Archive for the ‘Halsey Minor’ Category
Sunday, August 23rd, 2009
By Ray Paulick
Saying he is fed up with what he called the “most unprofessional process†he has ever seen, Internet entrepreneur and Thoroughbred owner Halsey Minor told the Paulick Report he has withdrawn from the bidding for the bankrupt Magna Entertainment (MEC) racetracks.“Magna Entertainment was to bankruptcy when dead what Magna Entertainment was to corporate responsibility and governance when alive,†he said. Minor said he “finally threw in the towel when they refused to allow me to speak and partner with one of America’s most profitable and respected gaming companies for the purpose of getting the value of my offer higher. … The shifting assortment of people ‘running’ the bankruptcy denied my right without ever feeling the need to even articulate a reason.â€
Minor’s decision came the same week U.S. bankruptcy court Judge Mary Walrath approved a request by the committee of unsecured creditors to include Magna chairman Frank Stronach and certain directors of the MEC in a lawsuit against Magna’s parent company, MI Developments, for allegedly preventing MEC from selling off some of its assets to avoid bankruptcy. The company filed for chapter 11 bankruptcy March 5.
The suit, filed July 21, said in its preliminary statement that “the MEC bankruptcy did not need to happen†if the company had sold some of its assets and raised equity. “Rather,†the suit states, “the MID Defendant, MID members of MEC’s Board of Directors, MEC management and Tom Hodgson worked together to make sure that asset sales were limited and that key properties –properties that MEC told the world would be sold to the highest bidder–were in fact set aside for MID and its controlling shareholder, Frank Stronach. MID, MEC management, Stronach, and those working with them stubbornly refused to sell MEC’s marketable assets, even after repeatedly telling the investing public in SEC filings and on investor conference calls that they would; and even after they knew that their refusal to act could violate their fiduciary duties. Instead of marketing MEC’s assets in good faith, Stronach and MID (which Stronach controls), larded MEC with purported loans (secured no less) to keep the failing MEC temporarily afloat, thereby ensuring that the MID Defendant would leapfrog ahead of the pre-existing unsecured debt (including $225 millon in unsecured bonds issued in 2002 and 2003) in an effort to protect MID’s equity ownership over MEC’s assets.â€
Stronach, the suit alleges, “used his control of MID to set up a ‘heads I win, tails you lose’ financing model.†If MEC’s performance improved, MID and its shareholders stood to profit, the suit says. If MEC were forced into bankruptcy, MID would use credit bids to retain the most coveted racetrack assets.
Click here for a copy of the unsecured creditors lawsuit, which outlines the history of Magna Entertainment and comments on much of the corporate, financial and governance intrigue behind the failed company.
In a proposal made last fall, Minor offered to buy MID’s bridge loans to Magna. He made a similar offer in April after Magna filed for bankruptcy. Minor said he was partnering on the proposal with California supermarket mogul Ron Burkle
, who is listed by Forbes magazine as the 105th wealthiest American, with a net worth of $3.5 billion. Burkle is a major political donor, almost exclusively to Democrats, though he has also contributed to California’s Republican Gov. Arnold Schwarzenegger. He was dubbed the “Billionaire Party Boy†by the New York Post, whose Page Six author Jared Paul Stern allegedly attempted to extort $220,000 from Burkle to stop negative stories about him from appearing in the tabloid paper.
“He is one of the five most influential people in Los Angeles,†Minor said of Burkle. “He’s an extraordinary investor with a sterling reputation, and he’s plugged in to the Hollywood crowd, something racing could use.
“After we submitted our offer I sent an email to MID asking if we could talk with this major casino company,†Minor continued. “I don’t want to name them, but they are extremely profitable and were interested.†Minor said he got an answer saying the offer would not be presented to the MID board because of the new issue involving a casino company.
“It’s so irrational,†Minor said. “They don’t even have a reason. They’re violating their duty, which is to get the maximum amount of money. When these guys are holding me back from doing that, when I have the strongest offer, it’s unconscionable. I’ve pursued this for a long time and spent a lot of money, but there is a limit as to how far someone will go to try and buy a business.â€
Minor also accused Magna’s interim chief executive officer, Greg Rayburn (who served as chief restructuring officer for WorldCom during what then was the largest bankruptcy in U.S. history), of having a duel role as an adviser to MI Developments, giving him an “utter and complete conflict of interest.â€
Because numbers at Magna tracks are “falling off the cliff,†Minor said, the company’s earnings before interest, taxes, depreciation and amortization (EBIDTA) has “absolutely nosedived.†He said Santa Anita’s EBITDA will have gone from $22 million to $8 million next year. As a result, he said, the track properties have dramatically fallen in value. “There are sub-$100-million bids for Santa Anita,†Minor said. Stronach paid $126 million for the Arcadia, Calif., track in 1998.
“The bids (for some Magna tracks) will be so bad that MID is going to have to credit bid, use their $400 million in debt to go in and buy back the assets, so the track will come back into the same parent company that bankrupted them in the first place,†he said. “That will trigger (investment fund) Greenlight and others to have a conniption because MID will not just lend the money but own the assets outright. There are bidders, but there’s no one to say ‘I will pay more.’
