Hawthorne Race Course, Inc. and three affiliated entities filed voluntary Chapter 11 petitions on February 27, 2026, in the United States Bankruptcy Court for the Northern District of Illinois, seeking to complete a sale of substantially all assets free and clear of liabilities. The debtors, which operate horse racing facilities, off-track betting parlors, and associated wagering operations in the Chicago metropolitan area, cited financial pressures including frozen bank accounts, suspended licenses, the termination of key wagering partnerships, and approximately $51.6 million in obligations to their senior secured lender. The debtors have secured a proposed $16 million debtor-in-possession financing facility to fund operations through the sale process.
Company Background and Business Operations
The Hawthorne racetrack, located at 3501 S. Laramie Avenue in Cicero, Illinois, approximately ten miles from downtown Chicago, traces its origins to 1909, when it was purchased by a Chicago alderman and entrepreneur. The facility has remained under the same family's ownership for four generations and is described in the filings as the oldest continuously run, family-owned racetrack in North America and the oldest gaming institution in the State of Illinois.
The debtors' corporate structure consists of four entities. Carey Heirs Properties, LLC owns the underlying real estate and certain improvements at the racetrack and leases the premises to both Hawthorne Race Course, Inc. and Suburban Downs, Inc. The real estate entity is owned by 77 members, most of whom are descendants of the original purchaser, and is governed by a board of three managers. Hawthorne Race Course, Inc. serves as the parent operating company, conducting thoroughbred horse racing and operating ten off-track betting facilities throughout Illinois in cities including Joliet, Crestwood, Villa Park, Rockford, and others. Suburban Downs, Inc. conducts standardbred harness horse racing at the track when thoroughbred racing is not in session. Post Time Catering, Inc., a wholly owned subsidiary of the parent company, provides food and beverage services at the racetrack.
The racetrack's business encompasses live pari-mutuel wagering on thoroughbred racing, simulcasting of horse racing programs from other tracks, sportsbook wagering, advance deposit wagering from funded online accounts, and off-track betting. In 2016, after the closure of the Balmoral and Maywood harness facilities, Hawthorne became the country's only dual breed racetrack, converting the track surface between thoroughbred and harness meets. Following the 2022 closure of Arlington Racecourse, Hawthorne became the sole underwriter of the Illinois horseracing industry in northern Illinois.
The racetrack employs over 250 people, with its longest-tenured employee having spent 52 years at the track. Between 290 and 500 people reside on the backside of the racetrack property depending on the racing season, including horsemen, their employees, and families, who receive housing and medical and dental care funded almost entirely by the racetrack. The filings estimate that the operation supports approximately 10,000 direct and indirect jobs in the Illinois horse racing agri-business, including farming, breeding, and training.
Gaming and Sports Wagering Licenses
In October 2019, in conjunction with the development of what was intended to be Illinois' first Racino entertainment complex combining casino-style wagering and horseracing, a gaming executive was named CEO of the Hawthorne Casino and Race Course division. In July 2020, the Illinois Gaming Board unanimously found the parent company preliminarily suitable for an organizational gaming license, and in July 2021 the board voted to approve key persons associated with the company. The company's continued licensing suitability and sports wagering license renewal were approved by the Illinois Gaming Board in September 2024.
The parent company also held retail, mobile, and online sportsbook wagering licenses, which were operated by PointsBet USA under a licensing agreement. During 2023, PointsBet USA's shareholders agreed to sell its U.S. operations to Fanatics, a subsidiary of Fanatics Holding Inc. In May 2023, the parent company and Fanatics signed a letter of intent to enter into a definitive agreement based substantially on the existing PointsBet arrangement. On January 26, 2026, Fanatics terminated the mobile and internet portions of its agreement but continued to provide retail sports wagering services at the racetrack and eligible off-track betting facilities.
Capital Structure and Debt Obligations
Signature Bank, N.A. served as the debtors' senior secured lender and central source of liquidity for both racing and Racino development activities. As of December 31, 2025, the debtors had outstanding a revolving line of credit of approximately $15 million alongside a suite of term loans and a $5 million bridge loan, totaling $35.1 million in combined term debt and revolver exposure. These loans carried interest rates ranging from a fixed rate of 10% to floating structures tied to prime plus a spread, resulting in $1.0 million of accrued interest as of that date. The Signature Bank facilities also carried substantial back-end financial obligations, including $6.1 million in exit fees across certain term loans, which materially increased the effective cost of capital. When combining principal, accrued interest, and exit fees, the debtors' estimated total obligations to Signature Bank were approximately $51.6 million as of February 24, 2026.
In 2025, Latto Capital LLC provided a $5.0 million term loan secured by a second-priority lien on the debtors' real estate, subordinate to Signature Bank's liens. On or about February 20, 2026, a family trust made a $300,000 loan to the parent company, secured by a junior mortgage on one of the debtor properties, which was recorded on February 24, 2026.
