Hawthorne Race Course: 363 Sale and License Preservation

Hawthorne Race Course, Inc. and three affiliated entities — Carey Heirs Properties, LLC, Suburban Downs, Inc., and Post Time Catering, Inc. — filed chapter 11 petitions on February 27, 2026, in the U.S. Bankruptcy Court for the Northern District of Illinois. The cases are being jointly administered under lead Case No. 26-03505 before Judge Timothy A. Barnes, who was assigned after Judge Deborah L. Thorne recused herself on March 1, 2026 and Chief Bankruptcy Judge Jacqueline P. Cox ordered reassignment to Judge Barnes that same day.

The filing followed a liquidity crisis triggered by a $1.5 million judgment obtained by Churchill Downs and a subsequent citation to discover assets that froze the debtors' operating accounts at Signature Bank. With cash inaccessible, purse checks bounced, horsemen refused to race, simulcast partners shut off signals, and monthly wagering deposits fell from roughly $5 million to well under $1 million. The debtors are pursuing a section 363 sale of substantially all assets, supported by $16 million in debtor-in-possession financing that the court approved on a second interim basis on March 12, 2026, while preserving the possibility of a recapitalization through a chapter 11 plan.

Debtor(s)	Hawthorne Race Course, Inc. (4 jointly administered entities)
Court	U.S. Bankruptcy Court, Northern District of Illinois (Eastern Division)
Case Number	26-03505
Petition Date	February 27, 2026
Judge	Hon. Timothy A. Barnes
DIP Facility	$16 million term loan from Derby DIP LLC; 13.0% note rate; $12.6 million interim
341 Meeting	April 7, 2026, at 1:00 p.m. via Microsoft Teams

Liquidity Crisis and Filing Trigger

Churchill Downs obtained a $1,546,266.84 judgment against Hawthorne on December 23, 2025, and a citation to discover assets issued on February 3, 2026. The DIP motion states that Signature Bank then froze the debtors' accounts, leaving the company unable to fund payroll, employee benefits, changeover to the thoroughbred season, horsemen obligations, utilities, insurance, and professional fees.

Purse checks that had already been issued could not clear, horsemen refused to continue racing until they were made whole, and simulcast partners shut off signals. The motion to pay necessary prepetition debts filed on March 6 states that monthly wagering deposits fell from about $5 million per month to well under $1 million after signals were cut.

Fanatics terminated the mobile and internet portions of its sports-wagering arrangement on January 26, 2026, while continuing retail sportsbook services at the racetrack and eligible OTB facilities. Fanatics is also the largest unsecured creditor at approximately $8.75 million.

The Illinois Racing Board suspended Hawthorne's harness racing license before the filing due to unpaid financial obligations. The debtors stated the reorganization plan would prioritize payments to horsemen and employees while seeking a buyer or investor.

Carey Family Racetrack and Racino Platform

Hawthorne Race Course operates a horse racing and wagering platform centered on live thoroughbred and standardbred racing in Illinois. Revenue comes from pari-mutuel wagering, a network of ten Illinois off-track betting locations (with Prospect Heights temporarily closed because of a fire), and sports wagering operations. The company began developing what it describes as Illinois' first racino entertainment complex in 2019.

The corporate structure separates functions across the debtor entities. Carey Heirs Properties owns the underlying racetrack real estate. Hawthorne Race Course conducts thoroughbred racing and wagering operations. Suburban Downs conducts harness racing operations. Post Time Catering provides food-and-beverage services.

Timothy Sean Carey, a fourth-generation family member, has served as President and CEO since 2005. As of the petition date, the debtors employed approximately 276 workers: about 61 full-time salaried employees, 85 full-time hourly employees, and 129 part-time employees, plus one independent contractor.

The company has operated at its Stickney, Illinois location for 134 years, making it one of the oldest family-owned racetracks in North America. The debtors have described a $400 million racino project planned for the Stickney site, and the search for a development partner is part of the restructuring strategy.

The debtors maintain more than 40 separate utility accounts with over 15 different service providers supplying electricity, gas, water, and telecommunications. The utilities motion proposed adequate-assurance deposits equal to roughly half the average monthly bill for each provider over the 12 months before the petition date, estimating aggregate deposits of approximately $129,733 if all providers submitted requests. Judge Barnes granted the utilities motion on March 12, approving the debtors' proposed adequate assurance deposits for ongoing utility services.

