Archive for the ‘Magna Entertainment’ Category
Wednesday, June 3rd, 2009
By Ray Paulick
The Paulick Report has learned that the Thoroughbred Owners of California has submitted an “expression of interest” to buy Santa Anita Park, which is in the process of being sold as part of the bankruptcy proceedings involving the track’s current owner, Magna Entertainment. According to sources, TOC’s plans would be to form a non-profit company to own and operate the Arcadia, Calif., track that averaged nearly 33,000 in daily on-track attendance as recently as 1985 but sees about one-fourth of that number today.
Drew Couto, president of TOC, confirmed Wednesday night that the owners’ organization has filed an intention to bid on Santa Anita but would not offer any additional comment. It is not known if there are individual investors behind the proposed bid or if the funding would be institutional.
The paperwork filed with the expression of interest to bid on Santa Anita is only the first step in the process. TOC will then have to be ruled as a “qualified” bidder after Miller Buckfire and Co., the bankruptcy specialist firm handling the sale of the Magna tracks, reviews its application. The deadline for expressing an interest in bidding was May 27, and formal bids must be submitted by July 31. If necessary, an auction on the properties may take place in September. (Click here for more information on bankruptcy bidding processes.)
There have been many rumors circulating through Southern California that another bidder for the track represents Chinese interests. Internet entrepreneur Halsey Minor has also expressed an interest in acquiring some of the tracks through the purchase of Magna Entertainment’s accumulated debt. MI Developments, which like Magna Enterainment was a spinoff of the automotive giant Magna International, submitted a “stalking horse bid” for a number of the tracks in the original bankruptcy filing in March. Since then, however, MI Developments, the largest shareholder in Magna Entertainment, has backed away under the threat of litigation from many of its institutional shareholders.
There are profound fears in the California Thoroughbred community that if Santa Anita is sold to a development company, racing in the Golden State would soon be extinct. Bay Meadows racetrack in Northern California has been torn down for future development by the Bay Meadows Land Co., which also owns Hollywood Park, where plans for mixed-use development could kill live racing at the end of this year. If Santa Anita is sold for development purposes, the only major track remaining in Southern California would be the Del Mar, which races from mid-July to early September. Gov. Arnold Schwarzenegger has listed Del Mar, which is owned by the state of California, as a potential property the financially troubled state may attempt to sell.
A successful bid by TOC on Santa Anita Park could go a long way toward preserving the California racing industry.
Magna Entertainment also owns Gulfstream Park in Florida, PImlico and Laurel in Maryland, Golden Gate Fields in Northern California, Lone Star Park in Texas, Remington Park in Oklahoma, Thistledown in Ohio, and Portland Meadows in Oregon.
Santa Anita Park, which opened in December 1934, was purchased by Magna chairman Frank Stronach for $126 million in 1998.
TOC was incorporated in 1993 and eventually replaced the California Horsemen’s Benevolent and Protective Association as the recognized organization representing horse owners in the state.
Copyright © 2009, The Paulick Report
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Tags: california horse racing, drew couto, Frank Stronach, horsemen's benevolent and protective association, magna bankruptcy, magna bidding process, Magna Entertainment, Miller Buckfire, Paulick Report, Ray Paulick, santa anita park, thoroughbred owners of california, toc
Posted in California, Magna Entertainment, santa anita park | 10 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 »
Wednesday, March 25th, 2009
By Ray Paulick
One of the creditors in the Magna Entertainment bankruptcy, citing a Florida statute that deals specifically with suppliers of feed and bedding products to facilities where racehorses, polo ponies and racing greyhounds are stabled, has filed liens on hundreds of horses located at Magna’s Palm Meadows training center in Florida.
Wood Mulch Products of Orlando, Fla., which supplies wood-chip bedding for Palm Meadows, had two checks from a Magna affiliate returned for non-sufficient funds, according to Brad Davis of the law firm of Davis & Kennedy, who is working on behalf of the creditor. Magna, which filed for Chapter 11 bankruptcy protection on March 5, allegedly owes Wood Mulch Products more than $250,000.
“There is a statute here in Florida, which I’m sure the bankruptcy lawyers will challenge, that provides that any vendor of feed and bedding materials to racehorses or polo horses or dogs that race is entitled to a lien on any animal that was present on the premises where the goods were delivered,” said Davis.
The statute, 713.66, can be viewed here. It states that liens can be applied to the owner, or the agent, bailee, lessee, or custodian of the owner of horses stabled where the supplies were delivered.