“I told (MID chief executive) Dennis Mills last year Magna was going bankrupt, and he said I was completely wrong, didn’t know what I was talking about, was a bomb thrower. I told Frank (Stronach) that if he went forward with the 363 process (stalking horse bid) and the unsecured creditors got nothing, they would sue him corporately and personally. I’ve told him the money will be tied up in escrow as litigation drags on for years, and said I believe from the work I’ve done that he will lose. The banks will get paid, the unsecureds will get paid, and what’s left will come to him after two years.
“All I’ve asked is, ‘Can I put something together with each of the parties that prevents going down the path of two years of litigation?’ But the basic answer is ‘no.’
“I said a year ago I wanted to prevent an ugly, destructive bankruptcy. We are about to see one hell of a an ugly and destructive bankruptcy. Who knows where these assets will end up? We won’t even know when they are sold who the beneficiary is.
“There will be more lawsuits coming. Frank is not going to let Gulfstream Park be sold for $20 million. So he will buy it back into MID, then what do you think is going to happen? It’s just starting, and it’s like the company itself: it just gets worse and worse and worse.â€
Minor said he is stunned that Stronach is considered a front-runner to acquire the German automobile company Opel from General Motors.
“How any sovereign nation can look at money losing Magna International, and chaotic, governance plagued MI Development, and bankrupt Magna Entertainment and decide that Frank Stronach should come near their industrial base absolutely defies all laws of common sense and business,†he said. “The title for his foray into the U.S. Thoroughbred business has now been officially written: Veni, Vidi, Deletum. ‘I Came. I Saw. I Destroyed.’â€
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Tags: dennis mills, Frank Stronach, general motors, greenlight financial, gulfstream park, Halsey Minor, Magna, magna bankruptcy, Magna Entertainment, magna international, mary walrath, mec, mec bankruptcy, mid, mid developments, opel, Paulick Report, Ray Paulick, ron burkle, stronach, tom hodgson, veni vidi deletum
Posted in Halsey Minor, Magna Entertainment | 28 Comments »
Wednesday, April 15th, 2009
By Ray Paulick
Attorneys for Halsey Minor and Save Hialeah Racing have filed responses to John Brunetti’s motion to dismiss the lawsuit against Brunetti and the City of Hialeah over who is the legal owner of the South Florida racetrack that has been closed since 2001.
The suit, filed in February in the 11th Circuit Court for Dade County, Fla., claims the City of Hialeah wrongly turned over the deed to the historic racetrack to a real estate entity owned by Brunetti, in violation of the city charter that requires a referendum before the transfer of city-owned property. It also claimed that Brunetti failed to live up to the terms of the lease with an option to buy Hialeah Park, when he failed to maintain a pari-mutuel permit and ceased live racing.
Brunetti’s attorneys filed a motion to dismiss the complaint as a sham, stating, among other things, that the agreement between the city and Brunetti preceded the law requiring a referendum on ownership transfers of city-property.
Brunetti’s motion to dismiss was based on alleged non-compliance with Florida Rule of Civil Procedure because plaintiffs did not attach a document to the amended first complaints; a lack of standing by plaintiffs; and alleged lack of viable claims against Brunetti.
Minor’s attorneys called those claims “baseless” in their responses, which can be viewed here and here. The motion to dismiss is based in part on the opinion of William Grodnick, attorney for the city of Hialeah. The response from Minor’s attorneys states “neither Plaintiffs nor more importantly this Court are bound by Grodnick’s unilateral, self-serving, and unsupported view of the law. The view of the law developed by Grodnick and supported by the Brunetti Defendants, with which Plaintiffs obviously disagree, merely frames the issue for this Court to adjudicate in this declaratory judgment action. The views of a defendant’s attorney do not render Plaintiffs’ Complaint a purported “sham” and do not support the Brunetti Defendants’ effort to shut down this lawsuit and escape what will likely be very revealing discovery as this matter goes forward.”
In a press release from Save Hialeah Racing, Minor, said he believes “the time has come to restore Hialeah Park Racetrack by preserving its historic buildings and reinstituting Thoroughbred racing on its track for the benefit of the citizens of Hialeah and the rest of Florida, as well as the millions of annual visitors to Florida.” The release stated Minor is “prepared to invest more than $100 million in restoring Hialeah Park Racetrack to make this dream a reality.”
Minor also called the recent move to bring Quarter Horse racing to Hialeah Park as a “charade.”
“The quarter horse proposal merely distracts the public’s attention from the deplorable condition of Hialeah Park Racetrack and is an insult to the people of Hialeah, who are accustomed to hosting the finest thoroughbred horses in the world.”