Signature Bank's $51.6 Million Secured Debt Stack

As of the petition date, Hawthorne, Carey Heirs Properties, and Suburban Downs owed Signature Bank approximately $51.6 million under a 2016 loan and security agreement. The DIP motion breaks that amount into approximately $15.98 million of line-of-credit principal and interest, $29.30 million of term-loan principal and interest, and $6.29 million of exit fees.

The Signature Bank package is secured by substantially all personal property of the borrowing entities, plus mortgages on substantially all of the race-course property and the Crestwood property. One carve-out exists: 3640 S. Laramie, a small parking lot across the street, is not included in the Signature Bank mortgage.

Mechanic's liens. W.E. O'Neil Construction recorded a mechanic's lien for $5,151,713.94 in October 2022. The debtors state that the lien was dismissed with prejudice in Cook County, but O'Neil has appealed. W.E. O'Neil retained Troutman Pepper and filed three separate appearances on March 10, 2026, signaling active engagement in the case. Aria Group Architects recorded a mechanic's/materialman's lien for $5,696,398.56 on August 7, 2024 against Carey Heirs Properties, Hawthorne, and Signature Bank.

Junior secured debt. Latto Capital made a $5 million loan to Hawthorne on January 3, 2025, secured by a junior mortgage on the race-course property recorded January 8, 2025. The Marital Trust of Robert F. Carey Jr. made a $300,000 loan on February 20, 2026, secured by a junior mortgage on the Crestwood property recorded February 24, 2026.

Unpaid taxes. The debtors report unpaid real estate taxes on the race-course and Crestwood properties totaling roughly $2.88 million for 2023-2024, with the first installment of 2025 taxes due on April 1, 2026. The DIP motion further breaks down the 2024 arrearage as approximately $1,230,740 for the race-course property and $188,622 for the Crestwood property.

For valuation support, the DIP motion cites a $95 million August 2025 appraisal for the race-course land alone — excluding going-concern value and gaming licenses — plus a $3.2 million April 2025 appraisal for the Crestwood property.

Derby DIP LLC's $16 Million Priming Facility

The debtors proposed a term-loan facility from JDI Loans LLC (later defined as Derby DIP LLC in the interim order). The structure is a $12.6 million interim facility and a $16 million final facility, with bi-weekly draws.

The term sheet and loan agreement set a 13.0% note rate, a 22.0% default rate, a 2.0% loan fee ($320,000, with $60,000 paid prepetition), a 2.0% exit fee ($320,000), and a break-up fee. The DIP motion describes the break-up fee as $500,000; the loan agreement definition in the interim order refers to a break-up fee equal to 3.0% of the outstanding DIP loan if the court does not enter the final financing order.

The debtors' financial advisor, Billy Condon of Getzler Henrich, disclosed in a first-day declaration that Getzler Henrich has served as the debtors' financial advisor since November 2025. The DIP motion states that 35 lenders were contacted during the pre-filing marketing process and only three term sheets were returned, supporting the debtors' position that the DIP facility reflects the best available terms and that no credit was available on more favorable terms.

The proposed collateral package includes a first-priority priming lien on encumbered DIP collateral and a first-priority lien on unencumbered DIP collateral, in each case junior only to the carve-out, plus superpriority administrative claims. The DIP collateral encompasses substantially all personal and real property of the debtors, but explicitly excludes avoidance actions, prepetition cash and prepetition receivables, and equity interests issued by any debtor, per the second interim order.

The debtors argued Signature Bank was adequately protected because the race-course and Crestwood appraisals produced more than a $30 million equity cushion even after priming Signature with $16 million of new DIP debt. They also proposed that all cash receipts from prepetition receivables would be paid to Signature Bank.

Judge Barnes entered an initial interim order on March 5, 2026 that granted part of the DIP relief and continued the matter. The order authorizes use of the DIP lender's cash collateral in accordance with the approved budget but limits borrowing to week one of the budget pending the continued interim hearing. The order defines maturity as the earlier of the effective date of a bankruptcy plan or 120 days from interim financing approval, with milestones requiring final approval within twenty-eight days of the petition date.

At the continued interim hearing on March 10, 2026, the court heard additional evidence and arguments from all parties. Judge Barnes entered a second interim order on March 12, 2026 authorizing the debtors to borrow up to weeks one through four of a thirteen-week initial DIP budget. The second interim order found that no credit was available on more favorable terms, that the DIP loan was negotiated at arm's length and in good faith, and that all objections to the interim relief were "withdrawn, resolved or ruled upon by the Court." The order carries the same priming-lien and superpriority-claim structure as the initial order, with a carve-out capped at $100,000 for a chapter 7 trustee and a $100,000 post-trigger professional fee cap. The DIP facility and the motion to pay necessary prepetition debts are continued to March 27, 2026 at 9:00 a.m. for further hearing.