“I don’t think (the statute) has been challenged,” said Davis. “There are a few cases related to it.”
Davis said the liens would be valid even if the horses now stabled at Palm Meadows leave the state of Florida.
A lien gives a claimant the right to retain the lawful possession of the property of another until a legal duty such as payment for services or products is made.
Palm Meadows in Palm Beach County, about 45 miles north of Gulfstream Park, was built by Magna Entertainment at a cost of about $90 million. The facility is open from Nov. 1-May 1, with a $12 per day charge for each of the 1,440 stalls.
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Tags: brad davis, davis & kennedy, florida statute 713.66, Magna, magna bankrupt, magna bankruptcy, Magna Entertainment, magna entertainment bankruptcy, palm meadows, Paulick Report, Ray Paulick, wood mulch products
Posted in Florida, Magna Entertainment, gulfstream park | 11 Comments »
Monday, March 16th, 2009
By Ray Paulick
Legislation approved by the Kentucky state Senate on Friday would pave the way for the Breeders’ Cup to make an emergency return to Churchill Downs this year in the event complications with Magna Entertainment’s bankruptcy prevent the Oak Tree Racing Association from hosting the two-day championships this fall at Santa Anita Park in California as scheduled.
The economic development bill, HB229, passed the House earlier this session and was amended by the Senate on Friday to include several incentives, including a pari-mutuel excise tax credit submitted by Republican Sen. Damon Thayer that would only go into effect if the Breeders’ Cup is held in Kentucky a minimum of two times between 2009 and 2012. The credit would remain on the books indefinitely, provided the Breeders’ Cup returns to Kentucky on a continuous basis of at least once every three years. Churchill Downs has hosted the Breeders’ Cup six times, in 1988, ’91, ’94, ’96, 2000 and ‘06 — more than any other track. The Keeneland Association is also looking into substantial expansion to its racing facility in Lexington in order to become a potential Breeders’ Cup host.
The pari-mutuel excise tax credits go to the racetrack, which contracts with Breeders’ Cup for distribution of pari-mutuel handle and other sources of revenue from the championships.
The 2010 Breeders’ Cup is scheduled for Churchill Downs, but no sites have been determined for future runnings. If this year’s Breeders’ Cup stays in California, Thayer told the Paulick Report that for the 2010 tax credits to kick in, the Breeders’ Cup will have to be contractually obligated to return to Kentucky in 2011 or 2012. He estimated the tax credit was worth $700,000 when the Breeders’ Cup was last staged at Churchill Downs as a one-day event in 2006. The amendment requires a minimum of $500,000 of the tax credit be used to fund Breeders’ Cup undercard races.
Thayer worked for the Breeders’ Cup from 1999 until parting ways with the organization in 2007, when he was vice president of event management. He started his own consulting firm and was given a six-month deal with the Breeders’ Cup to help with the 2007 championships at Monmouth Park – its first year as a two-day event – but that deal was not renewed.
The racing industry veteran and second-term state senator pushed for the Breeders’ Cup incentives in spite of any bitterness over his parting with the organization.
“As a legislator I have a responsibility to enact policy that I believe is beneficial to the commonwealth and having the Breeders’ Cup in Kentucky is an economic windfall for the state,” he said. “The University of Louisville said it has a $30-million impact for a one day event, and I’m no economist but I would think a two-day event could be worth $40-$50 million. Plus, the horse sales in Lexington that follow the Breeders’ Cup benefit by the Breeders’ Cup being in Kentucky. A rising tide lifts all ships. I tried to put any of my personal feelings aside and try to do what was right for Kentucky and the horse industry — which are not mutually exclusive, by the way.”
Though Breeders’ Cup president Greg Avioli has publicly stated the bankruptcy of Magna should not affect the ability of the Oak Tree Racing Association to host the event this year, Breeders’ Cup has retained legal counsel that specializes in bankruptcy and has Churchill Downs pegged as an emergency backup site. There are some fears that a bankruptcy trustee could nullify any leases that are not profitable to Magna, which could leave Oak Tree without a home.
“I’m well aware of the issues with Magna and how it could affect the Breeders’ Cup and Oak Tree, and that’s why I included 2009 in the Breeders’ Cup tax credit legislation,” Thayer said. “If there’s a chance Kentucky could get it back, I wanted to make sure the definition included a two-day event instead of a the one-day event that’s currently on the books.”
Thayer also submitted a one-day pari-mutuel excise tax credits to all Kentucky tracks that race 30 days or more, with Kentucky Oaks, Derby and Blue Grass days not eligible.