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Tags: Halsey Minor, hialeah lawsuit, Hialeah Park, john brunetti, minor lawsuit, Paulick Report, Ray Paulick
Posted in Halsey Minor, Hialeah Park | 8 Comments »
Thursday, April 2nd, 2009
By Ray Paulick
Halsey Minor, the Internet entrepreneur and Thoroughbred owner and breeder who made a failed bid to buy Hialeah Park from John Brunetti last year, is poised to make an offer to reorganize bankrupt Magna Entertainment (MEC) and take control of the company from founder Frank Stronach, the Paulick Report has learned.
The anticipated offer comes at a time when opposition to MEC’s plans to auction some of its assets is mounting from both creditors and shareholders in MI Developments, MEC’s parent company. According to a published report, the creditors have focused on the control that Eclipse Award-winning owner and breeder Stronach wields over not just MEC, but MI Developments. MI Developments, in addition to being the largest shareholder in MEC, is a major creditor that in the bankruptcy filing made a stalking horse bid for some of MEC’s assets. The court-appointed committee of creditors charged the proceedings are “overrun with serious conflicts of interest.”
Minor’s offer, the Paulick Report has learned, will pay off in full the debt owed to MI Developments by MEC (about $175 million), assume the debt on several bank notes while asking for an extension of time for repayment, and provide an option to the holders of $225 million in convertible bonds, either paying them roughly 25 cents on the dollar up front or offering 100% of the value as a new bond maturing in three years. Minor would take over management of the newly reorganized company upon acceptance of the deal by the creditors committee and the bankruptcy court.
This is not the first time Minor has made a run at MEC. Last October, the founder of the Internet company CNET proposed to the MI Developments board of directors that he would buy the outstanding loans from MID to MEC. That offer was not accepted, but now that the company has entered chapter 11 bankruptcy proceedings it has far less wiggle room.
“The goal would be to take control of the Magna tracks away from MI Developments and begin the process of rebuilding much of what has been harmed over the previous five years," Minor said in October. "Magna Entertainment, as a company, clearly has little chance of survival. The idea is to prevent a bankruptcy which would be disastrous for the industry and to begin to rebuild the company. The goal, first and foremost, is to stop the uncontrolled bankruptcy, which is almost inevitable. You can’t lose $120 million a year in this environment and continue.
“Frank Stronach only owns 2% of MI Development but has been using that company to prop up Magna Entertainment, which has basically been a bankrupt company for three years. It only exists because MI Developments continues to put money into a company whose losses are in excess of $100 million a year.
Magna filed bankruptcy on March 5. Click here for the history of the company and here for a list of its major creditors.
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Tags: Frank Stronach, Halsey Minor, magna bankrupt, magna bankruptcy, Magna Entertainment, magna entertainment bankruptcy, mec, mi developments, mid, Paulick Report, Ray Paulick, stronach bankruptcy
Posted in Halsey Minor, Magna Entertainment | 28 Comments »
Friday, March 6th, 2009
By Ray Paulick
While Thursday’s Chapter 11 bankruptcy filing by Magna Entertainment (MEC) leaves a multitude of unanswered questions about the future of the racetracks the Frank Stronach-controlled company owns, there was a positive reaction from the investment community concerning MI Developments — another Stronach company spun off from the auto parts mothership Magna International – which is the majority shareholder in MEC.
Shortly after news of the bankruptcy filing was released in the afternoon, the share price of MI Developments (MIM) shot upward, jumping over $1 from 3.50 to 4.55 on heavy trading. Thursday’s closing price remained relatively steady after the market opened Friday morning.
Nevertheless, MIM is far off its 52-week high of 30.26. Like many stocks, it began a steep descent in mid-September when the global financial crisis first hit, but MIM has underperformed against the markets. Institutional shareholders Greenlight Capital and Farallon Capital Management have protested moves by the company to keep Magna Entertainment out of bankruptcy by extending loan deadlines and infusing cash into the company’s operational budget. Its principals have not publicly weighed in on the bankruptcy filing.
It’s too early to tell how MIM’s move to bid on some of the Magna racetrack properties (Golden Gate Fields, Gulfstream Park and the surrounding shopping mall, Palm Meadows training Center, Lone Star Park, and AmTote) will play out. The "stalking horse bid" of $195 million includes $44 million in cash, $15 million in an assumed capital lease, and $136 million in existing debt) may be topped by other interested parties. The other properties, including Santa Anita Park, Pimlico and Laurel, Thistledown, Remington Park have purportedly been on the market for some time now, but there have been complaints from shareholders and some interested outside parties that Stronach and his key executives have not been earnest in their efforts to sell.
Who might be interested in some of the properties that Stronach bought in Magna’s name in a buying frenzy from 1998-2002? Halsey Minor, the internet entrepreneur who previously attempted to buy Hialeah Park from John Brunetti and offered to pucrhase one of the loans MIM extended to Magna Entertainment, could still be a player. So might Churchill Downs, the publicly traded company that has little debt and a strong balance sheet. However, Churchill already exited the California market in 2005 when it sold Hollywood Park to a real estate development company, so it’s questionable whether or not it would have any interest in Santa Anita or Golden Gate. There have been reports in Florida that Churchill-owned Calder race course could be the site of either a baseball stadium or convention center at some point, although that seems less likely now that the track is being converted to a racetrack/slots casino. So its interest in Gulfstream Park is in doubt.