Thoroughbred Meet and License Preservation

The motion to pay necessary prepetition debts states that failure to conduct the March 29, 2026 thoroughbred meet jeopardizes the racing license, that the gaming license depends on maintaining that racing license, and that potential buyers and recapitalization partners view the casino license as essential to value maximization.

Purse obligations. The March 6 motion reports that 38 thoroughbred horsemen received NSF checks totaling $281,844 and another 689 thoroughbred horsemen were owed $1,108,733 of accrued purses. For harness racing, 131 horsemen received NSF checks totaling $1,182,620 and another 701 harness horsemen were owed $1,337,968 of accrued purses. A full thoroughbred schedule requires about 700 horses on the grounds and roughly 1,000 horsemen, and purse restoration also supports 300 backstretch workers living on site with their families.

On March 12, 2026, Judge Barnes granted the motion in part, authorizing two categories of immediate payments: $1,390,577.09 in thoroughbred purses to the ITHA horsemen, and up to $750,000 to simulcast partners. The simulcast payments carry conditions: each partner must agree in writing to reactivate the simulcast signal and provide services within the same course of business as before deactivation, and the debtors must file a notice disclosing each partner's name and payment amount. The court found that each payee would not provide goods or services without the prepetition payment and that other creditors would be at least as well off as they would be if the payment were not made. The remaining relief — including $2,520,588 in harness purses and $48,867 for FGMK audit work — was continued to March 27, 2026 at 9:00 a.m. Counsel for the Illinois Thoroughbred Horsemen's Association represented at the hearing that upon funding, the ITHA horsemen would participate in the thoroughbred season at Hawthorne within the same course of business as prior seasons.

Simulcast revenue. The debtors state that reactivating simulcast signals could increase collections by approximately $4 million per month. The DIP budget assumes simulcast partnerships will be reactivated over the first four weeks of the chapter 11 cases.

Audit deadline. The 2025 audit is due to the Illinois Racing Board on March 31, 2026. The debtors report that $146,900 remains due to FGMK on the 2024 audit arrearage, and are asking to pay one-third of that amount immediately to get the firm to proceed.

Horsemen and industry groups have indicated that a spring thoroughbred meet may proceed under bankruptcy protection. The court's approval of thoroughbred purse payments cleared a key hurdle for the March 29 opening, though the debtors' stated goal remains to preserve operations and the workforce while restructuring finances.

Wages, Taxes, and Purse Payment Motions

The wages motion sought authority to pay roughly $462,000 of prepetition wage claims, approximately $51,257.72 of employer-side payroll taxes, and to continue employee benefits and honor approximately $505,236 of accrued unpaid PTO. Judge Barnes granted the wages motion on March 3, 2026, authorizing payment of prepetition employee obligations subject to the Bankruptcy Code's priority caps.

The taxes motion sought authority to pay about $3,743,825 of taxes due or coming due in the first 30 days, including approximately $2,875,549 of real estate taxes, $688,465 of handle taxes, $139,072 of sports-betting taxes, and smaller amounts for parimutuel, sales, and admissions taxes. The hearing on the tax motion was continued to March 27, 2026 at 9:00 a.m.

On March 6, the debtors returned with the motion to pay necessary prepetition debts tied directly to racing continuity: $1,390,577 of thoroughbred purses, $2,520,588 of harness purses, up to $750,000 to simulcast partners, and $48,867 to FGMK toward the 2024 audit arrearage — totaling approximately $4.7 million. The court also granted the utilities motion on March 12, approving the debtors' proposed adequate assurance deposits for ongoing utility services.

Section 363 Sale Without a Stalking Horse

The debtors are pursuing a section 363 sale of substantially all assets free and clear while preserving the possibility of a recapitalization through a plan if a party is willing to fund that path. Management states it is focused on maximizing recoveries through the section 363 process.

The filing lists estimated assets between $50 million and $100 million against estimated liabilities between $100 million and $500 million. The $95 million land appraisal excludes going-concern value and gaming licenses.

No stalking horse bidder has been announced. The debtors have stated they hope to attract a buyer or investor to recapitalize operations. The filing seeks to preserve horse racing in Illinois and protect jobs through a going-concern transaction.