The same economic development bill includes a sales tax rebate for Kentucky Speedway, which is now owned by billionaire Bruton Smith’s Speedway Motorsports. The rebate will pay for 25% of the renovations to Kentucky Speedway if the track is able to secure a NASCAR event.
The bill returns to the House, where it is expected to be passed during the final two days of the General Assembly’s regular session March 26-27.
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Tags: 2009 breeders' cup, 2010 breeders' cup, Breeders' Cup, Breeders' Cup championships, churchill downs, damon thayer, Greg Avioli, hb229, Keeneland, magna bankruptcy, Magna Entertainment, magna entertainment bankruptcy, oak tree racing association, Paulick Report, Ray Paulick, santa anita park
Posted in Breeders' Cup, Churchill Downs Inc., Keeneland, Kentucky, Magna Entertainment | 3 Comments »
Wednesday, March 11th, 2009
By Ray Paulick
A hearing has been scheduled for April 3 in U.S. Bankruptcy Court in Delaware to consider a motion requested by bankrupt Magna Entertainment to auction some of its assets on July 16.
Included in the proposed auction, tentatively scheduled at the New York offices of Weil Gotshal and Manges, is Gulfstream Park in Hallandale, Fla., Palm Meadows training center in Palm Beach County, Fla., the AmTote totalizator company, Magna’s 50% interest in the Village at Gulfstream mall, the XpressBet advance deposit wagering company, and the partnership interest in Lone Star Park, a Grand Prairie, Texas, racetrack built on leased property.
In Magna Entertainment’s chapter 11 filing, parent company MI Developments made a stalking horse bid for those assets of $195 million. The auction has been proposed in the event more than one party makes a qualified bid on any of the properties.
Not included in the proposed auction is Santa Anita Park in Arcadia, Calif., Remington Park in Oklahoma City, Okla., the Maryland Jockey Club tracks Pimlico in Baltimore and Laurel Park in Laurel, Thistledown near Cleveland, Ohio, and Portland Meadows in Portland, Ore. Miller Buckfire and Co., and a financial adviser and investment banker hired by Magna in 2008, is handling a marketing and sale process for all Magna Entertainment’s assets.
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Tags: lone star park, Magna auction, Magna Entertainment, magna entertainment bankruptcy
Posted in Magna Entertainment, Race Tracks | 1 Comment »
Tuesday, March 10th, 2009
By Ray Paulick
Racing in Northern California, scrambling to recover from the loss of Bay Meadows racetrack, which was closed in 2008 for planned development, also faces the bulldozing of Golden Gate Fields, the parent company of bankrupt owner Magna Entertainment stated in a Securities and Exchange Commission filing on Tuesday.
MI Developments (MID, stock symbol MIM) is the majority shareholder in Magna Entertainment (MEC, stock symbol MECA). When Magna Entertainment filed for chapter 11 bankruptcy March 5, it revealed a $195-million stalking horse bid from MI Developments for several of the racetrack properties, including Golden Gate Fields. In an amendment to a Form 13D filing on Tuesday, MI Developments said, if successful in acquiring Golden Gate, it will “immediately commence seeking all required approvals to develop the property for commercial real estate uses.” The filing goes on to say, "Racing at Golden Gate Fields would cease prior to commencement of construction on the rezoned property.”
MI Developments and Magna Entertainment are both spinoffs from the auto parts giant, Magna International. All three companies are controlled by Thoroughbred owner and breeder Frank Stronach.
Click here to access the filing; the reference to development of Golden Gate Fields is on page two.
Drew Couto, president of Thoroughbred Owners of California, told the Paulick Report Tuesday night he had assurances as recently as last weekend that MI Developments was only pursuing development of excess property at Golden Gate, and that it would not affect horse racing. Couto said he was told the commercial development would be along the lines of developer Rick Caruso’s "Shops at Santa Anita," slated for the Arcadia track’s north parking lot.
"If this is true, this represents a serious change of position of what was expressed to me and TOC last week," Couto said. "We’ll be following up with MEC and MID to see if this is accurate."
Magna Entertainment had previously sought zoning approvals for a portion of the Golden Gate Fields property, filing plans for a retail, entertainment and lodging development in 2002 in partnership with Caruso. After a few years and a groundswell of community opposition, the push for rezoning was dropped. Many local citizens and environmental groups want the the track property, located on the eastern shoreline of the San Francisco Bay, to be turned into public parklands.
