Had American Pharoah never done anything else with his life after owner Ahmed Zayat sold the Grade 1-winning colt's stallion rights on Jan. 15, 2015, the deal to Coolmore would have been for $8 million – a far cry from the $23.5 million he'd ultimately receive for the future Triple Crown winner.
A lawsuit filed in January against Zayat Stables by lender MGG Investments for allegedly defaulting on a $23-million loan last September has brought forth several documents submitted to the court revealing the inner workings of the Zayat operation, including the sale contracts for multiple stallions that ran under his colors.
One of the more interesting exhibits was the sale contract of American Pharoah between Zayat and Orpendale, one of the many wings of the international Coolmore operation, outlining the terms, incentives, and restrictions that got the horse to Ashford Stud in Versailles, Ky., for the 2016 breeding season.
The contract was finalized two days before the 2014 Eclipse Awards, at which the son of Pioneerof the Nile was a finalist for champion 2-year-old male. American Pharoah came into the night with wins in the Grade 1 Del Mar Futurity and G1 FrontRunner Stakes in southern California, and he secured the year-end honor, earning Zayat a quick $1-million incentive payment on top of the base $8 million sale price.
The incentive system in the contract laid out the roadmap for the rest of American Pharoah's racing career, all to be paid out within five days of the horse being officially declared the winner of the subject race or award.
Zayat would receive a $1.5-million bonus if the horse won either the G1 Blue Grass Stakes, Santa Anita Derby, Arkansas Derby, or Wood Memorial Stakes as a leadup to the Kentucky Derby. Winning the first leg of the Triple Crown netted Zayat an additional $3 million, while taking the Preakness Stakes and Belmont Stakes brought him $2 million for each race.
The second half of the year offered $2 million for wins in the G1 Haskell Invitational Stakes and G1 Travers Stakes, while a victory in the G1 King's Bishop Stakes was worth $1 million. Winning the Breeders' Cup Dirt Mile would have brought $1 million, while winning the Breeders' Cup Classic doubled that figure. If American Pharoah finished the year as champion 3-year-old male, it was worth another $2 million.
There were no explicit kickers in the contract for winning the Triple Crown or Horse of the Year, but it was specifically laid out that American Pharoah would not run in the Belmont Stakes if a Triple Crown was not on the line.
American Pharoah went on to make history during his 3-year-old campaign, winning the G2 Rebel Stakes (no bonus) and G1 Arkansas Derby ($1.5-million bonus) before sweeping the Triple Crown for a combined $7 million. His summer campaign saw a win in the G1 Haskell ($2-million bonus) and a second in the G1 Travers (no bonus) before finishing his career with a victory in the Breeders' Cup Classic at Keeneland ($2-million bonus).
Zayat picked up another $2 million when American Pharoah was named champion 3-year-old male, sending the horse off to stud with $15.5 million in incentives on top of the initial $8-million sale price.
What happened on the racetrack was just shy of a best-case scenario for Zayat and American Pharoah, but the contract language outlined a plan for what to do if the horse's campaign went sideways. Had he begun underachieving or gotten injured, a three-person panel of Zayat, Coolmore representative Paul Shanahan, and trainer Bob Baffert would meet to discuss the colt's prospects and vote on whether to modify or end his on-track career, with a two-thirds majority winning out.
When American Pharoah was officially handed off to the Coolmore operation, Ahmed Zayat himself did not receive any of the 11 lifetime Northern Hemisphere breeding rights granted to the horse's on-track connections. His son Justin Zayat, president and CEO of racing and bloodstock for Zayat Stables, received four annually transferrable breeding rights, while Zayat's other children – Ashley, Ben, and Emma – each received one. Joanne Zayat, Ahmed's wife, received two rights, and Baffert also received two. Coolmore had first refusal on any sale of the breeding rights.
In the complaint filed by MGG Investments, the creditor accused Ahmed Zayat of secretly selling the nine breeding rights tied to his family – which were transferred to Zayat Stables and pledged as collateral under the loan agreement – for a combined $3.3 million. The suit claims he did not use the proceeds to pay the debt.
The court filing reveals that two rights were sold to LNJ Foxwoods in December 2018 for a total of $750,000, while the remaining seven rights were sold to Orpendale through the first half of 2019 for a combined $2.55 million. These prices, MGG Investments claims, “did not reflect their fair market value and represents a deep discount from Zayat Stables' own $14 million valuation of the Zayat AP Breeding Rights as reflected in the proposed liquidation plan, as well as an independently appraised value commissioned by Zayat Stables in July 2019 that determined the Zayat AP Breeding Rights to be worth a total of $12.6 million.”
Both parties that bought the breeding rights have been added to the lawsuit, along with other entities that purchased horses from Zayat Stables. Those horses were considered collateral in the loan.
The court documents also revealed the purchase agreements from other Zayat runners who have recently gone off to stud, including Solomini, a multiple Grade 1-placed runner who was campaigned in partnership with Coolmore. The horse was sold in full to McMahon of Saratoga Thoroughbreds in December for $250,000, which MGG Investments claimed was also a deep discount from the $3 million valuation Zayat's representatives provided in July 2019, and that the proceeds were not used to repay the debt.
El Kabeir, a Grade 2-winning son of Scat Daddy, was sold in September 2017 to Yeomanstown Stud in Ireland for $500,000, which the creditor claimed was well under the various market valuations provided by Zayat's representatives. Those valuations ranged from $2.5 million to $5.75 million.
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