Hollypark Success Probably in Cards : Gambling: Attendance and handle are up, but main reason for financial well-being is card-playing club set to open next year.

At a time when many racetracks are struggling, Hollywood Park has apparently reversed the trend. It has erased a huge debt and built a cash cushion as it approaches a new era in gaming.

For the first year since 1980, Hollywood Park’s key business indicators--attendance and money bet on the races--may surpass Santa Anita’s seasonal totals. But the main reason the track has been able to escape the oppressive debt of the 1980s is a common stock offering that has increased investment in the company by a net of more than $113 million.

Hollywood Park, which had a debt of more than $118 million in 1989, during the closing years of Marje Everett’s regime, announced this week that its bank debt has been reduced to $317,000.

The report for the second quarter, reflecting business through June 30 of this year, also showed that the company has $89 million cash on hand.

Said track chairman R.D. Hubbard: “Hollywood Park is now in the strongest financial position in its 55-year history.”

The recent stock offering--4.6 million shares at $26 a share--was well received not because of the projected future of horse racing at Hollywood, but because of the card-playing club that Hubbard said will open in January.

“We’re a gambling stock now,” said Hollywood Park board member John Brunetti.

Ladenburg, Thalmann & Co. of New York, hired by Hollywood Park to research the company, estimates that 75 card tables will account for $111 million in revenue the first year, with racing revenues increasing slightly to almost $24 million.

Opponents of the club, among them the California Horsemen’s Benevolent and Protective Assn., are predicting that the card club will dramatically erode parimutuel betting. They fear that Hollywood Park could eventually be out of the racing business.

The recent stock offering has left Hollywood Park’s principal investors--Hubbard, Beverly Hills sportsman Harry Ornest and Brunetti, who is president of Hialeah Park in Florida--intact. But Hubbard said that a new major partner is an unlikely group, the State of Wisconsin Investment Board, which manages a multibillion-dollar pension fund for retired state employees.

The Wisconsin group bought almost $4 million in common stock during this year’s offering, and according to several sources, its investment is considerably greater.

“They were very active in the after-market,” said Mike Finnigan, Hollywood Park’s chief financial officer.

Investors with holdings of 5% or more of a corporation are required to file with the Securities and Exchange Commission, something the Wisconsin group hasn’t done, according to Finnigan.

“I have reason to believe that the Wisconsin group is now the third-largest shareholder in the company,” Hubbard said. “If they don’t own 5%, I’ll bet they’re at 4.9%.”

Hubbard owns about 14% of the company, Ornest has 7 1/2%, and Brunetti, who has his investment spread among family members, said their holdings total close to 6%.

Representatives of the State of Wisconsin Investment Board declined to comment about the Hollywood Park holdings.

PaineWebber Inc. and Oppenheimer & Co. co-managed the Hollywood Park stock offering.

“(The Wisconsin Investment Board) made a big bet on Hollywood Park,” said John Missett of Oppenheimer. “But they’re not looking at the investment in terms of a racetrack. They’re hoping to be the beneficiaries of the gaming phenomenon. That’s where the sizzle is.”

According to Missett, it was more a case of the aggressive Wisconsin investors finding the Hollywood Park stock than the track finding them. Hubbard’s reputation as former chief executive of one of the country’s leading glassmakers was also a factor.

“Madison, Wisconsin, is not exactly on the beaten path,” Finnigan said. “So we went there. They’re a group that says that you must visit them before they’ll consider anything.”

Hollywood Park hasn’t paid a dividend since a six-cents-per-share payout for the first quarter of 1992.

” . . . The company intends to reinvest any earnings for use in its business,” a stock prospectus said this year. “Accordingly, the board of directors does not anticipate declaring any cash dividends in the foreseeable future, other than dividends on the depositary shares.”

Depositary shares, which are convertible preferred stock, were sold in February, netting $26.4 million. They represent about 5% of the shares in the company.

There are some shareholders who are still skeptical about Hubbard’s long-range plans.

“How much more track business are they doing?” one shareholder asked. “Hubbard spent $20 million fixing the place up, and I’ll give him credit that he’s done some things that Marje (Everett) couldn’t do. But even with all the improvements, the company’s net income didn’t quite hit $5 million last year.”

After earning a net income of $4.7 million in 1992, Hollywood Park reported income of $2.3 million through June 30, up from $1.3 million for the first six months last year.

A recent Daily Racing Form survey of 26 completed thoroughbred race meetings this year showed that none were up in both attendance and handle when compared to a year ago.

Included in that survey was Santa Anita, which has lost more than $3 million with its racing operations in the last 1 1/2 years. Santa Anita is in the midst of a widespread cost-containment program and has had continuing discussions with Hollywood Park regarding a consolidation of some of the tracks’ departments, such as racing, publicity and marketing. Hollywood Park runs two meetings a year, neither overlapping with the dates at Santa Anita.

In evaluating Hollywood Park’s business, comparisons need to be made with 1991, because the start of the 1992 spring-summer season was marred by riots in nearby neighborhoods and skewed the rest of the racing schedule.

Counting off-track business, Hollywood Park’s handle this season has had a daily average of about $7.3 million, which is 6% higher than its record year in 1991. Its daily attendance average (again, counting off-track) of 30,800 is 8% higher than 1991. Much of the increase is because of a switch from daytime to Friday night racing--that was pioneered by Everett--for the last 10 weeks.

“By today’s standards, any kind of security is encouraging,” said Brunetti, a newcomer to the Hollywood Park board. “The track now appears to have a well-financed corporate structure. But the question that will have to be answered, the question that must come up six months from now, is: Where do we go from here? It’s a question that applies to all aspects of the company.”

A breeder and owner of horses and an owner of horse and greyhound tracks in Kansas, New Mexico and Oregon, Hubbard took over at Hollywood Park in February of 1991, winning a bitter proxy battle with Everett that cost the company about $10 million.

A year ago, Hubbard was under siege, reeling from a calamitous season and facing severe pressure from horsemen who were uncomfortable with Friday night racing and the specter of the card club. Friends say that Hubbard’s confidence suffered, and at one public meeting he said: “I got out of the glass business to have fun in horse racing, and now I’m faced with all this.”

Instead of selling out, Hubbard stayed on, and this week he said: “I’m very pleased with the strong position that the company is in. The difference between this season and last season is like night and day.

“I think we’ve proved that we could do what we said we were going to do: improve racing and get the company in better shape. Right now, we’re paying out purse money that averages about $330,000 a day. That’s the highest ever at this track and it might be the highest anywhere.”