Complicating matters for potential rezoning and development is the fact Golden Gate Fields is located in two cities: the majority of the property, including the section Magna previously sought to develop, is in Albany. A smaller portion, including the stable area, is in Berkeley. Both cities are conservative when it comes to commercial development, particularly on wetlands and shoreline property.
So why would MI Developments say it will seek rezoning of the track with two municipalities that have shown limited interest in commercial development? There is some speculation MI Developments and its board are reacting to institutional shareholders who have threatened possible legal action against MI Developments directors for potential breach of fiduciary responsibility. Those shareholders have expressed previous disagreement with the company’s decision to extend credit to Magna Entertainment and pump millions of dollars into the racing operations. Golden Gate Fields would be worth much more as commercial real estate than it is as a racetrack, and its sale or development might help alleviate some of the criticism from those shareholders.
Bay Meadows, located in San Mateo, opened in 1934 and had been California’s oldest continually operating racetrack. Since being closed and meeting the wrecking ball last year, there’s been no progress on development, and a pile of rubble sits as a reminder of what once was a thriving racetrack.
Golden Gate Fields, which this year inherited most of the dates Bay Meadows ran, held its inaugural race meeting in 1941. It’s anyone’s guess when Northern California’s last major track will hold its final race.
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Tags: drew couto, Frank Stronach, golden gate fields, Magna, magna bankrupt, magna bankruptcy, Magna Entertainment, magna entertainment bankrupt, magna entertainment bankruptcy, meca, mi developments, mim, Paulick Report, Ray Paulick, rick caruso, santa anita, thoroughbred owners of california
Posted in California, Magna Entertainment | 7 Comments »
Tuesday, March 10th, 2009
By Ray Paulick
Another day, another Schedule 13D filing with the Securities and Exchange Commission from an institutional investor concerning MI Developments, the parent company of bankrupt Magna Entertainment, the racing company created by Eclipse Award-winning Thoroughbred owner and breeder Frank Stronach.
Monday’s filing came from North Run Advisors, a Boston-based investment firm that spent just over $25 million to buy 2.3 million shares in MI Developments (MIM), roughly 5% of the company’s outstanding Class A stock. Half of North Run’s holdings in Mi Developments were bought in early February. North Run said it has joined with other shareholders in retaining counsel to consider legal action against the MI Developments board, which is also controlled by Stronach.
The 13D letter reads, in part: “Collectively with other large shareholders, together representing close to half of the outstanding Class A Shares as of March 4, 2009, (North Run Advisors) have retained counsel to explore the legal remedies available to shareholders of (MI Developments) in connection with related party transactions involving Magna Entertainment Corp., including whether claims should be asserted against directors of the Issuer. Such counsel recently sent a letter to the Issuer’s board of directors notifying them of such initiative.”
MI Developments is Magna Entertainment’s largest shareholder and has pumped hundreds of millions of dollars into the company through credit and cash, much to the dismay of some institutional investors who have seen share prices in MI Developments decline. When Magna Entertainment filed chapter 11 bankruptcy March 5, MI Developments offered debtor in possession financing and made a “stalking horse bid” to acquire several of the company’s racetracks for $195 million for cash and other considerations.
In related news, Magna Entertainment was notified by the NASDAQ stock market that it is being delisted and trading of the company’s stock will be suspended March 16. Monday’s closing price for Magna Entertainment stock (MECA) was eight cents per share.
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Tags: Frank Stronach, magna bankrupt, magna bankruptcy, Magna Entertainment, magna entertainment bankrupt, magna entertainment bankruptcy, meca, mi developments, mim, north run advisors, stronach bankruptcy
Posted in Magna Entertainment | 5 Comments »
Monday, March 9th, 2009
By Ray Paulick
The volume of paperwork in Magna Entertainment’s chapter 11 bankruptcy filing last Thursday yielded some interesting details about the Frank Stronach-controlled company, its operations and creditors (tens of thousands of which were listed on more than 500 pages of documents). But pleadings from the company’s attorneys in federal bankruptcy court in Wilmington, Del., for a loan of $62.5 million from parent company MI Developments (MIM) to continue operations were only partially approved by Judge Mary Walrath in Friday’s first hearing when she okayed a smaller loan of just $13.3 million. Bondholders reportedly objected to the amount sought by Magna Entertainment (MEC) and questioned whether its parent company should be the lender.
Along those lines, on March 5, the day Magna Entertainment filed for bankruptcy, one of the largest institutional shareholders in MI Developments sent a letter to the Securities and Exchange Commission expressing concern about MI Developments’ activities and warning of possible legal action against the real estate company’s board of directors.
