Magna in Bankruptcy: What, no bailout?

By JOE DRAPE

Published: March 5, 2009

Magna Entertainment Corporation, which owns some of the most prominent horse racing tracks in the United States, filed for Chapter 11 bankruptcy protection in a Delaware court Thursday and announced that it would sell Gulfstream Park in Florida and other racetracks to its parent company and largest creditor.

In a news release, M.E.C. said it had arranged a six-month secured loan of $62.5 million from a subsidiary of M.I. Developments, its controlling shareholder. It will use that money to protect certain assets and keep racing going at Gulfstream Park, Santa Anita and its other tracks. In the filing, there is no clear arrangement to protect Pimlico, which hosts the Preakness Stakes, the second leg of the Triple Crown.

“Simply put, M.E.C. has far too much debt and interest expense,” its chairman, Frank Stronach, said in a statement. Stronach, who built his fortune with the Canadian auto parts maker Magna International and assembled his track holdings over the past 10 years, controls Magna Entertainment and M.I. Developments, whose top assets are real estate.

“M.E.C. has previously pursued numerous out-of-court restructuring alternatives but has been unable to complete a comprehensive restructuring to date due, in part, to the current economic recession, severe downturn in the U.S. real estate market, and global credit crisis,” Stronach added.

The other holdings Magna apparently values in its agreement with M.I. Developments include the Palm Meadows training center in Florida, Golden Gate Fields in Northern California, Lone Star Park in Texas and its wagering companies AmTote and XpressBet. M.I. Developments has agreed to buy the assets for $44 million in cash, the rights to a $15 million lease and a credit on $136 million in debt Magna owes to M.I. Developments. It leaves open the possibility that the properties could be sold to a third party for a higher bid.

Magna has lost $500 million over the last five years. The filing was prompted by the fact it has $200 million of debt coming due over the next few weeks.


http://www.nytimes.com/2009/03/06/sports/othersports/06magna.html