Hawthorne Secures $16M Loan As Part Of Chapter 11 Reorganization

Hawthorne Race Course in suburban Chicago was able this week to secure a $16 million loan with hopes of being able to conduct a thoroughbred schedule starting in late April.

The track, which filed for bankruptcy earlier this month, secured a 120-day loan through JDI Loans to begin paying creditors. Hawthorne specifically filed a Chapter 11 reorganization via a “debtor in possession” financing method, also known as DIP. This allows Hawthorne to keep possession and control of its assets as it looks for a suitor in hopes of both survival and eventually building a $400 million racino in Stickney in the south suburbs of Chicago.

Hawthorne Race Course was granted “preliminary suitable” status by the Illinois Gaming Board in July 2020 to build the racino and had begun construction work at the venue that included clearing out the first-floor area. But little progress has been made over the last five years as President and CEO Tim Carey tried to find willing partners to build out the racino.

The financing problems prior to the filing reached a peak in late January, when the Illinois Racing Board suspended Hawthorne’s harness racing license after finding the track failed “to provide documentation demonstrating its financial integrity.”

Horsemen to be paid, but when?

Judge Timothy A. Barnes had previously approved funding to be made available to convert the track from harness racing to thoroughbred racing. On Tuesday, he accepted the argument from creditors that thoroughbred horsemen should be made whole first ahead of their harness counterparts as a means of increasing chances of racing this year.

The thoroughbred horsemen’s account had been frozen with a balance of nearly $1.4 million, and Hawthorne had bounced checks totaling nearly $282,000. In a statement posted on the Illinois Thoroughbred Horsemen’s Association (ITHA) website, racing is tentatively scheduled to begin April 19.

“It’s not yet clear when those funds will be available,” read the statement on the ITHA website. “We are cautiously optimistic, based on our conversations today, that this should occur within the next 10 days. More than $1.6 million exists between the bounced checks and existing thoroughbred accounts, so securing access to these funds represents a significant victory for our members.

The Illinois Harness Horsemen’s Association (IHHA) provided an update the following day on its website, explaining the process and reassuring members, “It is important for everyone to understand that this decision does not mean horsemen will not receive the money owed to them. The court is requiring additional review as part of the normal bankruptcy procedure before approving certain payments and financing arrangements.”

On Wednesday, the United States Trustee Office appointed ITHA Executive Director David McCaffrey, Greg Martin of Woodbine Entertainment, and Jack Jeziorski of the New York Racing Association (NYRA) to an Unsecured Creditor Committee.

Unsecured creditors rank lower on the list among parties who can recover money from a bankruptcy hearing. This committee, chaired by Jeziorski, has the ability to investigate Hawthorne’s finances, be part of the negotiations for any reorganization plan, and be consulted on business operations.

Will the race schedule be approved?

The Illinois Racing Board (IRB) has a scheduled meeting Thursday, and on the agenda is Hawthorne’s request to amend its live racing schedule. It is unknown if Hawthorne’s Carey will be the one making the presentation to the agency.

Carey did not appear at a January meeting after the IRB suspended Hawthorne’s harness racing license. His absence rankled both board members and horsemen as track representatives offered little in the way of specific answers to key questions regarding the track and its finances.