MI Developments and Magna Entertainment are all spinoffs from the auto parts giant, Magna International. All three companies are controlled by Frank Stronach.
Magna Entertainment’s unaudited financial statements showed 2008 revenues from continuing operations of $593 million, with $413 million of that amount attributable to pari-mutuel wagering. The company said it has assets of $1.049 billion and liabilities of $959 million. There are approximately $6.7 million in uncashed winning tickets and $16 million in horsemen’s accounts at tracks included in the chapter 11 filing. In addition, Magna reported estimated cage holdings of $15.6 million at the company’s casino properties.
“(Magna does not) believe that the funds in the Horsemen Accounts are property of their chapter 11 estates,” the filing said. “Furthermore, the Debtors believe the commencement of these chapter 11 cases could itself negatively affect their customers and Horsemen’s attitudes towards their races and create concerns about their ability to host such races. Accordingly, the Debtors must quickly assure their customers and Horsemen of their ability to fulfill their obligations under the prepetition obligations arising under the Customer Programs, and to maintain their existing customer base and preserve their goodwill on a going-forward basis by continuing these Customer Programs during the postpetition period."
As of Feb. 4, 2009, Magna employs nearly 5,000 workers — 2,748 of them full time and 2,145 part time; 1,862 are represented by labor unions. The company said it is current on all payrolls, with the exception of $1.24 million earned but not paid on bonus compensation (and it said no individual is owed more than $10,950)
There are 38 employees at Magna Entertainment’s Canadian headquarters that were paid $7.344 million in regular earnings and $2.5 million in bonuses in 2008 (an average per employee of $259,000 per year). Twenty-nine of those corporate workers have employment contracts.
Of the racetracks included in the filling:
Santa Anita Park employs the highest number of workers – 968 (829 of which are union members), with a 2008 payroll of $23.7 million (plus $330,000 in bonuses).
Gulfstream Park is next in the number of workers, with 864 employees (371 full time, 493 part time; none of them union members) and a 2008 payroll of $18.3 million (plus $150,000 in bonuses).
Maryland Jockey Club (Pimlico and Laurel) has 533 employees, 287 of which are union members. MJC’s 2008 payroll was $19.4 million.
Remington Park in Oklahoma has 473 employees (394 full-time and 79 part-time; none are union members). In 2008, Remington’s payroll was $11.7 million.
Golden Gate Fields near San Francisco has 414 employees (347 of which are union members). Golden Gate’s 2008 payroll was $11.5 million, plus $115,000 in bonuses.
Thistledown near Cleveland has 109 employees (82 full-time, 27 part-time, 55 are union workers). The 2008 payroll was $4.5 million, with $13,000.
UNHAPPY MI DEVELOPMENTS SHAREHOLDER
Hotchkis and Wiley Capital Management, a Los Angeles-based company which has stated previous concerns with the amount of money MI Developments has loaned or spent to keep Magna Entertainment afloat, filed a 13D letter with the SEC March 5, warning of possible legal action against the MI Developments board. Hotchkis and Wiley has invested more than $225 million in MI Developments in two separate funds, acquiring 5.3 million shares at an average price of $28.35 per share for one and 2.4 million shares at an average price of $31.77 for the other. Its holdings amount to roughly 17% of MI Developments’ Class A shares.
(MI Developments stock hit a 52-week low of 3.26 per share in the days before the Magna Entertainment bankruptcy filing; it opened today’s trading at 4.69. Magna Entertainment shares opened at 11 cents a share, but factoring in last year’s 1-for-20 reverse stock split, the actual value is less than a penny. Shares traded for as high as 10.00 per share in 2002, long before the 1-for-20 reverse split, which was done last year to keep prices over a dollar and in compliance with NASDAQ regulations.)
In its letter, Hotchkis and Wiley said they “continue to be concerned about MID’s activities and, with other interested shareholders, have retained counsel to investigate whether claims should be asserted against the MID directors in connection with transactions with insiders to the detriment of the corporation. Such counsel recently sent a letter to the MID board of directors notifying them of such concerns, which may be deemed an attempt to influence the MID policies.”
