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Published 28 October 2013 09:17, Updated 30 October 2013 07:11
Trainers say that the bad debts being racked up by owners are having repercussions throughout the entire racing industry. Photo: Nick Cubbin
Veteran South Australian horse trainer Leon Macdonald has been training horses full-time since 1975, so he knows how to spot an owner who won’t pay his bills. And when an owner does lag behind, he’s quick to act.
While stressing that he deals with a group of “pretty settled owners” who are good payers, Macdonald recounts a recent run-in with an owner who got behind with his account. Although the sum in question was less than $1000, Macdonald engaged a debt collector to recover the money – and make a point.
“I wasn’t going to let it become an issue,” Macdonald says.
“There’s a lot of trainers who have let their owners get too far in debt. If they don’t pay the first month, then by the second month they’re starting to owe seven or eight thousand dollars.
“You’ve got to keep on top of it. Good credit control is essential.”
Staying on top of credit issues is essential, says veteran trainer Leon MacDonald, pictured here with jockey Clare Lindop.Photo: Vince Caligiuri
In the four days of racing that make up the famous Flemington Melbourne Cup Carnival, more than $16 million worth of prize money will be on offer and the big names of Australian business will do battle.
Our biggest horse owners, such as Rich 200 list members Lloyd Williams , Gerry Ryan, Richard Smith, John Singleton , Bruce Mathieson , John Higgins and Gerry Harvey, will take on an army of overseas raiders keen to get a slice of one of the world’s richest carnivals.
And then, as quickly as it began, the carnival will be over, and owners, trainers, jockeys and service providers who make the industry go around, will be back to the grind of seven-day-a-week racing. It’s a tough way for a trainer to earn a living at the best of times, but when economic conditions are patchy, the degree of difficulty increases further.
Bad debts have reached epidemic proportions in an industry where, despite the glitz and big dollars on offer during the Spring Carnival, success and high financial returns are relatively rare.
Steve McMahon, chief executive of the New South Wales Trainers Association, estimates that 70 per cent of horses that race earn below $10,000 a year in prize money, and many earn nothing at all.
“If you assume it costs at least $25,000 per annum to train a horse then it is probably also safe to assume that 75 to 80 per cent of horses fail to repay training fees through prize money,” McMahon says.
When economic conditions deteriorate, success-starved owners start to fall behind on their bills and their trainers – followed by their service providers such as veterinarians and feed suppliers – start to suffer.
While most trainers would kill to have a Rich 200 member in their stable, perhaps the best known example of a poor payer in racing has been provided by Nathan Tinkler. He has sunk as much as $200 million into his Patinack Farm breeding and racing operation, but as his financial situation worsened, the stories of unpaid bills and wages grew.
Tinkler’s trainer, John Thompson, told last year of the hardships of running a stable where the cash has dried up. “I have gone weeks without farriers, bedding, run out of feed a number of times,” he said. Tinkler has been unsuccessful in his attempts to sell Patinack and will race horses during the Melbourne Spring Carnival.
Victorian trainer Pat Carey says while the problem of bad debts is not new in the racing industry, the intense competition among trainers has left businesses particularly vulnerable.
“We operate on very thin margins. The training dollar is very competitive and people discount to extraordinary levels. There is an increasing option to go down the scale and get away from the true costs of training horses.”
For Carey, the problem is one of owners not recognising their obligations. The proper care and training of a horse costs money, and racing’s status as a major employer means that there is a lot riding on owners promptly paying their bills.
“Clearly this business of racing requires entrepreneurial skills to recruit people to race horses. Once people have invested in the horse, what needs to be loud and clear is the responsibility that goes with that ownership.”
Pat Carey (pictured with jockey with Rhys McLeod) says trainers are facing increasing pressure on what were already thin margins. Photo: Tertius Pickard
Of course, giving owners a stern warning about their obligations doesn’t exactly guarantee that the bills are going to be paid.
While bigger trainers have credit control systems, smaller operators often find themselves in a more difficult position. Training fees alone do not generate profit and trainers also rely on prize money as a source of income. So to stop training a horse isn’t really an option.
“Any business where you provide the service before you get paid is vulnerable,” Carey points out.
He would also like to see racing authorities create some sort of mechanism whereby owners would need to be registered and bad payers would be pursued, or at least named and shamed.
“We would like to see some support in the pursuit and control of bad debt. We need new forms of policing.”
The Australian Trainers’ Association (ATA) offers members some debt collection services, but CEO John Alducci says the ATA has consistently pushed for racing authorities including Racing Victoria and Racing New South Wales to set up a more rigorous process.
He believes a registration or licensing regime is unlikely to be introduced due to opposition from the peak owners group, the Thoroughbred Racehorse Owners’ Association (TROA). However, TROA, the ATA and Racing Victoria have formed a working party to find some solutions to the bad debt problems. A similar group has been formed in NSW. “For the first time ever we’re actually all acknowledged there is a problem,” Alducci says.
A spokesperson for Racing Victoria says the working party has commissioned a survey of all Victorian trainers and owners on a range of issues, and the data is still being collated.
Racing Victoria pointed out that it has a full-time industry liaison steward who undertakes “issue resolution and mediation on behalf of industry participants and stakeholders”. It says the steward deals with an average of 25 cases per month, and is able to satisfactorily resolve 60 per cent of them. However, the ATA says these powers are limited.
While the Victorian working party’s discussions are preliminary, Alducci is working towards changes to the documentation that an owner signs when they register a racehorse.
Alducci wants the documentation to better set out the obligations owners face, particularly paying their bills. This would be backed by a dispute resolution system. It is hoped that the changes could be rolled out nationally.
What a dispute resolution system would help prevent is the nuclear option of legal action, which can be expensive and messy.
This is highlighted by a case before the Supreme Court of Victoria in which owners Francis and Karen Butler have taken legal action against John Symons and Sheila Laxon, who train in partnership in country Victoria.
The case, which is still before Justice Geoffrey Digby, involves the breakdown of a joint venture between the trainers, the Butlers and a third party, Glenn Fielding, and claims of unpaid legal fees. Both parties dispute any wrongdoing.
The parties in the case declined to comment as they are awaiting Justice Digby’s judgment. In the current climate, the case is being closely watched by everyone in the industry.
But while the industry gropes towards a solution to the bad debt problem, some are taking matters into their own hands.
Queensland woman Wendy Reynolds established Racehorsedebt.com.au last year. The site calls on users to help to “stop the cycle of horses transferred to new stables and trainers, leaving previous trainers, farriers and vets unpaid”. Trainers, vets and farriers can list debts they are owed on a specific horse for free, and when they are asked to work with another horse, they can check whether it has prior debts attached to it.
Reynolds stresses that details of trainers and owners will not be revealed, but hopes the site will act as an early warning system.
It’s a small way to attack a big problem that is unlikely to be resolved soon. For now, trainers will have to struggle along as they always have, hoping to unearth that great horse who can win big prize money, and praying that their owners pay up.
“[Most] people accept the responsibility of owning a horse,” Pat Carey says. “But the small percentage that don’t, make it hard for businesses and the industry.”