The case has drawn early interest from major gaming operators. PENN Entertainment, which operates casino and sports-betting properties nationally, entered an appearance on March 13, 2026 through Jackson Walker LLP and subsequently filed pro hac vice motions for additional counsel. MGM Resorts International also entered an appearance on March 9, 2026 through Stinson LLP. Neither company has filed a motion or disclosed a specific transaction interest, but their early engagement in a case centered on gaming-license preservation and a potential racino development is notable for the section 363 process.

Latto Capital Objections and Key Constituencies

Debtors' professionals. Saul Ewing LLP is acting as proposed counsel. Billy Condon of Getzler Henrich serves as the debtors' financial advisor, having been engaged since November 2025 to assist with restructuring efforts, liquidity management, and capital structure analysis. Omni Agent Solutions was approved on March 5, 2026 as claims and noticing agent.

Official unsecured creditors' committee. The U.S. Trustee appointed an official committee of unsecured creditors on March 11, 2026. An amended notice filed the following day expanded the committee to four members: Woodbine Entertainment (represented by Greg Martin), the Illinois Thoroughbred Horsemen's Association (represented by David McCaffrey), the New York Racing Association (represented by Jack Jeziorski, who serves as interim chairperson), and Meadowlands Racing & Entertainment (represented by Alex Figueras). The committee's composition is drawn from the simulcast and horsemen constituencies most directly affected by the operational shutdown, reflecting the central role that racing-continuity creditors play in the restructuring.

Latto Capital. Junior secured lender Latto Capital has objected both to the wages motion on the petition date and to the March 6 motion to pay necessary prepetition debts. Latto filed its initial objection on the petition date, opposing the DIP financing and wages motion. It then filed a further objection to the motion to pay prepetition debts on March 6. The second interim DIP order states that all objections to the interim relief requested in the motion were "withdrawn, resolved or ruled upon by the Court" at the March 10 continued hearing.

Signature Bank. The senior secured lender holds approximately $51.6 million in claims secured by substantially all of the debtors' property. Signature Bank appeared at the first-day hearings.

Labor constituencies. The wages motion and appearance docket reflect involvement by Teamsters Local 727, UFCW Local 1546 (which filed a separate appearance on March 10), IBEW Local 134, and Local 1/Unite Here. Teamsters Local 727 also filed appearances on behalf of its affiliated Health and Welfare Fund, Legal and Educational Assistance Fund, and Pension Fund, signaling multiemployer pension exposure.

Other secured claimants. W.E. O'Neil and Aria Group, holding mechanic's liens totaling more than $10.8 million, both appeared during the first week.

Illinois Harness Horsemen's Association. The IHHA filed an appearance on March 9, 2026, representing the harness horsemen whose $2,520,588 in accrued purses and $1,182,620 in NSF checks remain subject to the continued hearing on March 27.

Schedules deadline. The debtors filed a motion to extend the deadline to file schedules and statements of financial affairs, citing the operational complexity of compiling data for over 1,000 horsemen and hundreds of executory contract creditors across distinct business segments. The court denied the debtors' initial request to set that motion on an emergency basis, finding no emergency grounds under Local Rule 9013-2(A), but tolled the deadline pending a hearing. The debtors subsequently filed an amended motion seeking a 30-day extension to April 13, 2026, which is set for hearing on March 18, 2026.

The court has set a status hearing for April 28, 2026 at 9:30 a.m. The section 341 meeting of creditors is scheduled for April 7, 2026 at 1:00 p.m. via Microsoft Teams.

Frequently Asked Questions

Who is the claims agent for Hawthorne Race Course?

Omni Agent Solutions serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

What caused Hawthorne Race Course to file for bankruptcy?

A $1.5 million judgment obtained by Churchill Downs and a subsequent citation to discover assets led Signature Bank to freeze the debtors' operating accounts. Without access to cash, the company could not meet payroll, pay horsemen purses, or maintain simulcast partnerships, and the Illinois Racing Board suspended the harness racing license.

Will horse racing continue at Hawthorne?

The court approved $1,390,577 in thoroughbred purse payments and up to $750,000 for simulcast partners on March 12, 2026. Counsel for the Illinois Thoroughbred Horsemen's Association represented that the ITHA horsemen would participate in the thoroughbred meet starting March 29, 2026 upon funding. Harness purse payments remain pending before the court.

Is Hawthorne Race Course being sold?

The debtors have stated they are pursuing a section 363 sale of substantially all assets while preserving the option of a recapitalization through a chapter 11 plan. No stalking horse bidder has been announced, but PENN Entertainment and MGM Resorts International have both entered appearances in the case.

For more bankruptcy case coverage, visit the ElevenFlo bankruptcy blog.