TOP 50 UNSECURED CREDITORS
Finally, the chapter 11 filings included a list of what Magna Entertainment attorneys said were the 50 largest creditors with unsecured claims. Many of those claims involve purse money held in horsemen accounts by racetrack paymasters. There was a significant “run” on that money last week in the days leading up to Magna’s bankruptcy filing, with checks cut to various owners and trainers. Some horsemen contacted by the Paulick Report said the checks were accepted by their banks, but there is some question about whether or not they will be cleared with sufficient funds in Magna accounts as the legal proceedings move forward.
Here is the list, as reported in the Magna Entertainment filings:
NAME OF CREDITOR
|
NATURE OF CLAIM
|
AMOUNT |
| Bank of New York, as trustee |
8.55% notes |
$127,345,313 |
| Bank of New York, as trustee |
7.25% notes |
$76,193,229 |
| Maryland Thoroughbred Horsemen’s Assn. |
Trade |
$3,820,500 |
| Aon Reed Stenhouse Inc. |
Insurance |
$3,682,756 |
| Florida Thoroughbred Owners and Breeders Assn. |
Horsemen |
$2,157,327 |
| Zurich North America |
Letter of Credit |
$1,937,472 |
| RGS/St. Kitts |
Settlement |
$1.763.952 |
| Northern California Off Track Wagering Inc |
PRA Trade Payable |
$1,662,231 |
| State of California Treasurer |
Statutory Wagering Settlement |
$1,374,051 |
| Southern California Off Track Wagering Inc |
Statutory Settlement |
$1,194,623 |
| Magna International |
Related Party Transactions |
$845,892 |
| New York Racing Association |
Settlement |
$830,175 |
| McCasey Group |
Related Party Transactions |
$756,217 |
| Elite Turf Club 2, c/o Las Vegas Dissemination |
Settlement |
$695,411 |
| Oklahoma Tax Commission |
Gaming Tax |
$669,114 |
| The Leffler Agency |
Trade |
$637,487 |
| Red Rock Administrative |
Trade |
$617,561 |
| Royal River Racing (Lewiston Raceway) |
Settlement |
$605,791 |
| Aristocrat Technologies Inc. |
Slot Machine Purchases |
$551,153 |
| Jerry Hollendorfer or George Todaro |
Horsemen |
$550,252
|
| Los Angeles County Tax Collector |
Property Tax |
$442,281 |
| Las Vegas Dissemination |
Settlement |
$430,036 |
| Juddmonte Farms |
Horsemen |
$424,961 |
| Southern Service Corp. |
Trade |
$377,728 |
| Aladema County Tax Collector |
Property Tax |
$367,691 |
| Ranger Construction South (Pompano Beach. FL) |
Trade |
$364,289 |
| California Thoroughbred Business League |
Settlement |
$336,275 |
| Leonard Powell |
Horsemen |
$329,411 |
| Jerry Hollendorfer |
Horsemen |
$307,846 |
| Gulf Greyhound (Santa Fe, Tx) |
Settlement |
$290,.675 |
| New York Racing Association |
Settlement |
$288,285 |
| Harrah’s Louisiana Downs |
Settlement |
$274,900 |
| Oklahoma County Treasurer |
Property Tax |
$273,574 |
| Aware Digital (Hallandale, FL) |
Trade |
$270,000 |
| Maryland Horse Breeders Assn. |
Trade |
$269,800 |
| Max International (Lancaster, PA) |
Trade |
$250,416 |
| OK Breeding Development (OHRC) |
Horsemen |
$246,969 |
| Fair Grounds Race Course |
Settlement |
$220,591 |
| Bob Baffert |
Horsemen |
$204,617 |
| Cecil N. Peacock |
Horsemen |
$200,547 |
| C.R. Cono, LLC |
Horsemen |
$197,723 |
| Churchill Downs Inc. |
Settlement |
$195,098 |
| Maryland Racing Commission |
Pari-mutuel Taxes |
$193,914 |
| Roberts Communications Network |
Utility-Phone |
$188,005 |
| Las Vegas Dissemination |
Settlement |
$185,260 |
| Tampa Bay Downs |
Settlement |
$185,081 |
| B. Wayne Hughes/Spendthrift Farm |
Horsemen |
$184,882 |
| Richard J. O’Neill Trust |
Horsemen |
$170,516 |
| Florida Power & Light Co. |
Utility - Electric |
$168,000 |
| Lathrop G. Hoffman |
Horsemen |
$166,788 |
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Tags: Frank Stronach, gulfstream park, hotchkis and wiley, Magna, magna bankruptcy, Magna Entertainment, magna entertainment bankrupt, magna entertainment bankruptcy, mary walrath, Maryland Jockey Club, mec, meca, mi developments, Paulick Report, Ray Paulick, santa anita park, stronach bankruptcy
Posted in Magna Entertainment | 8 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.
