AWI to emerge from Ch. 11 bankruptcy

Mar 8, 2005 8:21 AM

American Wagering Inc. (AWI), which owns nearly 50 Leroy’s sports books in Nevada, is expected to emerge from Chapter 11 bankruptcy protection as early as this week, according to Chief Executive Vic Salerno.

"We are extremely pleased to finally be nearing the end of this long process," Salerno said. "Fending off hostile take-over attempts proved to dramatically extend the timeline for emergence and increase the reorganization expenses charged to the company."

In addition to Leroy’s sports books, American Wagering owns and operates Computerized Betting Systems (CBS), which supplies nearly 90 percent of the sports betting computer systems in the state.

The U.S. Bankruptcy Court in Reno is expected to confirm AWI’s reorganization plan on Friday, March 11. According to the plan, most creditors will be paid their approved claims plus interest. Two creditors — Las Vegas Gaming Inc. and M. Racusin & Co. — are being paid under previously-approved settlements.

The Racusin settlement was based on a $1.3 million judgment that Michael Racusin won in June 2003. His award stemmed from a dispute over monies due for his involvement in the company’s initial public offering nine years ago.

The judgment was a key factor in sending AWI into Chapter 11 protection. In addition to a court-approved settlement — which could include cash and/or shares of AWI stock — Racusin will be employed by a subsidiary of AWI in order to provide consulting services at a salary of $7,000 per month.

In addition to satisfying its creditors, AWI had to defend a hostile takeover attempt from off-track betting giant Youbet.com.

Last fall, Youbet.com, the country’s largest Internet provider of off-track betting, submitted a reorganization plan to the Bankruptcy Court seeking approval to acquire all shares of American Wagering stock for $9.5 million, about half in cash and half in Youbet.com common stock.

But at a hearing in November, the bankruptcy court indicated it would not consider Youbet.com’s reorganization plan, which was subsequently withdrawn.

Youbet.com, which last year opened an office in Las Vegas, said it would still like to expand its operations into Nevada. Its members can watch races via satellite and, in most states, wager on them via Youbet’s exclusive closed-loop network.

"We believe there are opportunities to work on various business initiatives with casino operators in the Nevada market," said Charles F. Champion, Youbet.com chairman and CEO.

Those business initiatives include providing the technology that would allow Nevada casinos to offer pari-mutuel betting via the telephone and Internet for their customers.

The Nevada legislature is currently working closely with the Gaming Control Board to fashion an initiative that would allow phone account and Internet betting within the state. Insiders say an announcement of such an initiative could come by summer.