CTL’s HISTORY CRUCIAL TO UNDERSTANDING DIVESTMENT

After several false starts, the sprint to the divestment of Caymanas Park racetrack is finally off and running with participants whittled down to two.

In an October 20 Press Release, DBJ announced: “The Development Bank of Jamaica (DBJ) has received Bids from two entities expressing an interest in acquiring the state-run horse racing promotions company, Caymanas Track Limited (CTL).

The bids were received from Caymanas Racing and Entertainment Limited [CRE] and Supreme Ventures Limited [SVL]…...

Previously, this had been the worst kept secret since all and sundry at the racetrack knew these bids were in and that it pitted lottery/gaming machines monolith SVL, in its seemingly inexorable quest to monopolize gambling in Jamaica, against CRE, a newly formed company led by racehorse owner Dr Graham Brown and owner/breeder, Richard Lake, as a vehicle to secure an ownership interest in horse racing for industry stakeholders. It’s a classic David v Goliath story.

But this is truly a long story and it begins over 40 years ago when private ownership, having bled the racetrack into bankruptcy, fled the country leaving behind an irretrievably damaged industry. For once government acted swiftly. If it hadn’t, horse racing would have died then and there terminally infecting innumerable island wide spinoff benefits in reduced crime, higher employment and increased government revenues.

Government acquired the racetrack and handed over its operations to Stakeholders using Michael Manley’s worker participation model. In a novel corporate arrangement, Racing Promotions Limited (RPL) was created with shareholders being the various racing associations and the Jockey Club (an anachronistic colonial hangover that controlled racing). However, carefully drafted Memorandum/Articles of Association made it a non-profit company which prevented shareholders from receiving any dividends. This was never fully understood by the nominal shareholders whose leadership often proclaimed: “Michael (Manley) gave us boys the track.”

The operations had its ups and downs and, in the beginning, fiscal/management arrangements weren’t the best but the overall betting industry prospered mainly due to the complete absence of competition in a pre-internet world. In the late 1980s, however, the track floundered financially (although Bookmakers prospered); failed to meet its tax obligations (it was labouring under an unrealistically high Pool Betting Duty); was unable to pass due diligence tests for licence renewals; and seemed on the verge of another collapse.

A Receiver was appointed but things only became worse so the Prime Minister (also Finance Minister) stepped in and asked stakeholders to return the “gift” of RPL shares so the government could arrange a reconstruction. This was met with stout resistance from some stakeholders especially the Trainers and Owners Associations led by political militants like the iconic Vin Edwards, Dr Paul Wright and Robert Dabdoub. These horse racing idealists and defenders of stakeholders’ “rights” dug their heels in and refused to co-operate. Government replied by creating a new company, Horseracing Promotions Limited (HPL), to lease and operate the track and by successfully asking the court to put RPL into liquidation despite strong legal resistance mounted by embattled stakeholders.

In 1989, accounting legend Willie Thwaites (of Price Waterhouse) was appointed Liquidator and it seemed the end was near. The stakeholders shifted their field of battle to the political stage. Stakeholders expected a PNP victory in upcoming elections and anticipated that Seymour “Foggy” Mullings, great friend of racing stakeholders and likely new Finance Minister, would reverse the JLP Government’s dictates and keep stakeholders in control. Some unkind things were said on the campaign trail about previous policy and even about the Liquidator’s intentions as forces from both sides of the ideological divide engaged in pitched battle.

PNP did win the 1989 election but stakeholders were disappointed at what followed. “Foggy” Mullings published a fulsome apology to Willie Thwaites in the Gleaner and the liquidation proceeded apace. Stakeholders were livid and delivered Churchillian promises to fight to the death. On a radio talk show, one caller promised that “blood will run down the streets of Kingston” before stakeholders gave in to what they saw as an illegal confiscation of their asset. Under severe political pressure, the new government called for a round-table meeting of all factions held at the Prime Minister’s Office and chaired by Paul Robertson.

I attended that meeting in my capacity as Willie Thwaites’ lawyer. Every pro- and an-tagonist was there. A “settlement” of stakeholders’ legal challenge was negotiated whereby stakeholders would withdraw their legal opposition to the liquidation on government’s assurance that RPL would be divested as soon as possible and, in any divestment process, the stakeholders would receive 10% of the shares in consideration of their forbearance. At that year’s (1989) Horse of the Year Awards Ceremony held at Terra Nova Hotel, Seymour Mullings announced that the track would be divested in six months.

The liquidation was completed smoothly. RPL changed its name to CTL and took the property in exchange for the tax debt. Danny Melville was appointed a new style Chairman and horse racing enjoyed its most profitable decade ever under his leadership regularly filling government’s coffers and keeping stakeholders united and happy for the longest period on record.

SVL’s history began in the very late 20th/early 21st Century when, in a non-transparent process (as was the practice in those days) it was granted a licence to operate a Cash Pot lottery game similar to the indigenous “drop pan”. Together with internationally famous service provider, G-Tech, whose Caribbean representative, then resident in Trinidad, came to Jamaica to become SVL’s head honcho, SVL wasted little time on aggressive expansion, gobbling up the former sole lottery licensee. Jamaica Lottery Company, followed by acquisition of leading Gaming Machine company Prime Sports Limited and Bookmaking company “Big A” which it rebranded as “Just Bet”.

Through innovative marketing and product offering strategies, Just Bet has dominated Jamaica’s sports betting market. All that’s left to complete SVL’s command of local betting and gaming is its proposed acquisition of Caymanas Park the campaign for which began some years ago when it became the leading sponsor of races at the track pumping some $7 million annually into several highly publicized race days including traditional crowd pleasers like the Governor’s Cup and the Jamaica Two Year Old Stakes.

So, with the best will in the world, how do you think stakeholders will react to a gaming monopoly, sealed by the acquisition of the racetrack, being handed to SVL? Unlike gaming machines that require only a customer and some coins, horse racing can’t operate without a dedicated, skilled network of stakeholders including trainers, jockeys grooms and breeders and won’t get off the ground without its main investor, owners. Owners invest almost a billion dollars per annum in recurrent keep and care costs alone chasing less than $400 million in purses offered to them (Trainers, jockeys and grooms earn 30% of all purses but have no liability for any of the maintenance costs). Additionally, among the yearling sales, sales directly from stud farms and sales of horses-in training whether via the claiming box or privately, it’s estimated that over $100 million per annum is invested as capital.

By the way, in the interests of full disclosure, I see I’ve been named in one of the bids as “Project Advisor” (whatever that is). I won’t name the bidder but you can probably guess. Although, based on my experience and knowledge of the game and its history, I do have my own “preferred bidder”, I can assure readers that I have zero financial or other personal interest in either bid.

Peace and Love

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