by | 11.17.2010 | 12:46am
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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