The debtors also carry a layer of unsecured obligations, primarily consisting of subordinated related party notes and racing working capital borrowings that are not collateralized by the debtors' assets. These instruments feature flexible or long-dated maturities and function as subordinated support capital used to fund racing operations, facility needs, and liquidity gaps.
Churchill Downs Incorporated, a judgment creditor, holds a judgment against the debtors in the amount of $1,546,266 and had issued a citation to discover assets.
Events Leading to Bankruptcy
The debtors faced financial hardship in recent years driven by challenges affecting the horse racing industry in Illinois. These pressures initially arose from the expansion of casino gaming in the state and were later compounded by an increasingly competitive sports betting market, rising costs, and increased regulatory fees.
Several adverse events occurred in the final months before the filing. On January 26, 2026, the Illinois Racing Board suspended the organizational license of the harness racing subsidiary, and the debtors' sports wagering partner terminated the mobile and internet portions of its agreement on the same day. The debtors' 2025–2026 harness racing season, which had begun on November 11, 2025, ended prematurely when the remaining fifteen race dates were canceled on December 28, 2025, due to liquidity constraints. The primary unpaid obligation related to horsemen's purse checks that, while issued prior to the bank's account freeze, could not be honored once the accounts were frozen.
In December 2025 and January 2026, Signature Bank froze all of the debtors' bank accounts. The bank was unwilling to advance funds to pay payroll, employee benefits, horsemen's purse obligations, utilities, insurance, professional fees, taxes, and other operating expenses. Multiple disruptions in simulcast partnerships and sports wagering reduced monthly wagering deposits from approximately $5 million per month to well under $1 million.
A land-only appraisal commissioned by Signature Bank, which did not value improvements, off-track betting parlors, or other assets, reflected a value of approximately $95 million as of August 7, 2025. The debtors believe their total enterprise value significantly exceeds this figure and had received numerous expressions of interest from third parties regarding a potential recapitalization. However, these parties indicated they would only proceed within the context of a bankruptcy process. The debtors were unable to attract capital outside of bankruptcy due to economic stress created by their relationship with Signature Bank, the Churchill Downs citation to discover assets, and reduced wagering revenue.
DIP Financing
Following Signature Bank's account freeze, the debtors' management determined that an infusion of outside capital was necessary. The debtors' financial advisor led an outreach process beginning in early January 2026, contacting 35 potential lenders. Fourteen expressed interest, five executed non-disclosure agreements, and the process ultimately yielded three term sheets.
After evaluating the three proposals, the debtors selected a proposed priming debtor-in-possession financing facility from JDI Loans LLC, providing up to $16 million in financing with a 120-day term. The financial advisor determined that the selected DIP facility offered the most cost-efficient structure, with projected interest and fees approximately $865,000 and $152,000 lower, respectively, than the competing proposals. The financial advisor also negotiated the removal of a $2.25 million interest reserve, thereby reducing the overall loan size and associated fees.
The DIP budget allocates $3.91 million in the first week of the Chapter 11 cases to restore purse balances owed to horsemen, which is described as critical to the ongoing viability of the debtors' business. The budget also provides for $750,000 in critical vendor payments over a thirteen-week period. Management identified the highest-margin simulcast partners for priority reactivation, as restoring simulcast signals could increase collections by approximately $4.0 million per month.
Debtors' Objectives and Sale Process
The debtors filed for Chapter 11 protection to complete a sale of substantially all assets free and clear of liabilities under Section 363 of the Bankruptcy Code. The filings note that the debtors remain hopeful that a suitable buyer interested in acquiring the business as a going concern may emerge. A reorganization through recapitalization is described as a possible alternative if the debtors are able to reach an agreement with a party willing to invest in the business, which could be pursued as part of a plan process for resolving the debtors' other liabilities.
The debtors' financial advisor will coordinate the sale with respect to all assets, with particular focus on evaluating potential going concern sales for some or all of the assets, as well as sales of the physical assets as an alternative. A comprehensive marketing strategy will be executed with respect to all material assets.
An immediate operational priority is restoring thoroughbred racing, which is scheduled to begin on March 29, 2026. According to the Illinois Racing Board, failure to conduct the thoroughbred meet would jeopardize the debtors' racing license, and the debtors' casino license is contingent upon maintaining the racing license. Based on discussions with potential buyers and recapitalization partners, the casino license is described in the filings as essential to maximizing enterprise value and achieving reorganization.
First Day Motions
The debtors filed several first day motions seeking relief to facilitate the transition into Chapter 11, including motions for joint administration of the cases, retention of a claims and noticing agent, authority to pay prepetition employee wages, salaries, compensation, medical and other benefits, and to continue employee benefit programs, authority to pay prepetition taxes and related obligations, authorization to provide adequate assurance of payment and deposits for utility services, and authorization to obtain debtor-in-possession financing. The debtors assert that the estates would suffer immediate and irreparable harm without the ability to make essential payments and otherwise continue business operations.
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