Posts Tagged ‘mi developments’
Tuesday, March 2nd, 2010
In a complete surprise to most, Magna Entertainment boss Frank Stronach has announced he plans to keep the Pro-Ride surface at Santa Anita Park despite recent problems with draining the track that have caused numerous cancellations.
Stranger than the decision perhaps is the reason behind the decision. Throughout the bankruptcy process of Magna Entertainment, Stronach has insisted on maintaining ownership of Santa Anita through a different Magna company, MI Developments, despite unloading several other tracks recently. Yet he is saying he will not invest in a new surface until the industry changes its business model.
If he believes racing is broken and won’t do the things necessary to fix the situation at his own track (regardless of your feelings on synthetics, it’s clear there needs to be some sort of surface change at Santa Anita), why is he holding the Arcadia track and California racing industry hostage?
Read it at the Daily Bulletin
Then come back to the Paulick Report and let us know what you think
- Bradford Cummings
Tags: bradford cummings, Daily Bulletin, Frank Stronach, Magna Entertainment, mi developments, Paulick Report, pro-ride, santa anita
Posted in Magna Entertainment, santa anita park | 27 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 »
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 »
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 |
Copyright © 2009, The Paulick Report
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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.
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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 »
Wednesday, December 10th, 2008
By Ray Paulick
Stock in Magna Entertainment, which only five months ago went through a 1 for 20 reverse stock split to keep from being delisted by NASDAQ because its share price had fallen under $1 for 30 consecutive trading days, has dropped below that threshold again.
After opening the day at $.89, share prices in the company (MECA) had fallen to $.74 by mid-afternoon after light trading. The stock has fallen steadily since the reverse split was enacted on July 22, a move that dramatically reduced the number of outstanding shares but bumped up the price from $.37 to $6.56.
MECA share prices held relatively even until mid-September, when the global financial crisis began to unfold, and the stock has tumbled since then. MECA closed at $1.75 on Sept. 30, spiked to $3.97 on Nov. 4, then quickly fell again, closing below $1 on Dec. 8, the first time since the split it fell below that mark.
MECA received noticed Feb. 12 that it had fallen out of compliance with NASDAQ regulations after share prices closed below $1 for 30 consecutive days. The reverse split was designed to keep the company in compliance
The racetrack operating founded and controlled by Thoroughbred breeder and auto parts mogul Frank Stronach owns such tracks as Santa Anita Park and Golden Gate Fields in California, Pimlico and Laurel Park in Maryland, Gulfstream Park in Florida, Lone Star Park in Texas, Remington Park in Oklahoma, and Thistledown in Ohio. It has slot machine operations at Gulfstream Park and Remington Park. However, the company has significant debt and has never turned a profit. It also runs an account wagering company, Xpressbet, and is co-owner with Churchill Downs Inc. of the HorseRacing TV cable channel.
Plans were recently announced to restructure the company, pending the approval of shareholders in MI Developments, another Stronach company that is the largest shareholder in MECA.
Since Stronach took MECA public in 2000, the value of its stock has fallen 99.2%.
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Tags: Frank Stronach, gulfstream park, Horse Racing, horse racing tv, HRTV, Magna, Magna Entertainment, meca, mi developments, mid, nasdaq, Paulick Report, racetracks, Ray Paulick, reverse stock split, santa anita park, stronach, xpressbet
Posted in Churchill Downs Inc., Magna Entertainment | 4 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 »
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