There's a high stakes situation developing between the Governor and Treasurer Frank Caprio over how to proceed with the Twin River bankruptcy. The Governor wants the General Assembly to agree to a set of conditions that would help Twin River's major financing creditors - Wells Fargo, Merrill Lynch and Bank of America - while obligating the state's taxpayers. Frank Caprio has weighed in on the Governor's plan and called it a "big bailout for big banks."
Let's deconstruct this: the Governor is advocating that to make the eventual sale of Twin River go through to an as yet unknown party, the state would guarantee an end to money losing dog racing, enforce employee reductions, provide financial assistance from the state towards Twin River's management and marketing expenses going forward, and provide legally-binding assurances that the state will cover Twin River losses in the event of new competition arising here in RI, although new competition is most likely going to come from neighboring Massachusetts. The financial obligations in the Governor's proposal total more than $5 million of state money and maybe more.
Caprio wants no part of that arrangement and prefers the state to let Twin River float downstream to an eventual auction of the property through banruptcy court. He thinks making assurances of the kind the Governor has put forward will only serve to pad the bankers' pockets when the property finds a buyer - at the expense of taxpayers.
The big banks effectively own Twin River right now, as the former ownership group - Kerzner, Starwood and Waterford - has agreed to turn ther business over to them. Should the lending banks balk at a package that doesn't satisfy them, they could opt to liquidate the business, and if that happens there goes the state revenue stream.
Anything that affects that revenue stream - amounting to over $200 million annually on sixty-one cents of every losing dollar wagered at Twin River - the state would be in immediate hot water. So the state now finds itself wedged into a very dicey situation.
Ultimately legislators will have to decide what to do: they either go with the Governor's recommendations, or at least most of the loaf, or they side with Caprio and push the decision into the hands of the banks.
Remember, any disruption of Twin River's operations immediately affects RI's bottom line. Scary stuff.