Mike Pegram must feel like his Kentucky Derby winner has been unjustly disqualified now that the owners of the Fair Grounds racetrack in New Orleans have dumped him in favor of Churchill Downs Inc. (CHDN).
Because of a poor operating decision, involving payment of slots revenue into the horsemen’s purse account by G.M. Bryan Krantz, the track was placed in bankruptcy after a judge ordered that the horsemen be repaid $90 million.
That triggered a national search for someone with deep pockets who would be willing to negotiate a deal with the horsemen; pay off the creditors, and protect the interests of the Krantz family, owners of 90% of the track.
After months of inactivity, the bankruptcy court ordered the track to be sold at auction, prompting Churchill Downs to place a $45 million "stalking horse" bid. But, before the auction could be held, Krantz came up with a "white knight" in the person of Pegram, a nationally known horse owner and the owner/operator of a number of McDonalds franchises.
Krantz announced a deal whereby Pegram would form a new company that would pay $25 million to satisfy the horsemen’s shortages, an agreement that the horsemen had agreed upon; pay off the creditors, and accept an 86% ownership of the track. The Krantz family would retain an 11% interest while the remaining 3% would be retained by existing shareholders. Also, Krantz would be given the title of vice-chairman and would be paid $200,000 annually for at least three years.
Pegram said the deal culminated 10 months of negotiations.
But hardly two days later, Krantz announced that he had made a deal with Churchill Downs for $47 million, or $2 million more than Churchill’s original bid.
In the announcement, it was noted that Krantz would remain as chairman for three years, although his salary was not mentioned.
Meanwhile, Pegram told the Daily Racing Form that he was stung by the sudden turn of events.
"I’m just sitting on the sidelines watching this thing play out. I thought I gave Bryan (Krantz) what he wanted. I know in my heart what they did wasn’t right," he said.