Posts Tagged ‘mec’
Friday, January 15th, 2010
Las Vegas Review-Journal columnist Richard Eng chimed in on the recent Magna deal reached with creditors to maintain control of Gulfstream Park, Santa Anita, Golden Gate Fields and XpressBet.
Despite such flops like the Horse Wizard slot machine, ultimately he makes a strong pitch for us to root for MEC to succeed ‘because way too much has been invested’.
Click here for the rest of the Las Vegas Review-Journal article
Then come back to the Paulick Report and let us know what you think
- Bradford Cummings
Tags: bradford cummings, Frank Stronach, golden gate fields, gulfstream park, Horse Wizard, Las Vegas Review-Journal, Magna, mec, Paulick Report, Richard Eng, santa anita, xpressbet
Posted in Magna Entertainment | 20 Comments »
Tuesday, January 12th, 2010
By Ray Paulick
How cold was it at Gulfstream Park in South Florida last weekend? So cold that local legend Hash Weinstein thought of wearing socks for the first time in his life. So cold the volleyballs at Frank’s beach all were sadly deflated. It was so cold racing fans couldn’t have cared less whether or not there were enough outdoor seats for them at the track that was once a winter paradise.
This was my first trip to Gulfstream Park since Magna Entertainment chairman Frank Stronach turned it into a multi-purpose facility: one with slot machines, an aquarium, upscale restaurants and a mostly empty shopping mall, the Village at Gulfstream Park, scheduled for a “grand opening” next month. There’s currently a Crate and Barrel and The Container Store at the mall, so it’s a good place to come if you need boxes.
Some Gulfstream Park employees are talking about the positive effect the Village will have on racing “if” it fills up and is successful—not when. It’s a tough economic market, and MEC doesn’t have the greatest track record in the retail world—much less the pari-mutuel one.
.jpg) I’ve been to worse facilities than Gulfstream Park (and there really are some things to like about it), but never to a place that seemed so much in denial about being a racetrack. It was difficult to tell, for example, when pulling into the parking lot, exactly where the racetrack and grandstand (what there is of it) are located. Signs at the walk-in entrance failed to tell patrons where to go to see live racing, though there was plenty of help in finding Christine Lee’s or the Ten Palms restaurants, the slots parlors or even the Silks Simulcast Center.
The walking ring is centrally located for future mall shoppers (“Hey, Mom, look…pony rides!) and even for racing fans, but anyone who wants to see the horses being saddled is out of luck. The saddling enclosure appears to be in an undisclosed location somewhere under the grandstand and out of sight.
I asked someone at Gulfstream where the horsemen generally hang out and was told “they mostly don’t come here.” Someone else said “Tampa Bay Downs.” There are those few rows of seats in front of the glass-enclosed dining room where a couple hundred folks will sit on a warm day and enjoy the races without spending $32 on a buffet lunch or $16 on a cup of Lo Mein noodles from Christine Lee’s (where you can see pictures of celebrities like Lucille Ball, Mel Brooks and Frank Stronach!), but they were empty on this 45-degree Sunday. There were more shivering mutuel clerks than fans outside braving the cold.
 The slots parlor had that familiar ringy-ding-ding background noise that serves as a siren call to folks who like to throw coins into a “Wheel of Fortune” machine. There is a beautiful fish tank in the middle of one of the casino rooms, too, reminding you that you’re in a tropical paradise. They even had a few television monitors showing the racing action just outside the room, along with simulcasts and an NFL playoff game, but when I asked someone where I could go to make a horse racing bet I got an empty shrug.
I searched the casino for a betting machine and finally found one—ONE!—off in the corner, literally hidden behind a curtain like the X-rated porn in a video store.
The simulcast room was fine, with rows and rows of TV-equipped cubicles, but I don’t  think I’d want to be in here on a nice warm day. Not nearly big enough. I’ll try Frank’s beach or the Jameson playground—both of which looked like deserted beaches on this day. At least you can see part of the racetrack from there.
I haven’t read any official pari-mutuel handle figures since opening day, when they were down significantly from last year, but a very good source said the daily average has dropped nearly one-third from 2009. The combination of bad weather and unfriendly facilities hurts, but the biggest factor is the plunge in off-track bets due to an impasse involving the Mid-Atlantic racetrack cooperative and TrackNet Media, which negotiates simulcast contracts for MEC, Churchill Downs tracks and Oaklawn Park.
The new Gulfstream Park, complete with its Village mall, is not fully baked yet. The jury is still out as to whether the whole thing was a half-baked idea to begin with.
Copyright © 2010, The Paulick Report
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Tags: Frank Stronach, gulfstream park, magna entertainmet, mec, mid-atlantic cooperative, tampa bay downs, tracknet media, village at gulfstream park
Posted in Florida, Magna Entertainment, Simulcasting, Slot machines, gulfstream park | 36 Comments »
Monday, January 11th, 2010
Attorneys for Magna Entertainment have struck a deal in U.S. bankruptcy court with unsecured creditors that will allow Frank Stronach to maintain control of Santa Anita Park, Gulfstream Park and Golden Gate Fields and the account wagering company Xpressbet.com and the Amtote totalizator company, Reuters and Bloomberg have reported.
