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Grand Prix takeover stalled as deadline looms

FinancePublic Officials

As a deadline set by city officials draws near, leaders of the beleaguered company that organized the inaugural Baltimore Grand Prix have yet to finalize plans for restructuring the business or paying debts to the city.

City officials gave Baltimore Racing Development an ultimatum nearly two months ago: Make the company solvent and draft a plan by Dec. 31 to pay nearly $1.5 million to the city or lose the rights to organize the three-day racing festival.

But a deal to cede control of the company to a wealthy investor appeared stalled Wednesday.

While shareholders have approved a deal to give control of the company to former Goldman Sachs and Constellation Energy executive Felix J. Dawson, only two of the racing group's five managers have approved the move, those briefed on the agreement said. A third manager's approval is needed for the deal to go through.

"They just need the managers to get on board," said investor Sean Conley of Martha's Vineyard, Mass. "I'm not sure why they haven't already."

Conley said more than two-thirds of the shareholders had approved a deal in which Dawson's company, Wilkes Lane Capital, would pump $3.3 million into the racing group in exchange for a 58 percent share of the company.

But the managers — Constellation executive Walker Mygatt, former state Democratic Party Chairman Ken Banks, Mother's Federal Hill Grille owner Dave Rather, Charm City Hospitality owner Jerry Gottlieb and Massachusetts businessman William White — have yet to agree to the terms of Dawson's contract, said Conley and others with knowledge of the deal.

Mygatt, Banks and White did not respond to requests for comment Wednesday, and Rather declined to comment. Dawson did not respond to a telephone call to his home.

Ryan O'Doherty, a spokesman for Mayor Stephanie Rawlings-Blake, said the city was in "ongoing discussions" with race organizers, but he declined to provide specifics.

The city has a five-year deal with Baltimore Racing Development to run the auto race.

Race organizers owe more than $12 million to vendors, the city and state. About $5 million is past due, and the company has about $600,000 in assets. Baltimore Racing Development has been the target of a half-dozen lawsuits filed by contractors and others who say the company owes them money.

A Prince George's County judge ruled last week that Baltimore Racing Development owed $284,000 to B&K Rentals, which provided grandstands for the race, according to court records and an attorney for the rental company.

The racing group never replied to the rental company's motion for summary judgment, said attorney Steven T. Cain. "They were served, term limits passed and judgment was entered in the amount requested."

While the racing festival was hailed as a success by city officials and IndyCar executives, Baltimore Racing Development has struggled financially. Nearly all of its employees have been laid off or have left the racing group, and its former headquarters at Camden Yards is largely empty, according to those close to the company.

The racing group's debts to the city include nearly $500,000 in admissions and amusement taxes and $750,000 to reimburse it for firefighters and police who worked at the festival. The group has also failed to plant dozens of trees to replace those removed for the race.

In a Nov. 7 letter, Deputy Mayor Kaliope Parthemos demanded that Baltimore Racing Development present a repayment plan by the end of the year and said the city would terminate its deal with the group — which has the sole right to organize an IndyCar race in Baltimore — if the company did not meet the deadline.

O'Doherty declined to say how the city would respond if the group were to miss the deadline.

"Obviously, we'd like to have another race and the $50 million economic impact that comes with it," he said in an email.

The three-day racing festival generated about $47 million in economic impact over Labor Day weekend, according to a report commissioned by the city.

The city allocated nearly $8 million for months of traffic-clogging roadwork in preparation for the race. Rawlings-Blake was an ardent supporter of the race, and her staff devoted long hours throughout the summer to prepare for the event.

Robin Miller, a racing analyst with the Speed Channel, said race organizers have, at most, until March to begin to line up sponsors and sell tickets for a September festival.

"I think six months out is probably cutting it close," he said.

At this time last year, Baltimore Racing Development officials said they had more than $600,000 in ticket sales. They had landed smaller sponsors, though they never found a title sponsor for the event, which contributed to their financial problems.

"It's a shame tickets aren't for sale," said Conley, who owns a 3 percent share of the company. "Many people give them as gifts at Christmastime."

Dawson had proposed slashing the company's expenses and teaming up with Dale Dillon, who served as the racing group's general manager in the final weeks leading up to the race.

Last month, Dawson urged shareholders to act quickly on his proposal, warning that delays could make it more difficult to revive the company.

"Restructuring now is better than later," he wrote to investors. "BRD's ability to restructure and continue operating is deteriorating with time."

julie.scharper@baltsun.com

twitter.com/juliemore

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