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By Katherine Gregg
PROVIDENCE, R.I. -- On the eve of a critical State House hearing on the fate of the bankrupt Twin River slot parlor, General Treasurer Frank Caprio has this advice for state lawmakers: "No big bailout for big banks.''
Caprio said the lawmakers should either say no outright to the request from Twin Rivers' lenders that the state pick up anywhere from $4 million to $11.4 million of the slot parlor's annual marketing and management costs, or come to terms on a compromise in which the taxpayers benefit from the eventual sale.
His comments were keyed to a House Finance Committee hearing, on Tuesday, on a Twin River concession package that Republican Governor Carcieri rolled out last Friday.
In it, Carcieri asks the legislators to free the Twin River owners from current employment and dog-racing requirements, cover more than $10 million of their marketing and management costs and provide them with an even more solid guarantee that state taxpayers will cover them if they lose money to a new competitor in Rhode Island.
The owners had been shopping for a legislative sponsor for months, but with key lawmakers in the House and Senate at odds over how much they were willing to give the lenders' group that is about to take control of the bankrupt slot parlor, Carcieri stepped in. The lenders' group is led by Merrill Lynch Capital Corp, Wells Fargo & Co. and BlackRock Inc.
Caprio, a Democrat running for governor, said he would prefer the lawmakers did nothing, forcing the lenders about to take possession to instead auction off the sprawling, 24-hour gambling hall that is home to close to 4,750 electronic slot, roulette and blackjack machines.
"Let's advertise it through the bankruptcy court and see who shows up....I think we'll be pleasantly surprised,'' Caprio said.
Instead of making commitments that increase the potential sale value of Twin River and "pad'' the bankers' bottom line at taxpayers' expense, Caprio said: "Rhode Island taxpayers would be better served if the state negotiated with a world-class gaming operator, who would be credible when [they] make proposals regarding marketing costs.''
Caprio said Brian McGill, a senior gaming analyst at Janney Montgomery Scott advised him the proposed shift in marketing and management costs "would increase the value of Twin River for the banks between $24 million and $68.4 million when it's eventually sold.''
If the lawmakers feel compelled to do something, Caprio suggested they hire an expert on bankruptcy - at his expense - to advise them on how to assess the value of Twin River now, and then help them write legislation that guarantees the state gets back what it gave to make Twin River more valuable at whatever point it is sold.
Caprio did not say how he would pay the expert, but he said it would not be at government expense.
Whichever direction the lawmakers go, Caprio said that if given a chance to speak at Tuesday's hearing, he would urge them "not to bail out the big banks from a bad loan'' at taxpayers' expense.
Twin River's current owners - a holding company made up of the principals in Kerzner International, Starwood Capital Group and Waterford Group LLC - filed for bankruptcy last June, under terms in which they agreed to eventually turn the business over to their lenders.
The case is still winding its way through U.S. Bankruptcy Court, with state officials watching closely what happens to a business that, last year alone, pumped $242.3 million in video-slot dollars into the state treasury.
