Bankruptcy Judge Says Yes to Plan To Keep Track, Utility District Alive

DALLAS - A bankruptcy judge on Friday approved a restructuring designed to solidify the financial health of Sam Houston Race Park and ensure the viability of an underlying utility district.

The restructuring's proceeds are supposed to keep the Houston-based racetrack going until it can turn a profit, according to the financial plan approved by U.S. Bankruptcy Judge Letitia Clark.

"It's a very good deal," said Scott Lamb, a spokesman for Maxxam Inc., the general partner in the track. He said the goal was to keep the track operating so it could pay all creditors, including the West Harris County Municipal Utility District No. 21.

The track is the largest landowner and primary taxpayer in the district, which sold $6.7 million in unrated tax-exempt 20-year municipal bonds in May 1994. Earlier this year the track defaulted on $75 million in unrated corporate bonds before seeking bankruptcy protection in April.

Though the entities' debt is separate, the success of the utility hinges on the success of the track, according to officials of both. The track's failure to pay taxes could have jeopardized the district's debt service, officials warned.

After the track default and Chapter 11 bankruptcy filing, questions were raised about the track's ability to operate and to make tax payments, which cover the 559-acre utility district's bonds. The track is the only developed property in the district, which provides water and sewage services.

Utility district officials said the district's bonds would have been safe for three years because of $3 million in reserve to service debt if the track sought bankruptcy protection. But after three years, the viability of debt service is unclear.

Under the terms of the restructuring, Maxxam will add $5.6 million in cash and a $1.7 million line of credit, which will raise its ownership to 64% from 29%. Meanwhile, corporate bond holders will see principal sliced to $37.5 million and interest payments deferred for six years.