New York Off Track Betting Corp Files Bankruptcy

Gambling may seem like one of those recession proof industries: A place where people turn to in hard times in hopes of making a quick buck.

But these days no business is safe, not even betting establishments supported by the state government.

The Off Track Betting Corp. in New York is the first of these to file for bankruptcy, according to a recent Bloomberg News report.

The Off Track Betting Corporation is a public benefit corporation that handles wagers for in-state and out-of- state horse racing. It was established in 1970.

The company is filing chapter 9 Federal Bankruptcy and starting reorganization plans. Filing chapter 9 allows the company to keep running and avoid liquidation sales.

The state took over operations of the OTB about a year ago after Mayor Bloomberg threatened to shut it down to protect the state from any further losses. It had already lost $38 million in revenue in the past several years.

However, shutting down the establishment could cost the state $600 million and cost many people their jobs.

The company plans to sell bonds worth $250 million to pay off some of their debt and update their technologies. Improved technology and new operating systems might allow the company to run around the clock allowing them to be available to customers all the time, thus creating opportunities for more revenue.

The reorganization plans include cutting down workforce, reducing the number of betting parlors and introducing new technology to increase sales. The goal is to add to the $1 billion in bets that are already collected annually.

But before the company can take action the plan must be approved by a federal bankruptcy court and state lawmakers.

Meyer Frucher has been appointed to develop this reorganization plan. He is the vice chairman of the NASDAQ OMX and has the experience of a financial and corporate manager.

Frucher says that if the plan should it go into effect it may protect 40,000 jobs in the state.

Frucher also said that state taxes and charges might need to decrease in order for the gambling operations to stay afloat. These affect payments to everyone including the state, horse breeders, and race tracks.

The plan is set to be presented in February to the federal courts and then the state must review it. It may take awhile before anything moves forward.

One of the biggest challenges to the plan is the unfunded payments to over a thousand workers’ pension and health care plans. The OTB workforce is represented by one of the biggest public employee union of New York State, and the union is currently cooperating with the plan.

To learn how Chapter 7 bankruptcy differs from Chapter 9.