It is not inconceivable that some wealthy individuals involved in owning racehorses – among them Dubai’s Sheikh Mohammed — could step forward to make a bid, either individually or in partnership, particularly on Santa Anita, which many see as a critical lifeline for horse racing in California. It’s expected that Hollywood Park will be closed for development in the next few years, as it is owned by the same company that shut down Bay Meadows with the intention of developing it (though development of the property is said to be at a standstill).
In the meantime, there have been assurances that all of the Magna tracks will continue to operate, just as United Airlines planes continued to fly after that company filed for bankruptcy protection in 2002. In the case of United, there were serious cuts made in operations and employee benefits. The company emerged from bankruptcy a little more than three years after originally filing.
And Stronach has not indicated that he wants to get out of the business of owning and operating racetracks. He may do everything within his power to retain the tracks under one of the Magna umbrellas.
“The fact that MEC’s day-to-day operations will continue uninterrupted throughout the Chapter 11 process is good news to industry participants, including thousands of horsemen and employees, as well as customers," said Alex Waldrop, president and CEO of the National Thoroughbred Racing Association.
Magna and its tracks remain members of the NTRA, though it isn’t known if or when their $400,000 in annual dues (which are billed quarterly) will be paid. The NTRA went through a similar situation when the New York Racing Association filed for Chapter 11 bankruptcy protection in 2006. NTRA senior vice president Keith Chamblin said NYRA made good on all of its dues when it emerged from bankruptcy.
Greg Avioli, president and CEO of the Breeders’ Cup, said the filing by Magna should have no bearing on plans to return to Santa Anita this fall with the two-day championships, which are being hosted by the Oak Tree Racing Association. Oak Tree, which hosted the 2008 championships, leases the facility and staff from Santa Anita for its fall meeting.
“Our agreement is with Oak Tree, so at this time based on the information available to us, we fully expect to have the event there,” Avioli said. In the meantime, the Breeders’ Cup has retained the same bankruptcy counsel used when NYRA’s looming bankruptcy threatened the 2005 Breeders’ Cup at Belmont Park. It is expected that Churchill Downs would serve as a potential backup site if developments threaten Santa Anita or Oak Tree.
Perhaps Avioli’s key phrase is "based on the information available." No one really knows how this bankruptcy will proceed at this stage — not even Stronach.. We’ll learn more when the legal proceedings begin.
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Tags: alex waldrop, Breeders' Cup, Greg Avioli, keith chamblin, magna bankrupt, magna bankruptcy, Magna Entertainment, mec, mec bankruptcy, meca bankruptcy, mi developments, mim, National Thoroughbred Racing Association, New York Racing Association, NTRA, nyra, nyra bankruptcy, oak tree racing association, Paulick Report, Ray Paulick, stronach bankruptcy
Posted in Breeders' Cup, Churchill Downs Inc., Halsey Minor, Magna Entertainment, National Thoroughbred Racing Association, New York Racing Association, santa anita park | 9 Comments »
Monday, February 9th, 2009
By Ray Paulick
Thoroughbred owner and Internet entrepreneur Halsey Minor showed he isn’t willing to take “no” for an answer from John Brunetti in his efforts to revitalize South Florida’s dormant Hialeah Park, claiming in a lawsuit filed Monday against Brunetti and the city of Hialeah that Brunetti is not the rightful owner of the historic racetrack.
Click here for a copy of the lawsuit, which was filed in Circuit Court of the 11th Judicial Circuit for Miami-Dade County.
The complaint, filed by Minor and Save Hialeah Racing Inc., a Florida not-for-profit corporation that Minor said includes Hialeah residents and members of South Florida preservation groups, is seeking to nullify the 2004 property deed transfer from the city to Brunetti. The suit claims the city had no lawful authority to transfer ownership because Brunetti failed on several counts to live up to terms of the lease-with-an-option-to-buy agreement and that residents of Hialeah were never given an opportunity to vote on the property transfer in a city charter-mandated referendum.
Minor was rebuffed after first approaching Brunetti last summer with a proposal to purchase and restore the track to its former condition as the “grand dame” of South Florida racing. Brunetti had operated the track since 1977, when a Brunetti company, Hialeah Inc., and the city of Hialeah entered into a lease-purchase agreement. The agreement, the suit claims, required Hialeah Inc. to offer live Thoroughbred racing, hold a pari-mutuel permit from the state, and “maintain the property and to make all repairs necessary to keep the property, buildings, fixtures, and improvements in the same condition as on the day the least agreement was signed.”
Hialeah has not run a live race since May 22, 2001, after which it lost its pari-mutuel permit, and its stable area has been torn down. Significant damage occurred when Hurricane Wilma hit Florida in 2005. The suit does not address who would be entitled to any of the insurance claims Hialeah Inc., or an affiliated real estate company, Bal Bay Realty, may have received following Wilma.
