Racetrack developer: company out of cash

MERCED -- Riverside Motorsports Park is out of cash and has not raised the quarter-billion dollars it needs to build a massive, multivenue racetrack complex in Merced County.

In fact, it recently has issued stock in the private company in return for petty cash to pay some of its bills.

Those are some of the revelations found in sworn testimony by RMP's founder and chief executive, John Condren.

A law firm that once represented RMP filed a lawsuit against the company in November to collect on an overdue $147,000 legal bill. As part of the lawsuit, an attorney with the firm questioned Condren under oath Dec. 27. The Sun-Star obtained a transcript of the deposition this week.

It provides a rare peek into RMP's finances and raises questions about whether the project, trumpeted for the boost it could give the county's economy, will become a reality.

Condren's answers under oath, as well as other statements RMP recently has released, stand in contrast to his early assurances that the money to build RMP had been secured.

Some of Condren's earliest partners said he told them the money to build RMP was "in the bank." And as recently as July, other RMP officials said the company had secured commitments to fund it.

Even as these admissions come to light, RMP officials say the 1,200-acre complex is on track to break ground this year.

In the deposition, Condren said RMP hoped to close its funding deals in August, but they were delayed because of the implosion of the subprime credit market.

"All the deals were held," he told Michael Vergara, who conducted the interview. Vergara is an attorney with Somach, Simmons & Dunn, the Sacramento law firm suing RMP.

Condren said RMP has no sources of income and the company has been unable to pay many of its creditors.

"Do you recall telling me (in) August of '07 that you were not paying other creditors?" Vergara asked.

"That's true," Condren answered.

"Did that change at any time between August and (this month), your ability to pay other creditors?" Vergara asked.

"We have to pay creditors as far as to keep the operations going," Condren said. "The ability to make the payments that you demand, for full and complete payment on your payable, was quite different from being able to make a $200 payment for a telephone bill."

To pay other bills, RMP has sold stock to generate cash. In an e-mail entered as evidence during the deposition, Condren told Vergara that RMP sold shares to pay overdue fees owed to Merced County.

"Contrary to your beliefs that RMP is rolling in money and making payments to others for engineering, legal and the like, perhaps you'd be interested to know that RMP provides shares of stock for its engineering and legal services," Condren said in the Oct. 31 e-mail.

'No interest in investing'

Condren then offered to pay Somach, Simmons & Dunn in stock.

"My firm has no interest in investing in the racing business," Vergara replied. "... I believe that the RMP Web site and press releases are intentionally written to create the impression that RMP 'is rolling in money and making payments to others.' "

Later in the deposition, Vergara asked, "If RMP receives the $250 million funding that you discussed earlier, how would that debt be serviced?"

"Based on the operation of the motor sports park," Condren answered.

"Well, how soon after construction will operation commence?" Vergara asked.

"Two years."

"So during that two-year period, how will that debt be serviced?"

Condren's attorney instructed him not to answer.

In phone interviews this week, Condren and other RMP officials insisted the company's financial position is strong.

"We've got the funds necessary to move the project forward," Condren said.

Neal Sebbard with Stone & Youngberg LLC, the San Francisco investment firm working to secure RMP's financing, said RMP is close to finishing deals for funding RMP's construction. He said the company plans to borrow $160 million of the $250 million it needs and that two banks have given "very strong indications" they'll provide loans.

The remaining $90 million will be funded by equity investors, Sebbard said. He declined to name the banks and investors interested in RMP.

Mark Melville, RMP's vice president of operations, said RMP still plans to break ground this year and that the company is close to completing development and financial agreements with Merced County.

This story was originally published February 16, 2008 at 4:50 AM with the headline "Racetrack developer: company out of cash."