly clear. The track's Standardbred stakeholders have been the hardest hit.
The meeting followed the action of the state racing board to suspend the operating license of Suburban Downs, Inc., which manages Hawthorne's harness meet, for “failure to provide documentation demonstrating its financial integrity, and proof that they can meet the minimum standards” as outlined in state law.
Hawthorne is responsible for more than $580,000 in bounced checks between some 66 individuals in recent months, according to an IHHA representative at the meeting. The ITHA is apparently separately owned around $600,000 from Hawthorne for payments dating back seven months.
In 2019, Hawthorne received approval by the Illinois Gaming Board (IGB) to build and operate a “Racino” with casino style gambling machines and table games.
“The IGB also issued Hawthorne a Master Sports Wagering License which permitted Hawthorne to offer retail and online sports betting. In 2024, the IGB approved continued licensing suitability for Hawthorne and renewed its sports wagering license,” according to the press release.
Since 2019, however, nothing concrete has materialized on that possibility despite repeated promises to the contrary by track operators.
At last month's board meeting, John Walsh, Hawthorne's assistant general manager, suggested once more that a deal was imminent.
“We're working with a new partner, someone nearby, someone interested in Illinois and Illinois racing, who really wants all of this to succeed and move quickly,” said Walsh, who stood in last minute for Carey.
Come the end of the Standardbred meet, the track must be prepared for Thoroughbreds. As of Monday, the rail had been switched but the annual reconditioning of the track surface was moving along in slow-motion fashion.
“They normally contract that out to a company that brings in some heavy equipment-semi-trucks and tractor trailers-that they can use to expedite the process of putting the surface down,” Block explained on Monday.
That so far hasn't happened. Instead, the usual track maintenance crew are using existing equipment, which is dragging the process out.
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