PROVIDENCE — If the owners of the state’s largest slot parlor are unable to pull themselves out of their financial hole and “the price is right,” General Treasurer Frank Caprio says: “A purchase of Twin River is something the state should seriously consider.”

In an interview Friday, Caprio said a state takeover would not be his first choice. He said he would prefer to see “the private owners and lenders resolving this themselves.”

But with that possibility becoming increasingly uncertain — and a major credit-rating agency warning of the high probability that the company that owns Twin River will end up in bankruptcy — Caprio said the state has an opportunity to buy the real estate at a rock-bottom price and potentially increase its share of the revenue from the greyhound track and slot parlor.

“Due to the downturn in the real estate market and the credit crisis, the state could purchase the Twin River real estate at a market low and sell at a higher price when favorable economic and credit conditions return,” he said.

While acknowledging the state might need to bring in a “partner” to manage the operation, he said the state Lottery would be in a strong financial position to purchase the real estate and increase the state’s share of the profits above the current 60 percent. Cutting the state’s share of the profits is not an option.”

Caprio said he has not been asked for his advice or had any role so far in the Carcieri administration’s private talks with the owners of the Lincoln gambling emporium, but intends to discuss “this and other issues with the governor in the very near term.”

State Lottery Director Gerald Aubin and his boss, Department of Revenue Director Gary Sasse, had no comment, with Governor Carcieri’s spokeswoman Amy Kempe saying: “The administration is not going to comment on Treasurer Caprio’s thoughts on Twin River,” but “our priority remains to protect the taxpayers.”

Twin River also had no comment on Caprio’s remarks.

While Caprio previously acknowledged that a state takeover was a last-resort “option,” his latest comments suggest the state could benefit financially from buying the Twin River real estate at fire-sale prices and take over operations of a gambling enterprise where the main attractions — 4,751 video-slots — are already owned by the state Lottery.

Out of every dollar lost into one of these machines, the state currently gets approximately 61 cents and splits the remaining millions among the owners, GTECH and the other video-slot providers, the Town of Lincoln and the Narragansett Indian tribe.

If expectations panned out for this year, the state would get $254 million. A report out Friday indicates that the first offering of promotional points — or free play — on a trial basis over the summer helped Twin River post year-over-year gains of 6.8 percent in July, and 9.1 percent in August while slot play at Foxwoods, Mohegan Sun and Newport Grand was down from what it was a year earlier.

Still, credit-rating agency Moody’s Investors Service downgraded Twin River owner UTGR Inc. last month, citing “the high probability that the company may be forced to seek bankruptcy protection in the near term.” Moody’s said, the slot parlor is “barely generating enough cash to run its daily operations” and cannot borrow more money. Standard & Poor’s lowered its financial rating to “D” a week earlier, after the company had missed a Sept. 2 interest payment on $145 million in loans to its second-lien lenders.

Twin River is run by a subsidiary of BLB Management Services Inc., a holding company composed of Kerzner International, Starwood Capital Group and Waterford Group LLC. The company bought the aging Lincoln Park dog track in 2005, along with three greyhound racetracks and a horse track in Colorado, and then embarked on a $225-million renovation and expansion of the Lincoln facility to accommodate the 4,751 video-slot machines. The owners have not disclosed how much remains on their loans, but Moody’s said its downgrade affected $565 million in debt.

Twin River’s precarious financial position first surfaced in March when Twin River’s owners missed a payment to its lenders, who include Merrill Lynch, JPMorgan Chase and the Deutsche Bank.

In June, the owners offered to pay the state $560 million up front if it would cut its share of the slot revenue by more than half, to 25 percent. Asked at the time how Twin River’s owners could afford to offer the state $560 million when they couldn’t afford to pay their lenders, spokeswoman Patti Doyle said: “If we are able to reduce our tax rate overall, the lending community will look more favorably on our relationship with the state” and presumably be “willing to advance the upfront payment.” If the state were willing to drop its share of the take — which is more than twice the percentage of what the Connecticut casinos pay their home state, she said — Twin River’s lenders “would consider it a more competitive arrangement in the marketplace and they would consider it a more stable enterprise going forward.” The governor and lawmakers said no. Carcieri last week reaffirmed his opposition to reducing the state’s share of the take, saying: “This is a problem between BLB and their lenders. They borrowed too much money.”Twin River’s real estate is currently assessed at $114,677,600 for tax purposes, and the tangible property — such as furniture and fixtures — at $71,359,288, according to the Lincoln tax assessor’s office.

“In my opinion,” Caprio said, “the owners of Twin River have too much debt to support the profit they are making.”

Going forward, the general treasurer said “one of two things will happen: business improves and the current owners renegotiate their deal with the lenders; alternatively, the lenders to Twin River foreclose on the real estate, then the state, a private entity, or a combination of the two, will emerge as the owner and operator. Under either alternative, the state is in position to keep at least its current 60 percent of the profits from the video lottery terminals at Twin River, and the facility will continue to operate during any transition.”

While other gambling companies and investors might be interested, Caprio said they probably would not have the same access to financing in the current financial market that the state, with “its credit worthiness,” would have, so it might make sense for the state to buy it, “expand its share of the profits and then when conditions improve in the financial world and the local economy, the real estate could be sold at that time for a profit.”

Caprio said he has not done a thorough financial analysis, but believes the state could buy the property with tax-exempt “certificates of participation” — that do not require voter approval; seek an operating partner and keep anywhere from the current 61 percent to 80 percent of the net-slot revenue, by cutting out a chunk of the 27-percent currently paid Twin River’s owners.

Seen as a likely candidate for governor in 2010, Democrat Caprio said he has no qualms about the state buying its largest privately owned gambling enterprise business because, in his mind, it would be no different than the state owning the Westin Hotel, and hiring a hotel-management company to run it, and he would also have no objection to asking voters if they are willing to move Twin River a step closer to full-casino status, by introducing table games if the Town of Lincoln was “satisfied with the deal.”

Top lawmakers — including House Finance Chairman Steven Costantino — did not respond Friday to questions about where they stood on Caprio’s proposal.

The report released by the state Lottery Friday, compiled by the accounting firm Sullivan & Company, examined the effect of the free-play promotion at Twin River.

Under an agreement with the revenue department, Twin River was allowed to give away up to $1.5 million in free play during the trial period, then up to 4 percent of its “net terminal income” from the same month a year earlier. Should the move fail to live up to revenue expectations, the agreement requires the owners to reimburse the state, up to a point, for lost tax revenue.

The results among 21,368 of the 29,176 “rewards club” players who received free-play offers of between $5 and $200 in the mail showed the amount wagered was up 19.9 percent. It was also up 13.7 percent among 27,840 players who were not offered the deal, but may have hoped to qualify. But it was down sharply among all other players, including 7,808 of those offered the free play.

While the results overall were positive, Aubin, the state Lottery director, said no decision has been reached on whether to extend the program beyond the current trial period. “We have an agreement through the end of October…and we will continue to monitor the situation throughout the month and await our advisors direction on this matter.”

kgregg@projo.com