Minor, who has residences in Virginia and (like Brunetti) California, is president of Save Hialeah Inc., which a press release said was formed to “educate the public regarding the value of continued Thoroughbred horse racing in South Florida.” Restoration of the track and resumption of live Thoroughbred racing will be to the “benefit of the citizens of Hialeah and the rest of Florida, as well as the millions of annual visitors to Florida," the press release states.
Hialeah Park is listed on the National Register of Historic Places, and in 2007 the National Trust for Historic Preservation listed Hialeah Park as one of the 11 most endangered historic places in the United States.
Included in the suit is a claim the charter for the city of Hialeah “provides that the city shall not give, donate, sell or otherwise dispose of city real property, parks or recreational areas without approval of the electorate in a referendum held at a general or special municipal election.”
No referendum was held when the city transferred the deed to Brunetti’s company in 2004, which the suit claims occurred after Brunetti’s company “ in 2002, made clear, that it intended to abandon thoroughbred racing and undertake residential development on the property.”
Questions about the city’s role in deeding Hialeah Park to Brunetti’s company were first raised in an article in the Paulick Report last October, which discussed, among things, Brunetti’s relationship with city officials.
Tags: city of hialeah, Halsey Minor, halsey minor lawsuit, Hialeah Park, john brunetti, Paulick Report, Ray Paulick, save hialeah racing
Posted in Halsey Minor, Hialeah Park | 16 Comments »
Wednesday, November 26th, 2008
By Ray Paulick
Halsey Minor thought he would be meeting with MI Developments (MID) chief executive officer Dennis Mills in Baltimore, Md., on Wednesday morning to discuss Minor’s proposed buyout of the company’s $100-million loan to Magna Entertainment (MECA), the financially beleaguered racetrack company that operates Santa Anita Park and Golden Gate Fields in California, Gulfstream Park in Florida, and Pimlico and Laurel Park in Maryland, among other facilities.
When Mills failed to show, Minor called him, only to discover that Mills was still at Magna’s corporate headquarters in Canada putting out a press release outlining new loans from MI Developments to Magna Entertainment, further extensions of existing loans, and a proposed reorganization that could put the racetrack company more firmly under the control of Frank Stronach. The proposed reorganization, subject to MI Developments shareholder approval, is “an egregious attempt to hijack shareholder value and will never pass,” Minor told the Paulick Report.
Minor, a technology entrepreneur who created CNET.com among other Internet companies, is a horse owner and breeder who has also expressed interest in buying and restoring the dormant Hialeah Park in South Florida.
“He stood me up to put out this press release?” Minor said of Mills. “It might have been good to have met with me before the press release, because we have a better offer, by far, that will be far more acceptable to MID shareholders. It was a good faith attempt on my part to sit down with him and see if there was something we could do. Instead they put out this preposterous press release and he stands me up the day before Thanksgiving after I traveled all the way here to meet with him.
“I could have told Mills that what he put out, even though the stock is up a few pennies, has no chance of passing. There is a contingency (among MID shareholders) that is of the mind that says, ‘We’ll do anything to get rid of Frank,’ but this proposal doesn’t really fully get rid of him."
At least two institutional shareholders in MID, Farallon Capital Management and Greenlight Capital, have suggested possible legal action for breach of fiduciary responsibilty by MID’s board of directors over the MECA loans, one of them calling MECA a "financial sinkhole." A previous proposal to hand MECA over to Frank Stronach was voted down by MID shareholders earlier this year.
The proposal calls for a new loan from MID to MECA of $50 million to fund current operations and $75 million to pay for a possible slots license and temporary facility in Maryland, along with extensions of an existing bridge loan and of repayment deadline for another $100-million loan.
A second stage of the proposal, subject to shareholder approval, calls for MID to purchase unsold real estate in Dixon, Calif., and near the Palm Meadows training facility in Florida at what it calls “fair market value.” It also seeks additional extensions on the loans and the option to repay the loans in MECA stock instead of cash. The third and final stage, taking control of MECA away from MID and into the hands of an entity called the “Stronach Group,” is contingent upon MECA retiring its convertible bonds.
Minor insists that even if the proposal somehow gets shareholder approval, MECA will fail. “Frank doesn’t buy the stock until after the $295 million in convertible bonds are paid off,” he said. “If they are not paid, the company goes bankrupt. The slots deal in Maryland is terrible, and most of the big guys have said they are not even going to try to get the license. It’s only 33% (of revenue), versus close to 50% in Pennsylvania and Delaware. He has to spend $250 million to build his slots parlor, then give 60% of his profits to (Joe) DeFrancis (who sold his family’s interests in the Maryland tracks to Magna with a contingency for a share of any future slots revenue). So his own deal, which sucks all this money away from MID shareholders, would itself have a life of a year or two before it went under. This is Stronach’s way of saying, ‘I have this company (MID) hostage. If you want me to go away, you have to pay up.’
“The shareholders fully intend to have their day with Frank.”
Magna Entertainment (MECA) closed at $2.01 on Wednesday, up $.60, a gain of 42.8% on the day. MI Developments (MIM) gained $1.62 to close at $10.05, up 19.2%.
