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.