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October 29, 2009

Another desperate try for slots by Magna

The pathetic lengths to which Magna Entertainment will go to obtain slots at Laurel Park just got longer. First Magna and boss Frank Stronach botched their bid for a license. They didn't put up the required $28.5 million in earnest money. Then they threw a fit after their bid was rejected, arguing that they didn't pay because the money wasn't refundable. Then they argued that, because the state was looking at changing the sites for some of the successful bidders, that was tantamount to reopening the process and they should be allowed reentry.

Now they're throwing partner Joe De Francis and his partners under the bus, hoping that their absence will let the state countenance Magna's bid. De Francis et. al. were supposed to get 65 percent of Laurel slots profits for the first five years and a diminishing amount over the next 15 years. De Francis personally would get 11.7 percent for the first five years, documents show -- millions. Magna is asking the bankruptcy court to terminate that deal.

One question: What took Magna so long? Bankruptcy is all about rejecting contracts. The profit-sharing contract with De Francis is at the tiptop of the list of binding deals that Magna regrets. Even if Magna doesn't get a license in this round, jettisoning De Francis would yield a theoretical greater share of slots profits for any future ventures. That makes Magna look look more valuable, which is what its creditors want. But for the owner of Pimlico and Laurel to get slots anytime soon is still a long, long shot.

Posted by Jay Hancock at 9:11 AM | | Comments (15)
Categories: Slots
        

Comments

Can anyone clarify what is meant by "not refundable"? If one posted the money but failed to win the bid would the state have kept the money? That sounds like a pretty expensive lottery ticket.

Dan: Yeah, that's what it meant. Magna argued that the state would have kept its money even if its slots bid were rejected.

This whole slots fiasco is a joke--on the citizens of Maryland. Magna can't run a race track-if horses were car parts they might have a clue. In the end, we'll have two small locations which will be nothing and maybe one or two large locations which will end up costing the state money. Very sad to see our so called state leaders make such awful decisions. The city has already spent millions for a site which, for all we know, may be run by the Russian mafia or a Columbian drug cartel.

The entire idea of it is the wrong approach and because it is so different from what it was originally thought and described to be... $hit can the whole thing and start over.

Completely abandon the concept of a WalMart sized warehouse full of foolish tourists, lonely old ladies and your dumb cousins slamming coin into those sucker machines.

Allow a few slot machines in appropriate venues (bars and such with licenses and parking) that are willing to buy their own machines... just like it used to be!

Allow a few actual "parlors" for some slot operators. A parlor being a small room immediately attached to some other venue geared around adults and gambling like (ta dah!) a racetrack.

Allow some of these places to set up a licensed card room to meet the desire of the actual gamblers and stop pretending that slots are anything but sucker machines.

From Day One, for some reason that I don't understand, the Pols in this state have Hated the all of the DeFrancis Family going back to Joe who my Father worked for at one time. Then when the family sold their interests to Magna after Joe's passing then Magna became one of the "Evil Corporations" that the Pols were so Loathe to deal with.

The only rationale that I can figure is that the Pols really believe that THEY are the ONLY ones Entitled to make Any Money from Gambling in Any form in this state.

As a result, NONE of the Major Gaming Corporations, Harrah's, MGM/Mirage, Las Vegas Sands or Boyd Gaming had any desire to come to MD. Only Penn National, considered a 2nd Tier Gaming Co. came to the Bidding. At least they have Experience with some 16 Casinos/Racinos across the US. Cordish has only "Developed" 2 Indian Casinos in Fla. and is building "Indiana Live" for Indianapolis, hardly a Great Track Record in the industry. The Balto. Group is a "Made-Up" conglomerate of Investors, who knows what they have in mind, they certainly haven't built anything anywhere else to look at.

Is it any Wonder that this issue has dragged on for so long and that Anything that will be built here will be anything but Too Little, Too Late, Too Bad.

This was supposed to be simple: $600 million for schools, local zoning control, no corruption, and racing was going to be saved. What the heck happened? Why don't we see any comment from Fred Puddester who was Martin O'Malley's hand-picked champion for slots? Everything that we were told during the campaign turns out to be fake. Don't we deserve a few answers from the political establishment folks who called all of the estimates "conservative?"

How about the connection between Magna and Baltimore City Entertainment Group? A VP Paul MIcucci is involved with BCEG and he was with Magna before? Does Magna really have a failed bid or are they covering there bases all over the place?

I'm no fan of Stronach. He's certainly made a hash of his horseracing ventures. But I have to believe the politicians come in for a lot of blame here.

And am I understanding you correctly that Magna could have put up 28 million and possibly got nothing in return?

Jontradom: That was Magna's excuse for not putting up the $28 million. I can't believe it's true. The real reason probably was they didn't have the money.

Jay,

Why are you so pro Cordish? Why don't you ask Mr. Cordish if you could have the pleasure of his casino near your home? Slots are no good for any residential community, and none of you 'pro-slots' pro-cordish folks will acknowledge it.

Anne Arundel County has an oppertunity to build an information based economy based around Ft Meade and NSA 2 miles south of Arundel Mills. Instead we will drive all the jobs and potential residents to nearby Counties who have effective state legislators who protected their Counties.

Hi Rob: Not aware that I was pro-Cordish. The Sun's editorial page seems pro-Cordish, or at least pro quick-and-big slots revenue, for which Cordish may be the best hope. Me, I just think the whole thing is a fiasco.

The slots legislation in Maryland is a fiasco. But not because of what the proponents said or promised but because the politicians greedily wrote it to take such a large share as to make it unattractive for most organizations to host the slots. Those companies would take all the risk, spend all the upfront money and the state government would take most of the profits (for which the government would do virtually nothing).

Compare Maryland to Pennsylvania, WV and Delaware. Those 3 states are all prospering with slots. The communities now have funds for local improvement projects. Horse racing has dramatically improved. And crime has not increased. Are the people who play slots being taken advantage of? I don't think so. It is a voluntary form of entertainment that some people enjoy. And because it is voluntary, it is not a tax (like some people like to call it). To be a tax requires that you have no choice but to pay it.

I THINK EVERYONE IS LOOKING FORWARD TO NOT SEEING THE WORD MAGNA ANYWHERE IN HIORSE RACING PERIOD!!!!!!!!!!!

The old adage of "pigs get fed and hogs get slaughtered" certainly applies in the State of Maryland. If the politicians had had only a little sense they would have brought in one of the big guns of gaming, let them, with their expertise set up the system and reaped the tidy profits. But no, the elected a**holes of Annapolis must first push back for four years even thinking about it because and nasty Republican was in the State House and then they conceive some half-ass scene of where the parlors are to be placed. Actually, the State is now so for behind the surrounding states, who will soon go to table games and sport books, that the money they will finally get from slots will be a pittance of what they had originally projected.

Jay, I have to agree with you on your last point, this whole thing is a fiasco.

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Wednesdays and Fridays.
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