Copyright © 2008, The Paulick Report
Tags: dennis mills, farallon capital management, Frank Stronach, greenlight capital, gulfstream park, Halsey Minor, Magna, Magna Entertainment, Maryland Jockey Club, maryland slots, mec, meca, mi developments, mid, mid shareholders, mim, Paulick Report, Ray Paulick, santa anita, stronach, stronach group
Posted in Halsey Minor, Magna Entertainment | 13 Comments »
Wednesday, November 5th, 2008
MI Developments, the publicly traded real estate concern that is the largest single shareholder in racetrack operator Magna Entertainment, is under fire again from one of its biggest shareholders, this time for ignoring an offer from technology entrepreneur Halsey Minor to buy the outstanding loans Magna Entertainment has been unable to repay to its parent company.
Minor made an offer last month to buy Magna Entertainment’s debt obligation and went public Oct. 17 after failing to get a response from the MI Developments board.
David Einhorn, the president of the Greenlight Capital investment fund that owns 10% of the Class A shares in MI Developments, is demanding that the MI Developments board of directors give serious consideration to Minor’s offer without interference from Frank Stronach, who controls both MI Developments and Magna Entertainment. Einhorn expressed his demands in a letter to the MI Developments board filed with the Securities Exchange Commission on Tuesday. Greenlight has had a longstanding battle with MI Developments and lost an earlier lawsuit against the company alleging shareholders were oppressed by board of director decisions.
The demands from Einhorn come two weeks after a similar letter was written to the MI Developments board by a managing member of the Farallon Capital Management investment fund, threatening legal action and alleging breach of fiduciary responsibility.
Einhorn’s letter accuses the MI Developments board and CEO Dennis Mills of making “false and misleading” promises and says that ignoring Minor’s offer was a “clear violation of the board’s fiduciary duty and duty of care to its shareholders.”
The letter says MI Developments board members “continue to abandon ship,” and accuses Stronach of stacking the board with “cronies” and “childhood friends.”
“The MID board has a long history of ignoring our letters, and those of other large MID shareholders,” Einhorn writes. “The MID board can not continue to stick its head in the sand and ignore the wishes of an overwhelming majority of the MID shareholders.
“Since ignoring the Minor Offer is clearly a violation of the MID board’s duties, we expect, and demand as shareholders of MID, that the MID board immediately take up serious consideration of the Minor Offer without Mr. Stronach’s interference. Any transaction in which MID can be rid of its unlimited and never-ending exposure to MEC must be taken seriously. We minority shareholders rely on you to protect our interests from Mr. Stronach’s uneconomic and self-serving support of MEC and remind you that you will be held accountable if you fail to fulfill your fiduciary duty to the MID shareholders.”
Click here to read the Einhorn letter.
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Tags: david einhorn, dennis mills, farallon, farallon capital management, Frank Stronach, greenlight capital, Halsey Minor, Magna, Magna Entertainment, meca, mi developments, mid
Posted in Halsey Minor, Magna Entertainment | 1 Comment »
Monday, October 20th, 2008
By Ray Paulick
Santa Anita Park will be the focal point of the racing world on Friday and Saturday with the 25th running of the Breeders’ Cup world championships, but that doesn’t mean the rest of the nation’s tracks have gone into hibernation for the week.
Take Suffolk Downs … please! But, seriously, the East Boston racetrack was packed to the gills on Sunday, and it was all for a good cause. Thousands of walkers took to the sandy loam racing surface to help fund scientific research and to increase autism awareness at the eighth annual Greater Boston Walk Now For Autism.
It was the second time the event was held at Suffolk Downs following the successful debut last year when more than $1.3 million was raised and 15,000 turned out to take a couple of laps around the one-mile track. All proceeds from the event benefit Autism Speaks, the nation’s leading autism advocacy organization. A growing health crisis, autism is a complex brain disorder now affecting one in every 150 children by inhibiting their ability to commmunicate and develop social relationshiops, and is often accompanied by extreme behavioral challenges. A child is diagnosed with autism every 20 minutes.
Since becoming principal owner of Suffolk Downs last March, Richard Fields has elevated the profile of the track in both the racing and local communities through his support of events like Walk Now for Autism and the creation of a policy to prevent racehorses that compete at his track from being sent to slaughter. Fields has been a welcome and positive addition to the industry.
IT MIGHT BE A STRETCH TO SAY THAT BELMONT PARK WILL BE JUMPING ON WEDNESDAY, since the term “weekday crowds” there is an oxymoron. But a $1-million pick six carryover is going to put Belmont in the spotlight among the nation’s horseplayers, who figure to pump as much as $3 million more into the pool. That’s what happened back on June 11 during the spring-summer meeting when a $1-million-plus carryover resulted in a final pool of $4.4 million. There were 29 winning tickets that day (each worth $103,754), none of them purchased on-track at Belmont Park.
The good news for the New York Racing Association during Belmont Park’s final week follows the bad news for local horsemen, who learned of 10% purse cuts at the upcoming Aqueduct meeting, and for a number of full-time employees, who were laid off. The carryover is not good news for Breeders’ Cup officials who would rather see horseplayers hold onto their bankrolls until Friday, when the two-day world championships begin at Santa Anita.