The creditors will receive nearly $100 million, according to the reports, while Magna sells off the Maryland Jockey Club tracks (Pimlico and Maryland) and Thistledown in Ohio. MI Developments, which, like Magna Entertainment, is controlled by Stronach, will take over ownership of the aforementioned assets. The unsecured creditors claimed in a lawsuit they were owed as much as $260 million from the total MEC debt of nearly $1 billion. Magna officials hope to have a reorganization plan in place by next month to get the company out of bankruptcy.
Here is the story from Reuters.
Here is the Bloomberg story.
After you’ve read the stories,feel free to return to the Paulick Report and comment on this latest development regarding Stronach and his affiliated companies. — Ray Paulick
Tags: Frank Stronach, golden gate fields, gulfstream park, laurel park, Magna, Magna Entertainment, Maryland Jockey Club, mec, mi developments, mid, pimlico, preakness, santa anita park, xpressbet.com
Posted in Uncategorized | 14 Comments »
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€
Copyright © 2009, The Paulick Report
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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 »
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.
Copyright © 2009, The Paulick Report
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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 »
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 »
Wednesday, February 25th, 2009
By Ray Paulick
The recent press release announcing Magna Developments (MIM) was scrapping its reorganization plan to help debt-ridden racetrack company Magna Entertainment (MEC) has prompted one of Magna Developments’ largest institutional investors to warn the real estate entity’s board of directors that it was prepared to “vigorously protect” its rights as a shareholder if the board “does not fulfill its fiduciary duties in the weeks ahead.”
Farallon Capital Management, which in October called Magna Entertainment a “financial sinkhole,” filed a letter with the Securities and Exchange Commission on Tuesday that called for the Magna Developments board to foreclose on loans made to the racetrack company if they are not repaid on the accelerated March 20 due date. Half of Magna Entertainment’s $600 million in debt is owed to Magna Developments, and the racetrack company has lost $500 million over the last five years, according to the Farallon letter. Farallon owns 5.5% of the company’s Class A shares. Click here for the Farallon letter to the Magna Developments board.
“Given the (MIM) board’s history of failing to defend MIM’s contractual rights against MEC, we are greatly troubled by the press release’s silence on whether MIM will enforce MEC’s debt obligations when they come due,” the letter states. “Bankruptcy would allow MIM to realize at least some value on its loans to MEC.”
The Farallon letter calls it “folly” that current market conditions justify providing additional financing to Magna Entertainment. “There is no realistic prospect that MEC will ever be financially viable,” it states. “That the (MIM) board has authorized over $300 million in loans in a failed attempt to prop up this equity only highlights the foolishness of the two companies entanglement. There is no possible justification for MIM to deepen that entanglement by lending more money to, or accepting equity in, MEC.”
Frank Stronach is chairman of both Magna Developments and Magna Entertainment.
“If MEC fails to repay the loans as scheduled, MIM should not waste a single day waiting to exercise its rights as a creditor,” the letter states. “Any other course of action would be a dereliction by the (MIM) board of its fiduciary duties. Farallon is watching the board closely. We are prepared to vigorously protect our rights as a shareholder if the board does not fulfill its fiduciary duties in the weeks ahead.”
The Farallon letter comes two weeks after another unhappy institutional shareholder, Greenlight Capital, wrote to the Magna Developments board saying they will be held responsible for any failure to live up to their fiduciary duties. Click here for that letter.
More bad news for Magna: just last week, Jerry Campbell, a former CEO of Magna Entertainment, resigned from the MEC board.
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Tags: farallon capital management, Frank Stronach, greenlight capital, jerry campbell, Magna, magna developments, Magna Entertainment, mec, mid, mim, Paulick Report, Ray Paulick
Posted in Magna Entertainment, Thoroughbred Business | 8 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 »
Monday, August 25th, 2008
By Ray Paulick
While CNET founder Halsey Minor continues his efforts to purchase Hialeah Park from current owner John Brunetti, he also has contacted financially troubled Magna Entertainment about the possible sale of Santa Anita Park near Los Angeles and the company’s two Maryland Jockey Club tracks, Pimlico and Laurel. But after speaking with Magna’s chief financial officer, Blake Tohana, Minor doesn’t think Magna is a serious seller, despite recent comments by company chairman Frank Stronach during a conference call to discuss second quarter financial results.
“I had the most baffling conversation in my life with a CFO, particularly one whose job depends on asset sales,” Minor said in an email to the Paulick Report, which he also copied to Tohana. “Basically, nothing is for sale. Maybe they have some time shares for you. (Tohana) said Frank misspoke when he said he was considering selling a majority interest in Santa Anita. Now it is back to a minority interest.
