Thursday November 18, 9:01 am Eastern Time
Company Press Release
Colonial Downs Holdings Inc. Announces Stabilization Plan and Potential Sale of the Company
NEW KENT, Va. --(BUSINESS WIRE)--Nov. 18, 1999--Colonial Downs Holdings, Inc. (NASDAQ: SCM: CDWN) which, through its subsidiaries, holds the only licenses to own and operate a pari-mutuel horse-racing course and satellite racing centers (''Racing Centers'') in Virginia announced that it will seek to sell the racetrack facility located in New Kent County, Virginia and its four satellite wagering facilities in Brunswick, Chesapeake, Hampton, and Richmond.
The announcement was made in connection with a proposal to remove the barriers to attracting capital to Virginia racing. The stabilization and growth plan was announced by Ian M. Stewart, President of the Company, at the Virginia Racing Commission's November 17, 1999 meeting.
The plan provides for ceasing live harness racing in Virginia and using existing purse funds and funds generated from simulcast signals to pay purse bonuses to Virginia-bred standardbred horses racing at other mid-Atlantic racetracks, such as Rosecroft in Maryland. In addition, the plan calls for a long-term contract with the Virginia Horsemen's Benevolent and Protective Association (''VaHBPA''), the representative thoroughbred horsemen's group in Virginia, pursuant to which contributions from simulcasting racing will be stabilized for the long term and the VaHBPA will use funds available to it to assist in marketing and promoting live racing. Finally, the plan seeks the Commission's support to modify the existing requirement that 150 days of live racing be conducted by 2002.
The proposal would allow the Commission to set the number of live racing days each year based upon the best interest of promoting, sustaining, and growing a Virginia horse industry. In an effort to win the cooperation of the various stakeholders in such a plan, CD Entertainment Ltd., the Company's largest shareholder and an affiliate of Jeffrey P. Jacobs, Chief Executive Officer of the Company and other insiders, will waive all related party fees, which aggregate approximately $750,000 a year, until two additional Racing Centers are opened.
The Company lost approximately $22,500 per day during the 1999 30-day standardbred meet. The stabilization plan calls for reducing the current 5% contribution from handle on standardbred simulcast racing to 1% of handle and ceasing standardbred racing in the state until two additional Racing Centers are opened. Payment of the purse contributions to date and in the future, as well as funds from the Virginia Breeder's fund, to Virginia-bred horses running at other tracks will result in greater payments to Virginia horsemen than under the current system, according to the Company's analysis presented to the Commission. Additional components of the plan include a proposal to use the Commission's budget surplus to fund purses and marketing expenses to grow the Virginia Derby, Virginia's premier horse racing event.
Mr. Jacobs stated in connection with the announcement of the plan: ''We need to remove the barriers to attracting capital to Virginia racing, regardless of whether this capital takes the form of refinancing of existing debt, bringing in a new owner, or providing incentives to contribute revenue generating businesses to the Company to grow live racing. Currently, there are three barriers: an obligation to conduct a money losing harness meet, instability and uncertainty inherent in any three year contract regarding the Company's largest expense (thoroughbred racing purses), and the requirement of racing 150 days in 2002 regardless of whether the horsemen, the Commission or the Company believe such a goal is achievable. Our plan addresses each of these barriers and attempts to remove them. We look forward to working with the Commission and the horsemen to implement this plan and bring stability and long-term growth to Virginia racing.''
The Company also will invite bids during the first quarter of 2000 for the acquisition of the Company. If the Company receives a satisfactory offer, the Company believes it can enhance shareholder value by redeploying capital into other opportunities. ''In any event, components of the stabilization plan must be implemented in order to attract interest in the sale of the Company. Even if no satisfactory offer is received, implementation of the plan is expected to allow Colonial Downs to re-finance its $15 million in third-party debt that becomes due in June 2000 and to look for opportunities to expand its revenue base to support live racing in Virginia,'' stated Mr. Jacobs.
In the course of presenting its stabilization plan, Colonial Downs indicated that it projects operating at break-even for the fourth quarter of 1999, resulting in losses for 1999 of approximately $1.2 million. Additionally, Colonial Downs projected that if there were no changes in the current cost structure and no components of the stabilization plan are implemented, the Company would be projected to lose approximately $2.7 million for 2000. Conversely, if the stabilization plan is implemented, Colonial Downs projects that it will earn approximately $370,000 for 2000. |
