PROVIDENCE — The lenders who control the bankrupt Twin River slot parlor and the greyhound owners association that provides dogs for racing in Lincoln have reached a deal that is expected to save more than $90 million for the gambling hall over a decade, according to federal court filings.

The agreement ends the Rhode Island Greyhound Owners Association’s part in racing, but state law still requires Twin River to offer 125 days of racing annually. A Twin River spokeswoman said the slot parlor has a tentative deal with another group to provide dogs to run the required races, though she declined to name the entity.

UTGR Inc., the holding company that operates the slot parlor, filed for federal Chapter 11 bankruptcy protection June 23, citing among other issues a contract with the greyhound owners association that UTGR said cost too much. The 62-year history of racing in Lincoln was interrupted Aug. 8 with the suspension of greyhound racing.

Since then, the two sides have been negotiating the terms of an agreement that would significantly reduce the amount of money the roughly 300 dog owners would receive from Twin River.

“Rejecting the [greyhound association] contract is perhaps the most significant operational restructuring to be achieved through these Chapter 11 cases,” states a proposed settlement agreement filed with the U.S. Bankruptcy Court in Providence shortly before midnight Thursday. “The [association] asserts that rejecting the [contract] would give rise to a rejection damages claim of at least $99,000,000 — in addition to administrative expense claims.”

The settlement agreement prevents potential claims by the association for the “significantly smaller sum” of $5 million, comprising a $2-million payment due when the pact is approved by a bankruptcy court judge and a $3-million payment due when certain conditions are met by the association and certain financial and timing milestones are reached.

The deal “effectively makes the [association] a partner with the debtors and all other parties in interest in their collective goal of a successful and expeditious conclusion” of the bankruptcy case.

The proposed settlement must be approved by U.S. Bankruptcy Court Judge Arthur N. Votolato, who is expected to take up the matter Nov. 17.

In a statement e-mailed to The Journal, association spokeswoman Jennifer Bramley stated: “We have done all we could to continue greyhound racing, yet in the settlement discussion, we were unfortunately not able to reach an agreement to allow the [association’s] continuation in Lincoln. Therefore, after much consideration, we have agreed on a settlement with Twin River. In light of the bankruptcy, we believe this settlement to be a fair and appropriate agreement.”

While the deal will lead to the dissolution of the greyhound association and its relationship with Twin River, it does not mean an end to dog racing in Lincoln. Twin River still must host racing on at least 125 days a year as a condition of its state license to operate slot machines.

Only the state government can relieve the gambling hall of fulfilling that requirement.

“We have a plan to comply with the law as it reads now,” said Patti Doyle, Twin River’s spokeswoman.

Twin River “has an agreement in principle” with a New Hampshire group to provide greyhounds for the races, she said, “absent a fee.”

Settling the contract with the association would allow the slot parlor to drop the $9-million annual fee it pays the group. The slot parlor’s owners estimate they would spend about $1.3 million annually to host races with a new provider, saving the venue between $7.5 million to $8.6 million a year.

The settlement helps the state, according to Amy Kempe, a spokeswoman for Governor Carcieri.

Getting Twin River on firm financial ground is of keen interest to Rhode Island because out of every dollar lost by bettors at one of the slot parlor’s 4,750 video-lottery terminals, the state gets slightly more than 60 cents.

The slots alone produced $396.7 million in net income in the year that ended June 30. From those player losses, the state got more than 60 percent, $242.3 million; Twin River’s owners, $110.3 million; Providence-based GTECH and other equipment providers split $27.8 million; GTECH, another $9.9 million as the central-system operator and the Town of Lincoln, $5.7 million.

When UTGR Inc. filed for Chapter 11 bankruptcy protection, the company owed nearly $568 million to dozens of banks, investment firms, government agencies, contractors and individuals, but had only $56.6 million in assets.

The slot parlor lost more than $54 million in 2008 on interest-rate swaps tied to its debt and cut the estimated value of the Lincoln gambling venue.

Continuing dog racing was a condition placed on the Lincoln venue by the General Assembly in 1992 when legislators approved the installation of the first slot machines at the track.

The state also guaranteed the greyhound association a share of the VLT revenue, an amount that topped $8 million a year by 2000.

The payment structure changed in 2004, shortly after BLB Investors LLC, a holding company made up of Kerzner International, Starwood Capital Group and Waterford Group LLC, bought Lincoln Park –– the precursor to Twin River. BLB incorporated UTGR to operate the track.

The dog owners accepted a new deal in 2004 that guaranteed them a flat fee of $10 million, which would go up by a cost-of-living measure pegged to start in 2008. The responsibility for making the payments also changed from the state to BLB. The contract runs through 2020.

The association agreed in 2008 to reduce its payment to $9 million a year, waive the cost-of-living hike, and to pay a portion of the pari-mutuel clerks’ salaries.

The proposed deal filed with the court cuts out almost all of those costs for whomever ultimately owns the slot parlor, though UTGR earlier estimated it would spend about $1.3 million annually on race-related matters if it contracts with an alternate greyhound provider.

“Most importantly, the deal will increase net revenue at the venue and that increase will benefit all stakeholders, including the state,” she said.

Among UTGR’s secured lenders, those at the head of the line to receive money in the event of Twin River’s sale, are: Merrill Lynch Capital Corp., Wells Fargo & Co., BlackRock Inc., Deutsche Bank AG and JPMorgan Chase Bank.

If UTGR emerges successfully from bankruptcy, the lenders will swap the old $500-million-plus loan package for a new $300-million, 5-year term loan. The lenders would convert a large portion of their debt into equity in the reorganized Twin River entity.

The state would chip in money to help Twin River square away its finances.

The state would provide up to $10 million “in the form of promotional and marketing” initiatives annually. The marketing payment would only be made if the revenue from Twin River exceeds the state’s share of the VLT revenue for fiscal 2009.

The state would pay an annual fee of up to $1.4 million to Twin River’s managers.

pgrimald@projo.com