A GOOD HORSEKEEPING SEAL OF APPROVAL … is that really all the enforcement strength the National Thoroughbred Racing Association can muster with its Safety and Integrity Alliance? If so, last week’s announcement of proposed wide-ranging reforms by the NTRA only reinforces the need for some form of federal intervention to create national standards for the racing industry.
In a press teleconference that included former Wisconsin Gov. Tommy Thompson, whose Washington law firm has been hired to independently monitor the reform movement’s progress, NTRA president and CEO Alex Waldrop called the Alliance a “voluntary” organization. He suggested tracks that don’t conform to the Alliance’s Code of Conduct may be considered pariahs by horseplayers, who will bet their money at tracks that do comply. Waldrop also failed to substantively answer any questions about how the industry will pay for the reforms, even going so far as to say the NTRA has no idea how much the reforms will cost. Click here to read the teleconference transcripts.
Good work was done by the Alliance and the many people who worked on the sensible and much needed reforms, but the fundamental flaw that has derailed so many prior industry initiatives still remains: the lack of a central authority with real enforcement powers. Oaklawn Park and Tampa Bay Downs, two tracks that did not join the Alliance, can’t be forced into the Alliance, and I seriously doubt their future success or failure will be a byproduct of their membership status.
Structure remains an impediment to serious progress in this industry. Until there is a structure that includes a national office with real enforcement and decision-making capabilities, volunteer organizations are doomed to fail.
HALSEY MINOR IS NOT GIVING UP ON HIALEAH PARK. Just because the technology entrepreneur has shifted his attention to MI Developments, the controlling shareholder of the near-bankrupt racetrack company Magna Entertainment, doesn’t mean he’s taken his eye off Hialeah Park, the dormant South Florida track he wants to buy.
Minor told the Paulick Report he intends to legally challenge the city of Hialeah’s right to turn over the deed for Hialeah Park to John Brunetti four years ago at the end of a 30-year lease agreement between Hialeah and Brunetti. Minor contends that Brunetti failed to live up to the terms of the lease by failing to offer live racing, not holding a pari-mutuel license and falling behind in his payments to the city. Minor thinks the city of Hialeah should enforce an eminent domain claim on the land. If not, he said he has a team of lawyers ready to strike.
BREEDERS’ CUP OFFICIALS COULDN’T FORESEE THE FINANCIAL CRISIS that has many people cutting their discretionary spending, and there is no doubt the troubled economy will lower expectations for business this weekend. But long before the Wall Street meltdown, it was obvious to many people the inflated ticket prices and insistence on a two-day ticket package was a mistake. Now they are scrambling to sell reserved seats for the world championships. A quick check of online ticket brokers shows seats are available for Friday’s program at prices less than half of face value. The Breeders’ Cup should go back to the drawing board on their ticket pricing for 2009. It may the “Super Bowl of Horse Racing,” but it’s not the Super Bowl.
Copyright © 2008, The Paulick Report
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Tags: autism, belmont park, Breeders' Cup, breeders' cup tickets, Breeders' Cup World Championships, greater boston walk now for autism, Halsey Minor, hialeah, Hialeah Park, Magna Entertainment, mi developments, National Thoroughbred Racing Association, New York Racing Association, NTRA, ntra safety and integrity pledge, oaklawn park, Paulick Report, pick six, pick six carryover, Ray Paulick, richard fields, santa anita, suffolk downs, super bowl, tampa bay downs, wall street meltdown
Posted in Breeders' Cup, Halsey Minor, Hialeah Park, Horse Racing, Horse Slaughter, Industry Reform, National Thoroughbred Racing Association, New York Racing Association, Thoroughbred Business | 1 Comment »
Saturday, October 18th, 2008
By Ray Paulick
A major institutional investor in MI Developments, the Frank Stronach-controlled real estate company that has kept Stronach’s failing racetrack entity Magna Entertainment afloat with bridge loans, has threatened legal action against the MI Developments board of directors, alleging they have “flagrantly breached their fiduciary duties to shareholders.”
Richard Fried, a managing member of the San Francisco-based Farallon Capital Management that owns 8.5% of the Class A shares in MI Developments, protested the board’s most recent extension and expansion of a now $125-million bridge loan and delay of a due date of a separate $100 million loan payment. Fried wrote that Magna Entertainment “has been, is, and will remain a financial sinkhole. Continuing to finance it offers no conceivable benefit to MID’s shareholders.”
“There is no possible justification for the Board to approve loans to a near bankrupt horseracing concern, especially one that is hopelessly entangled with irrational, non-economic, and conflicted parties and has a track record of massive value destruction,” Fried wrote. The letter was filed with the Securities Exchange Commission on Friday, the same day that technology entrepreneur and Thoroughbred owner and breeder Halsey Minor went public with an offer to buy out MI Developments’ loans to Magna Entertainment.