“You can only buy (the Maryland tracks) if you have a gaming license. (Tohana) did not specify what that meant or why it was important. … This is despite the fact that Magna is not guaranteed any slot franchises in the current legislation, and they would need to post a $50-million bond which they don’t have to get one. At the very least if he had been on his toes he should have asked to borrow the money.
“You need to call him and hear this for yourself,” Minor suggested. “You would think you were talking to the CFO of Microsoft sitting on a pile of cash, given the attitude. Self-effacing, Blake is not. Not a good quality in a salesman. Without an investment bank, nothing sells if my experience is any guide.”
Minor said Tohana had no idea who he was when he called (“which is odd because I am the only person in America acquiring tracks right now and they claim they are selling them”) and eventually hung up on him. “I will go on record as saying these assets are going to be sold by banks,” Minor continued. “Banks don’t necessarily have good bedside manners, either, but they have good prices.”
Tohana responded to Minor with a terse email of his own, which he also copied to the Paulick Report, saying that Minor had “misrepresented” their telephone conversation. “Further, your manner of communicating to me via email and telephone was inconsiderate, rude and misinformed,” Tohana wrote. “In doing my job, I have always carried myself with dignity and professionalism. I think that view would be shared by anyone who has dealt with me during my career.”
Tohana went on to say that MEC has sold more than $400 million in assets “without investment bankers,” adding, “We will continue to pursue other asset sales and joint venture transactions as we have previously publicly disclosed. However, I do not have to take your personal insults just because you purport to have an interest in Santa Anita Park and the Maryland Jockey Club.”
Tohana also seemed irritated that Minor had called him to discuss the possible sale of the tracks during a family vacation, a comment that seemed to heighten Minor’s disdain for Magna’s CFO.
“I find interesting that you are on vacation at all and that you feel so offended I have bothered you on your vacation,” Minor wrote Tohana in a follow-up email. “My company is not imploding and yet I am fully engaged working to clean up some of your mess while here in Hawaii (on a vacation) with my family.
“Blake, you are condescending and that is no way to be with a company whose market value is less than many of our farms, whose massive debt is unserviceable and where you work in the service of the company that has literally blighted our industry.
“Enjoy your vacation, Blake, because when you get back things will only have gotten worse, not better, and you pissed off a potentially valuable ally royally. And if you haven’t noticed, you didn’t have many to start with.
“I believe results in life speak volumes, and I believe this applies equally to my career as it does to your company. Neither failure or success is an accident. A quick check would reveal that I have created billions in value, even exceeding your leader’s car parts business, while your outfit has not only destroyed massive amounts of shareholder value, but possibly the Thoroughbred business with it.”
When reached by the Paulick Report, Tohana said Minor was not “respectful” during their conversation. Tohana said he was fully aware of who Minor was when he received a call from him. “I had heard of the guy,” Tohana said, “but I wasn’t happy with some of the things he has said about our chairman (Stronach).”
Tohana has been Magna Entertainment’s CFO for more than five years, outlasting many of the executives who have come and gone in a revolving door atmosphere. He joined the company in July 2003 after serving in a number of executive positions at Fireworks Entertainment, a Toronto, Canada-based concern that produces and distributes television programs and movies.
“I’m quite a reasonable person,” Tohana told the Paulick Report. “I’m pretty straight up. Look, it’s not a secret (that we’ve had a great deal of executive turnover). This company hasn’t performed very well.”
Tohana insists Magna is “continuing to sell” some properties but said Stronach’s comments about possibly selling a majority interest in Santa Anita were “misreported.” He also said there remains the possibility that MI Developments, the real estate operating company that holds a controlling interest in Magna Entertainment, could be reorganized to relieve the debt-ridden racetrack company’s financial pressures. MI Developments recently extended by one month a bridge loan in excess of $100-million owed by Magna Entertainment and due at the end of August. Dennis Mills, a former member of Canada’s parliament and one-time vice chairman of Magna Entertainment, was recently named interim CEO of MI Developments following the departure of John Simonetti.
In the meantime, Minor continues to work on a business and operating plan for Hialeah. He has had a second meeting with Brunetti in Del Mar, Calif., and said Brunetti is working with his team on developing a business plan. “That’s a tremendous benefit,” Minor said, “and it shows that John really wants to help get Hialeah reopened.” Minor said the architects he would use to renovate Hialeah Park have inspected the long-shuttered track to get a better estimate of what the price tag would be to return it to its former condition.
Copyright © 2008, The Paulick Report
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Tags: blake tohana, cnet, Del Mar, dennis mills, fireworks entertainment, Frank Stronach, Halsey Minor, Hialeah Park, john brunetti, john simonetti, laurel, Magna Entertainment, Maryland Jockey Club, mec, mi developments, Paulick Report, pimlico, Ray Paulick, santa anita
Posted in California, Halsey Minor, Hialeah Park, Magna Entertainment, Maryland Jockey Club | 31 Comments »
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