Copyright © 2009, The Paulick Report
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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 »
Thursday, March 5th, 2009
By Ray Paulick
(UPDATE: Magna Entertainment filed for Chapter 11 bankruptcy protection today. Click here for the company press release, with details on the filing.)
What a long, strange trip it’s been.
Hard to believe, but it’s been just over 10 years since Frank Stronach dove head-first into racetrack ownership with his December 1998 purchase of Santa Anita Park. Or perhaps I should say he did so with his company’s purchase of Santa Anita, since the 76-year-old Canadian auto parts magnate and Eclipse Award-winning owner and breeder has been careful not to spend too much of his own money on any of the racetrack ventures.
The strong-willed Stronach was hailed by many, including this writer, as a savior when he first rode into Southern California and purchased Santa Anita for $126 million. The historic racetrack was then owned by Meditrust, a real estate investment trust that had little to no interest in horse racing, and there were concerns about the sport’s future at the “Great Race Place.”
Stronach had big plans: a new stable area; a gated community to replace the infield parking lot; a grand entrance hall of sorts where horses of all breeds would be in the spotlight and robust women in lederhosen would serve an endless supply of cold beer. “I have no plans to move the mountains,” he joked, in a reference to the San Gabriel Mountains that serve as one of American horse racing’s most beautiful backdrops amidst concerns that he was going to change Santa Anita too much.
One of his biggest early supporters was the late Bob Lewis, a major horse owner and industry leader who had been going to the races at Santa Anita for decades. At a meeting Stronach conducted with horsemen who were worried that Santa Anita’s traditions would be thrown out the window, Lewis stood up and said:“Frank, you and I have had our arguments on the track, but as an owner I want to thank you for your magnanimous willingness to go ahead with your plans for Santa Anita. You’re going to be a breath of fresh air for this place.”
Stronach invested in some capital improvements, adding the new Frontrunners restaurant atop the grandstand and making Santa Anita’s track apron more appealing for railbirds. But big plans for a new stable area and other improvements were put on hold while he turned attention to his growing appetite for additional acquisitions.
He purchased Gulfstream Park in July 1999 for $95 million from a Japanese company that, like Meditrust, wasn’t interested in horse racing. Optimism abounded that racing in South Florida would improve. He also acquired land in Palm Beach County north of Gulfstream and built a state-of-the-art training center.
Then came deals to buy Golden Gate Fields along with the racing license for Bay Meadows in Northern California (though not the land on which the track was located); Thistledown in Ohio and Remington Park in Oklahoma; Portland Meadows in Oregon; Lone Star Park in Texas; and Laurel and Pimlico in Maryland. He also built Magna Racino, a racetrack/casino in his native Austria (since closed), and purchased plots of land for the possible development of a new track in Northern California and another in north central Florida. He started a racing cable network, HRTV, and an account-wagering company, Xpressbet. Once, when he disagreed with something I wrote in Bloodhorse magazine, he threatened to buy that publication – and he was serious.
There were rumors Stronach was set to purchase Suffolk Downs near Boston, Emerald Downs near Seattle, Monmouth Park in New Jersey, even Fairmount Park in Southern Illinois, among other tracks. In some ways, he looked like a kid in a candy store, and racetrack owners everywhere who were looking to unload their properties were hoping to catch his eye.
By now, Stronach’s racetrack interests were part of Magna Entertainment (MECA), a publicly traded spinoff of his Magna International (MGA) auto parts company that was formed in March 2000. A few years later, another Magna International spinoff, MI Developments (MIM), the real estate branch of the parent company, became the majority shareholder of Magna Entertainment after large shareholders in the auto parts concern protested that too much of their money was being invested in racetracks.
Stronach controlled the majority of the voting shares in all of the companies because of how they stock was structured into different classes. That allowed him to handpick board members and run the companies the way he saw fit. R.D. Hubbard, a very savvy businessman and racetrack owner who has had more than a few boardrowom battles of his own, told me very early on that only a fool would make a serious investment in a company that sells a majority of its stock in non-voting shares.
There was a constantly revolving door of top managers at Magna Entertainment and at many of the company’s racetracks that made it nearly impossible to ascertain who was in charge. (Click here for a partial roster of former Magna executives.) Some good people were brought in, but were never given the chance to manage without Stronach’s hands-on supervision. Other hires were head scratchers, including the appointment of former jockey Chris McCarron as general manager of Santa Anita. Stronach even called me once to see if I was interested in running one of his racetracks, something in which I had no experience or interest. I politely declined.
