The bankruptcy filing seeks to relieve Twin River of its obligation to run at least 125 days of greyhound races each year, a move requiring legislation from the General Assembly.

The Providence Journal / John Freidah

PROVIDENCE — Overwhelmed by more than a half-billion dollars in debt, Twin River’s owners have agreed to turn over the keys to the 62-year-old track and slot parlor to their lenders, and let them bring in a new operator within 120 days under the terms of a “consensual” agreement filed in U.S. Bankruptcy Court on Tuesday.

The filing reflects what one of the lead lawyers called a “heavily negotiated and hard-fought agreement in principle” hammered out among the state, a lenders group led by Merrill Lynch Capital, and BLB Investors, the consortium of hotel, gambling and real-estate interests that owns the sprawling Lincoln gambling hall that is home to 4,751 video-slots and a greyhound track.

The filing states: “As successful as [Twin River’s] operations have been, their revenues cannot support the substantial demands imposed by the state tax rate and the debtors’ debt services obligations” on $589 million in loans. If there is no agreement within 60 days relative to the current owners’ continuing role, it says, “the sponsors will transition ownership to the lenders.”

The agreement would relieve the current owners of their debts, but it would also wipe out their own $153-million investment in one of the few gambling enterprises across the country that has continued to post profits in the topsy-turvy economy; potentially end live dog racing there and require state licensing hearings for the group of as yet unidentified lenders who would become the owners of a gambling enterprise expected to produce $245 million for the state this year alone.

It would usher in 24-hour gambling, seven days a week at Twin River, a move Governor Carcieri says his administration can authorize without legislation.

It also seeks to relieve Twin River of its obligation to run at least 125 days of greyhound races each year, a move requiring legislation that elicited no immediate support from key lawmakers despite repeated assertions by Twin River’s owners that the dog-racing costs millions of dollars more than it brings in.

“At this point, we are not changing the law,” said House Speaker William J. Murphy, while the Rhode Island Greyhound Owners Association vowed to “continue its fight to keep Rhode Island workers working and to protect this productive industry and longstanding tradition.”

In the interim, state officials — from the governor on down — asserted it will be “business as usual” at Twin River for its patrons, a message that will be driven home in a $37,000, four-day radio blitz featuring the voice of state Lottery Director Gerald Aubin saying: “I want to assure all Twin River patrons that your gaming experience will remain unchanged.”

Carcieri said at a news conference: “I believe this reorganization plan is the best solution under the circumstance, and is in the best interest of all parties, particularly the taxpayers of Rhode island … [and] BLB executives have assured my staff of their commitment to maintain normal operations during the Chapter 11 reorganization.”

Added Patti Doyle, spokeswoman for Twin River: “We began the process of restructuring our finances more than one year ago with the hope that we would reach an agreement with our lenders and key constituencies that was in the best interest of all parties, chief among them our patrons and the State of Rhode Island.

“Today’s consensual agreement does exactly that, and most important, does so in a way that guarantees little to no disruption to operations at Twin River,” Doyle said. Twin River is operated by UTGR Inc., a subsidiary of BLB Investors — a holding company made up of Kerzner International Limited, the Waterford Group LLC and Starwood Capital Group — which in turn invests money for pension funds across the country.

The video-slots are still a moneymaker for Twin River and, by extension, for the state Lottery, which controls the leases on the 4,751 electronic gambling machines housed there. Out of every dollar lost in one of these machines, the state gets roughly 61 cents, an anticipated $245 million this year alone.

At an emergency hearing, U.S. Bankruptcy Judge Arthur N. Votolato gave preliminary approval to a number of routine requests in such cases, including a request by the owners for permission to pay wages, taxes and utility bills out of their remaining cash reserve. These are some of the other key elements:

In exchange for wiping close to $290 million in debt off their books, the lenders are to immediately begin a process “to identify a new operator” to run the slot parlor within the next 120 days, subject to approval by the two state agencies that regulate gambling in the state: the Lottery and the state Department of Business Regulation.

It remains to be seen how the new operator would be chosen, but the prospect sparked immediate interest from Harrah’s Entertainment, the backer of the Narragansett Indians’ defeated 2006 West Warwick casino drive. “We are absolutely interested,” said Harrah’s executive Jan Jones.

The Carcieri administration would be required to authorize overnight gambling seven days a week and agree to pay up to $11 million in “annual support,” including a new management fee of up to $1.4 million, and a share of the annual marketing costs.

The prospect of overnight gambling without town approval riled Sen. Edward J. O’Neill, the new state senator from Lincoln, who learned of the proposal at Carcieri’s news conference. “First we started out as a horse track, then a dog track, then we went to off-track betting, then … to slots, then we got more slots … now 24/7,’ he said. ‘At what point do the people of Lincoln have a say in what’s going on in their town?”

It appears the deal could also spell the end of live racing in Rhode Island, 62 years after the Lincoln venue opened in 1947 as a thoroughbred track known as Lincoln Downs.

After B.A. Dario sold the track, in 1977, to Joe Linsey and his nephew Al Ross, it took on a new identity as Lincoln Greyhound Park, a dog track. By the 1990s, the grand dame of Louisquisset Pike was owned by the British Wembley PLC, and didn’t change hands again until the criminal conviction in 2005 of the top Wembley executives here and in the United Kingdom on charges they conspired in an attempt to bribe former House Speaker John B. Harwood.

That set the stage for the current owners — who include two of the original developers of the Mohegan Sun casino — to buy Lincoln Park and spend $220 million on renovations aimed at providing “a first-class casino experience” at the track-cum-slot parlor.

The bankruptcy filing was not a surprise. The owners defaulted on their loans in March 2008. The following September, Moody’s Investor Service downgraded their credit rating, citing a “high probability of bankruptcy.”

The owners issued increasingly urgent warnings about the likelihood that they would be forced into bankruptcy if the state did not come to their aid, by either raising their share of the revenue or paying upward of $20 million annually in marketing costs.

It appears that Dimeo Construction and a phalanx of other local contractors still waiting to get paid for their work on the renovations that transformed the deteriorating Lincoln Park into Twin River would be paid in full, but a group of unidentified second lien-holders would not though they would be given what lawyer Paul Basta described as “a right to share in the upside” of a future sale of the venue.

While Twin River would not be the first gambling enterprise to sink into bankruptcy, it has a unique relationship with the state. The state gets all of the money on hand each day, takes its share and then divvies up the amounts owed each of the other “partners,” including Twin River’s owners. As Twin River’s financial troubles mounted, state Department of Revenue Director Gary Sasse confirmed that “additional measures [had] been put in place to ensure protection of state funds in the event of a bankruptcy filing.” That included posting a Lottery representative in the Twin River money room to examine the deposit slips, and observe the physical pick-up of the money by an armored car service.

kgregg@projo.com