By Gordon Robinson
Once again, racehorse trainers are threatening to disrupt racing and are calling for a CTL chairman to resign.
Yawn. I've heard this before. With their industry staring over a fiscal cliff, the trainers' resort is hoary histrionics. What's their beef this time? It seems CTL has implemented a new $20 per-stall-per-day charge to help offset maintenance-related expenses. The predictable revolt was instant and intense with Generalissimo Vin Edwards declaring he'll leave racing rather than pay the fee.
Promise, Vin? I hope so, because my opinion is your antagonistic approach to racetrack relations over the years has contributed significantly to racing's persistent decline. The industry now needs to unify around an agreed survival plan. If this can only happen after you leave racing, please don't let the door hit you on your way out. Perennial 'lock-it-down' threats have resolved nothing. It's time for a change. Better must come.
Let's try something new - facts. CTL's audited accounts for year ending March 31, 2012 contain the following 'Qualified Opinion' from KPMG:
"[CTL] continues to report losses and ... has significant net current liabilities and shareholders' net deficit. Continuation ... as a going concern may, therefore, be in doubt and appears to be dependent on obtaining continued financing and, ultimately, upon attaining profitable operations."
This is alarming from notoriously conservative chartered accountants. Its context is a balance sheet disclosing current assets of $169,326,000; value of property, plant and equipment at $365,847,000 (total assets $535,173,000); and current liabilities at $919,028,000. The combined effect of this is a $383,855,000 deficit (up 415 per cent from 2010-11's deficit of $92,530,000.00).
But the reality is worse. Yes, worse than an asset/liabilities deficit increase of 415 per cent in one year. Closer examination reveals 60 per cent ($101,783,000) of the 'current assets' as 'accounts receivable'. Notes to the accounts (always the place to look for truth) reveal the accounts receivable breakdown as follows:
|(1)||Trade receivables, $61,012,000. This ginormous figure (for a company whose sole 'trade' is a cash operation) includes $57.5 million owed by OTBs (up 120 per cent from $26.1 million in 2010-11). This is untenable. How aged are these 'new receivables'? How does a cash operation allow that sort of receivables increase in one year? Are they collectible?|
|(2)||Deposit, prepayments and other miscellaneous balances, $19,017,000.|
|(3)||Bookmakers, broadcasting and publication rights fees, $24,951,000. So the illusion of a massive bookies rights fee increase is exposed. It's not being collected. Why? Is it collectible?|
|(4)||Loan receivable of $6,877,000 being unsecured loans to Thoroughbred Owners and Breeders Association (TOBA) for TOBA's revolving-loan scheme.|
|(5)||Of $111 million-plus total, only a $10,074,000 doubtful debt provision.|
Sixty per cent of CTL's 'current assets' are dubious 'accounts receivable', which probably won't be received. So the asset/liability deficit is worse than it appears. Then, there's the small matter of $500 million owed as pool betting duty (and more than $173 million owed to the Betting, Gaming and Lotteries/Jamaica Racing commissions) because of what looks like an unprofessionally crafted arrangement in 2003 between CTL and the junior finance minister (JFM).
JFM wrote to CTL's chairman purporting to reduce the pool betting duty from seven per cent to two per cent and promising the requisite legislative changes. The law was never changed and doesn't permit waivers. The 2011-12 accounts alone add $144 million to the back tax owed on top of an operational loss of $146 million.
NO WHITE KNIGHT
This is the stark reality facing 'Big Joe' Matalon's new board. There's no government bailout, no white knight, no rescuer. Day-to-day operations can't immediately help. The clearest indicator of the fiscal crisis' urgency was the threatened first-time abandonment of the Caribbean Sprint Championship on an unsponsored Superstakes raceday despite five high-class entries. Eventually, three more entries rescued the race.
Trainers must recognise the life-or-death situation racing faces and decide what contribution they're prepared to make to secure their own livelihoods. Joe Matalon doesn't make his living from horse racing. Should racing collapse on a dump heap of uncollected manure and silly internecine squabbling, he'll return to his comfortable already-earned retirement. Meanwhile, if CTL continues in business, the directors do trainers a favour, since directors risk personal liability for any CTL debt incurred after receipt of this evidence of insolvency.
So, trainers, what'll it be? More finger-pointing? More blame games? What'll YOU do to rescue racing? Accept a purse cut? Or ask owners to pay the required stall fee to help clean up the mess their horses excrete? No, you can't phone a friend. No lifelines left. Final answer needed now.
Peace and love.
Gordon Robinson is an attorney-at-law. Email feedback to email@example.com