Interestingly, this is not how Stronach ran Magna International or his hugely successful breeding and racing operation, Adena Springs, where management was stable for years.
Stronach himself seemed to be afflicted with attention deficit disorder, lurching from one idea or project to another. All the while Magna Entertainment was accumulating massive debt that now totals $600 million and losing hundreds of millions of dollars. “We’re turning the corner,” he would say to increasingly skeptical analysts during conference calls to review financial results. Sometimes his focus bordered on the bizarre; witness his dive-off-the-deep-end launch of Frank’s Energy Drink, which now appears to be about as successful as his racetracks. Or his latest missive on how there should be changes in determining winners of Eclipse Awards, something Stronach wrote just days before Magna defaulted on the first of several debt obligations coming due this month.
In the early years, he seemed to love the limelight that came with owning racetracks. At a public forum at Gulfstream Park in 2001 that he used as a platform to publicize his views on the industry, Stronach said with glee, “I can’t wait to tear this place down.” Sure enough he did, rebuilding what many thought was a perfectly good grandstand and spending hundreds of millions to create a racetrack (and now casino) that is widely detested. He made similar promises to tear down and rebuild Pimlico, which would have been applauded, but those plans never got off the drawing board. Of course, Magna’s history in Maryland has been tainted by their recent folly in failing to file an adequate slot machine application for Laurel, after voters approved a statewide referendum last November. The company is now the laughingstock of the Free State.
Stronach also used his prominent position as owner of the nation’s largest racing company to air his differences with the National Thoroughbred Racing Association and Breeders’ Cup, calling for democratic elections to the organizations’ boards of directors (while overlooking the fact that his own companies weren’t democratic because of the different classes of voting and non-voting stock). His ideas did have merit, and he deserves credit for helping bring greater transparency to some racing organizations.
Stronach once told me that he would “create his own Breeders’ Cup” because of differences he had with that organization. A couple of years later, he made good on that promise, creating the Sunshine Millions, an annual event at Gulfstream and Santa Anita that matches Florida-breds vs. California-breds.
The late Bob Lewis, his onetime supporter, began to publicly criticize Stronach’s comments about the NTRA and other industry initiatives. “Frank got mad and stopped talking to me after that,” Lewis told me. Then, with his broad, trademark smile, Lewis added, “So, naturally, whenever he’s at Santa Anita I go out of my way to reach out my hand and say hello to him.”
Clearly, Stronach can no longer be having fun as a racetrack owner. Though sources complain that he has surrounded himself with “yes” men at the corporate level — executives like Dennis Mills, CEO of MI Developments — he cannot help but hear the criticism that has come his way from racing fans, horsemen, state regulators, and shareholders in his various companies.
Magna Entertainment is teetering on the verge of bankruptcy, and institutional shareholders in MI Developments are threatening legal action if they feel that company’s board of directors breaches its fiduciary responsibility by extending additional credit to Magna Entertainment. Though some of its tracks are performing moderately well in this desperate economy, it’s too little too late, and the debt load is more than the company can absorb.
It’s sad, really, when I think back to the energy (sans Frank’s Energy Drink) and commitment Stronach brought to this endeavor 10 years ago. He had ideas – some good and many bad – that he felt could help reinvigorate racing. I have no doubt that his intentions were always to make Thoroughbred racing more appealing and successful. But his appetite for domination of the industry and his “my way or the highway” management style were a recipe for disaster. Several former Magna executives told me they tried to talk Stronach out of many bad decisions, but he seldom paid attention to them.
“You’ve got to listen, right?” Stronach said during a horsemen’s meeting at Santa Anita in April 1999. Unfortunately, he failed to take his own advice over most of the last decade. Now he’s paying the price, but so is the rest of the Thoroughbred industry. No one can be certain where those bad decisions will take us.
Copyright © 2009, The Paulick Report
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Tags: chris mccarron, dennis mills, Frank Stronach, frank's energy drink, gulfstream park, HRTV, Magna, magna bankrupt, magna bankruptcy, Magna Entertainment, magna entertainment bankrupt, magna entertainment bankruptcy, magna international, magna racino, meca, mi developments, mim, Paulick Report, Ray Paulick, santa anita, santa anita park
Posted in California, Magna Entertainment, Maryland Jockey Club, Race Tracks, gulfstream park, santa anita park | 21 Comments »
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