ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Monday, January 20, 1997 TAG: 9701200027
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
DATELINE: RICHMOND
SOURCE: DAVID M. POOLE STAFF WRITER
Colonial Downs acknowledges it may have trouble competing with horse tracks in neighboring states that offer casino-style gambling.
In preparing for an initial stock offering, Colonial Downs advises potential investors of the threat from slot machines at tracks in West Virginia and Delaware. Maryland is also considering slots.
"It may be more difficult for the Company to attract horsemen to race at the Track if other nearby racetracks offer higher purses," Colonial Downs wrote in its prospectus filed with the Securities and Exchange Commission.
Colonial Downs officials say the prospectus, required to advise investors of potential risks, should not be interpreted to mean the track intends to bring slots to Virginia.
"My clients have never mentioned it," said Bill Thomas, a Colonial Downs lobbyist in the General Assembly. "And if they did, I would not be working for them."
But some stock analysts say fast-paced gaming holds the promise of shaking the horse industry out of its slump.
"I think slot machines is where the growth comes from, not a pari-mutuel-type setup," said Steven Tuen, who follows new stock issues for IPO Value Monitor in New York.
Some Virginia lawmakers predict that it is only a matter of time before Colonial Downs will ask for slots at its proposed track in New Kent County, just east of Richmond.
"Horse racing is no longer a leisurely day at the park," said Sen. Mark Earley, a Chesapeake Republican who wants to abolish pari-mutuel gambling. "The only way they can compete is to bring in casino-style gambling."
Earley noted that the track's president, Jeffrey Jacobs of Cleveland, operates casinos in Colorado and Nevada.
Colonial Downs faces a July1 deadline to begin racing at the track, which will be situated in a pine forest off Interstate 64 between Williamsburg and Richmond.
If Colonial Downs misses that deadline, the General Assembly could force the company to shut down off-track betting parlors it operates in Chesapeake and Richmond.
So, the Ohio-based developers are asking the General Assembly for an extra 60days, pushing the track opening back to Sept.1.
"I don't see any problem with an extra 60 days," said House Speaker Thomas Moss, D-Norfolk.
In its prospectus filed with the SCC, Colonial Downs describes its bid to raise $31.5 million in an initial stock offering next month.
With many gambling stocks humming on Wall Street, Colonial Downs hopes the timing will be right to raise equity for the New Kent County track and up to six betting parlors around the state.
In addition to selling stock, Colonial Downs plans to secure $18.5 million in bank financing.
By offering stock, Colonial Downs hopes to avoid the heavy debt load that have bankrupted many horse tracks that have opened in the last decade.
Some lawmakers have noted that the stock offering will mean a windfall for Jacobs and the track's original investor, Arnold Stansley of Toledo, Ohio.
``There is a lot of `sweetheart' to it,'' said Del. Glenn Croshaw, D-Virginia Beach, a frequent critic of Colonial Downs.
Colonial Downs' officers will recoup their original investments from proceeds of the stock sale. Jacobs will receive at least $1.7 million. Stansley, the company's original president, will get $386,788.
"All they've been doing for the last 2 1/2 years has been putting money in," said James Weinberg, a Richmond attorney representing Colonial Downs. "They're not cashing out at all. They're staying in with the rest of the investors."
Weinberg noted that Jacobs has agreed to lend the company another $3 million in return for additional stock.
Jacobs, Stansley and other original investors will end up with 45 percent of the outstanding shares of common stock. The company will be structured, however, to give them 77 percent of the stock voting power.
The prospectus lists a number of insider transactions:
* A construction company owned by James Leadbetter, an original investor in Colonial Downs, has a $26 million contract to build the New Kent track.
* Jacobs will run the food and alcohol concessions at the track and off-track parlors. The track will pay most of the concession overhead, while Jacobs will pay rent ranging from 10 percent to 15 percent of gross sales.
* Jacobs will receive a $250,000management fee for real estate and consulting services.
LENGTH: Medium: 87 lines ILLUSTRATION: GRAPHIC: Map by staff. color. KEYWORDS: HORSE RACINGby CNB