The letter said Farallon concludes that “the (MI Developments) Board is pursuing a value-destroying investment instead of a relatively safe and accretive investment because the Board is ignoring common shareholders’ interests and is only interested in pleasing Frank Stronach, even if his desires conflict with the best interests of MID’s shareholders.”
Farallon also went on record as opposing what it called “an ill-conceived transaction” that would have MI Developments buying out Magna Entertainment, whose stock has lost more than 95% of its equity value. MI Developments already owns a controlling interest in Magna Entertainment, which operates Santa Anita Park (host of the Breeders’ Cup world championships in 2008 and 2009), Gulfstream Park, Lone Star Park, the Maryland Jockey Club tracks Pimlico and Laurel, and Golden Gate Fields.
“We believe the Board’s duties require it to end MID’s support of MEC and focus urgently with management on developing a coherent and fair reorganization plan. You must tell Mr. Stronach that his time for self-serving maneuvers is over. It is time for you to meet your fiduciary duties as directors. If you do not, Farallon will consider all legal tools available to it as a shareholder.”
Magna successfully defended a previous lawsuit by Greenlight Financial alleging that Greenlight and other investors were oppressed by Stronach and the MI Developments board.
Click here for the complete text of the Farallon Capital Management letter.
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Tags: Breeders' Cup, cnet, farallon capital management, farfallon, financial sinkhole, Frank Stronach, gulfstream park, Halsey Minor, Horse Racing, laurel, lone star park, Magna, Magna Entertainment, magna entertainment farfallon capital management, Maryland Jockey Club, meca, mi develoments, mi developments, mid, Paulick Report, pimlico, Ray Paulick, richard fried, santa anita park, stronach
Posted in Halsey Minor, Magna Entertainment | 8 Comments »
Friday, October 17th, 2008
By Ray Paulick
Technology entrepreneur Halsey Minor has gone public with a letter sent to the Special Committee of the Board of Directors of MI Developments (MIM) asking the board to consider his proposal to acquire outstanding loans made by MI Developments to the financially beleaguered racetrack company Magna Entertainment (MECA).
Click here to read the letter.
Both MI Developments and Magna Entertainment are controlled by Frank Stronach, though Stronach owns just 2% of MI Developments.Both companies are offshoots of auto parts giant Magna International (MGA), whose stock price has declined by 67% over the last year.
On Thursday, Magna Entertainment received another extension on more than $250 million in outstanding loans, all but $40 million from MI Developments. The new agreement on a bridge loan from MI Developments added $15 million to the amount Magna Entertainment could borrow.
Minor, the founder of CNET and several other technology firms, said his proposal was made several weeks ago but that he has yet to receive a response from the Special Committee, necessitating the need to make the offer public so it could receive full consideration from shareholders of MI Developments.
“While it is unfortunate that we have to take the unnecessary step of making our proposal public,” Minor said, “we believe that MI Developments’ shareholders deserve to know about the opportunity to relieve the company of what has become an increasingly burdensome debt obligation. Magna Entertainment owns some of the world’s premier racetracks, but many of them have fallen into disrepair and are in desperate need of capital to both improve the facilities and attract fans back to the industry. I have long had a passion for the horse racing industry, and believe strongly that this storied, exciting sport can be revitalized. I want to help rebuild this industry, and initiating discussions with MI Developments to explore ways we can solve Magna Entertainment’s liquidity problem and help provide a better strategic direction to these under-capitalized properties is a winning proposition for MI Developments and the horse racing industry overall. I look forward to a response from MI Developments’ Special Committee.”
Minor, who also has made a bid to buy Hialeah Park in South Florida from John Brunetti, told the Paulick Report he is very concerned over the affect a potential bankruptcy by Magna Entertainment could have on the horse racing industry. “The goal would be to take control of the Magna tracks away from MI Developments and begin the process of rebuilding much of what has been harmed over the previous five years," he said. "Magna Entertainment, as a company, clearly has little chance of survival. The idea is to prevent a bankruptcy which would be disastrous for the industry and to begin to rebuild the company. The goal, first and foremost, is to stop the uncontrolled bankruptcy, which is almost inevitable. You can’t lose $120 million a year in this environment and continue.
“Frank Stronach only owns 2% of MI Development but has been using that company to prop up Magna Entertainment, which has basically been a bankrupt company for three years. It only exists because MI Developments continues to put money into a company whose losses are in excess of $100 million a year.
“We have made a proposal, but the Special Committee of MI Developments hasn’t allowed us to have any access to any of the information, which is really crazy. They are depriving their shareholders of even knowing what our final offer will be. This will let the hedge funds who own the stock realize the company has been offered the opportunity to exit the Magna Entertainment funding business and so far has declined to even talk.”
Members of the Special Committee are Jerry D. Campbell (Chairman), Anthony J. Campbell and William J. Menear.
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Tags: cnet, Frank Stronach, Halsey Minor, Magna, magna bridge loan, Magna Entertainment, magna international, meca, mi developments, mim, Paulick Report, Ray Paulick, stronach
Posted in Halsey Minor, Magna Entertainment | 10 Comments »
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