ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, November 20, 1996 TAG: 9611200071
SECTION: VIRGINIA PAGE: C-4 EDITION: NEW RIVER VALLEY
DATELINE: RICHMOND
SOURCE: DAVID M. POOLE STAFF WRITER
MEMO: NOTE: Shorter version ran in Metro edition.
A ballot setback in Northern Virginia and a tight construction deadline make the proposed horse track Colonial Downs an even longer shot for investors.
A Colonial Downs spokesman said Tuesday that the project east of Richmond will need more time - perhaps until January - to secure $55 million in debt and equity financing.
Investment bankers for Colonial Downs are revising a prospectus for investors to reflect the added risk inherent in two recent developments:
*Voters in Manassas Park rejected a ballot initiative that would have allowed Colonial Downs to open an off-track betting parlor in Northern Virginia. Investors will be told there is no guarantee Colonial Downs will gain access to the state's most populous and affluent region.
*Construction work is proceeding at the New Kent County track, but Colonial Downs has begun making contingencies for missing a General Assembly-mandated deadline to begin live racing by July1. Investors will be told about the possibility that the state could close, at least temporarily, Colonial Downs' off-track betting parlor in Chesapeake and one opening soon in Richmond.
Colonial Downs is scheduled today to brief the five-member Virginia Racing Commission on its construction schedule.
Mike Mulvihill, a spokesman for the proposed track, said crews are making progress at the New Kent County site, located just off Interstate 64 between Williamsburg and Richmond.
Workers have brought the 11/4-mile track to grade, roughed out the parking lots and are preparing to pour concrete footers for the grandstand, Mulvihill said.
The work is being financed by a bridge loan from Jeffrey Jacobs, the son of an Ohio shopping center magnate who earlier this year assumed control of Colonial Downs from founder Arnold Stansley.
Permanent financing is still unresolved. Colonial Downs has retained Friedman, Billings, Ramsey & Co., a Rossyln-based investment banking firm, to underwrite up to $15 million in publicly traded stock and $40 million in bonds.
A spokesman for Friedman, Billings declined to comment Tuesday on how the bonds might be classified.
Generally, horse track bonds are considered high-risk investments, given the financial troubles at recent start-up tracks around the nation and competition from casinos and lotteries for gambling dollars.
Under a financing agreement, Jacobs can walk away from the deal if risk bumps the yield above 12.5 percent.
For Colonial Downs, the risks have grown in recent weeks.
Manassas Park became the fifth locality in Northern Virginia to snub off-track betting parlors in the last two years.
``It's certainly no help,'' Mulvihill said. ``How much of a risk it is, you'd have to ask an investor. It certainly is cash-flow we'd like to have coming in.''
Mulvihill said Colonial Downs would try again, but might first concentrate on expanding into one or more of the four localities where off-track wagering has been approved: Hampton and Virginia Beach in Hampton Roads; Brunswick and Greensville counties in Southside.
Colonial Downs is expected to generate about 80 percent of its revenue from up to six off-track wagering sites.
Colonial Downs, however, would have to close the sites if its maiden thoroughbred meet misses the July1 deadline.
The General Assembly set that date earlier this year in an effort to block Colonial Downs from postponing live racing indefinitely, while making money from bets wagered on races beamed via satellite from other states.
Mulvihill said Colonial Downs officials probably would not lobby the General Assembly for an extension; instead, it will try to cut its losses if the track opens late.
In an effort to assess the risk to investors, Colonial Downs officials plan to ask the Racing Commission for a ruling on when off-track betting could resume once the New Kent track opens.
Mulvihill said he expected track opponents to seize upon the request as evidence that Colonial Downs is foundering.
``You're going to have every bozo in Northern Virginia, the horsemen, who will be saying, `See, they're already planning to miss the [start] date.'
``We just want to clear up any uncertainties so investors can assess the risk.''
LENGTH: Medium: 85 lines KEYWORDS: HORSE RACINGby CNB