DBR expected to license new Twin Rivers owners; parlor seen leaving bankruptcy

Video slots parlor Twin River is set to hurdle a final obstacle in its yearlong bankruptcy when state business regulators consider this week whether to give its prospective new owners an operating license.
The R.I. Department of Business Regulation is expected to approve the license for Twin River owner UTGR Inc., the last step before the company emerges from Chapter 11 protection relieved of much of the $568 million in debt that forced it into bankruptcy in June 2009.
Under the reorganization plan approved by the U.S. Bankruptcy Court, UTGR’s parent company BLB Worldwide Holdings Inc. will be handed over to a lenders’ group led by financial giants Bank of America and Wells Fargo, and Sankaty Advisors LLC, a $20 billion Boston-based investment fund manager.
In exchange for stakes in BLB, those three companies and a group of about 140 creditors – mostly investment-fund managers – have agreed to forgive about $290 million of debt.
“They took a considerable hit,” Patti Doyle, spokeswoman for Twin River, said of the creditors.
Hundreds of other unsecured creditors agreed to settle for 65 cents for every $1 they claimed to be owed or a lump sum of $2,500.
For example, Dimeo Construction Co. said in Twin River bankruptcy filings that it was owed $3.3 million for work the contractor had done at the Lincoln property. It agreed to accept $2.15 million.
The bankruptcy proceedings and the DBR license hearing scheduled for Wednesday, Sept. 29, are critical for state leaders, too, since the Lincoln slot parlor has grown into one of the state’s biggest sources of revenue, at a time when Gov. Donald L. Carcieri and the General Assembly are grappling with severe budget deficits.
In fiscal 2010, for example, the 4,750 video lottery terminals in Lincoln brought $250.38 million into the state’s coffers.
The reorganized UTGR is expected to make its case for a license before a hearing officer at the hearing, followed by DBR’s report on its review of UTGR’s 615-page application and the backgrounds of BLB’s largest prospective owners and board of directors.
DBR Deputy Director Louis DeQuattro said last week that the agency decided to forgo an in-depth review of Bank of America’s subsidiary Merrill Lynch Capital Corp. and Well Fargo’s subsidiary Wachovia Bank – even though each will have more than a 5 percent stake in BLB – because both companies are closely monitored by federal regulators. Much of the focus was on Sankaty Advisors, an affiliate of Bain Capital LLC. Sankaty will also have more than a 5 percent interest in BLB, according to the license application.
DBR investigators examined the backgrounds of prospective members of UTGR’s board of directors, identified as John Taylor Jr. of Vero Beach, Fla., Glenn Carlin of Larchmont, N.Y., and John McLaughlin of Carmel, Ind.
Those familiar with the hearing procedures don’t expect any snags. Following the Sept. 29 hearing, the independent hearing officer will make a recommendation to DBR Director A. Michael Marques. He will make a decision “soon after,” DeQuattro said.
Twin River got into financial trouble after BLB Investors LLC paid $445 million for the antiquated slot parlor and greyhound race track in 2005 then spent $225 million transforming it into an upscale gambling destination.
Observers say it’s unlikely the lenders’ group wants to hold on to the Lincoln property, but it’s not exactly a seller’s market right now as the industry suffers through the economic downturn.
“The problem [Twin River’s owners] are going to have right now is trying to price the facility,” said Clyde Barrow, director of the Center for Policy Analysis at the University of Massachusetts-Dartmouth.
Adding another element of uncertainty: Massachusetts leaders have failed for two years in a row to approve casino gambling, which threatened to take a multimillion chunk of revenue from both Twin River and Rhode Island’s other slot parlor, Newport Grand.
Industry experts say it’s only a matter of time before casinos appear in Massachusetts, and it’s believed that New Hampshire might follow suit.
Still, with the bulk of its financial problems behind it, Twin River is better off than many other gaming locations, according to Joseph Weinert, senior vice president of Spectrum Gaming Group, an independent gaming-research firm based in Linwood, N.J.
Weinert points to its convenient location near Providence and the Massachusetts border. Indeed, “convenience” gambling facilities are performing better than larger casinos. Twin River took in $410.46 million through its video slots in the fiscal year ending June 30, up 3.5 percent over a year earlier.
“Not everybody wants to go to a massive casino,” Weinert said. •