Judge Seeks Higher Bid, Continued Racing at Hawthorne

Bankruptcy Judge Timothy Barnes has agreed to extend the deadline for bids to buy Hawthorne Race Course out of bankruptcy, hoping to increase an initial $90 million offer and to encourage bidders who would continue racing at the suburban Chicago track. At stake is the future of racing in the Chicago area. Since Arlington International Racecourse closed in September of 2021, Hawthorne is the last operating track in northern Illinois. The bid deadline had been set for June 30. Barnes agreed at a June 29 hearing to push that to July 10. He also delayed a sale hearing from July 13 to July 20. The extension was coupled with approval of the $90 million "stalking horse" bid by a Delaware-registered limited liability corporation. The bidder, whose identity is shielded by Delaware laws, would seek to redevelop the property for other uses, Hawthorne and a creditors' committee have revealed. Approval of the stalking horse bid sets a minimum for any other bids and also unlocks an additional $1.9 million in bankruptcy funding that Hawthorne attorney Barry Chatz said is needed to continue racing through July. "We're running out of money," Chatz said. Before ruling, Barnes said he was surprised the initial bid was as low as $90 million since Hawthorne officials earlier said they had entertained offers for well more than $100 million. The judge questioned all parties to the case about prospects for obtaining higher bids, including "going concern" bids, through an extension. A going concern bid is one that intends to purchase a distressed business or property with the intent of sustaining it. With the bidding process shrouded in nondisclosure agreements, Barnes said it was left to his determination whether that chance was worth approving another $1.9 million in spending. "It's a risk," he said. "Is there a potential for more real estate bids and more going concern bids? I cannot imagine the $90 million will stand. I think the process will be more robust if the real estate bidders are competing with the going concern bidders. "Is it worth $1.9 million? That's the decision I'm being asked to make. I think it is." The time pressure to get a sale done goes beyond the dwindling supply of operating funds. Any "going concern" bidder would require licensing by the Illinois Racing Board. An IRB official declined June 29 to say whether any application is under consideration. A key attraction for continued racing is the potential to develop a racino on the Hawthorne property. Hawthorne in 2019 received preliminary approval for a gaming license but a new owner presumably would require approval by the Illinois Gaming Board. Hawthorne filed for bankruptcy protection Feb. 27. Awash in a sea of debt and cut off from access to its bank accounts, its checks began bouncing, and the IRB suspended the track's harness license. The bankruptcy filing allowed the track to get a delayed start on the current Thoroughbred meeting using "debtor in possession" financing. That interim financing and other obligations would be repaid through the proceeds of a sale. Barnes, however, indicated a sale price as low as $90 million might mean unsecured creditors might not recover any of the money they're owed. "If the stalking horse bidder is the winning bidder, that's a disastrous outcome," said Michael Brandess, attorney for the creditors' committee.