Operator of Laurel, Pimlico Says Its Ability to Continue in 'Doubt'
Racetrack operator Magna Entertainment, the parent company of Laurel Park and Pimlico, announced yesterday it had more than tripled its fourth-quarter loss to just less than $43 million, and reported in its financial statement that its "ability to continue as a going concern is in substantial doubt "
The Ontario-based company, one of the major racetrack operators in the country, suffered losses of more than $113.7 million in 2007 despite implementing a debt-reduction plan last September that called for the sale of non-core racetracks and other real estate holdings.
Magna, which also lost $288.3 million between 2004 and 2006, is carrying long-term debt of $879.9 million with $209.4 million of that debt due this year.
The company's financial struggle raises questions about Magna's position when Maryland voters face a slot-machine referendum this November that would provide a huge infusion of income into the state's racing industry. Maryland racing has been battered in recent years as tracks in Delaware, Pennsylvania and West Virginia began realizing revenue from slot machines. None of those tracks is owned by Magna.
Recent analyst reports to the Pennsylvania Gaming Congress found that slot-machine revenue in Pennsylvania last year reached $1.08 billion, according to a story in the Thoroughbred Times.
Maryland Racing Commission Chairman John Franzone has called on Magna to detail its finances at the commission's upcoming meeting March 18.
"It's almost inconceivable how [Magna] can lose that much money," Franzone said. "Are you making mistakes at the window and paying people incorrectly?"
Franzone suggested it would be wise for Magna to concentrate fully on helping pass the slots referendum in Maryland.
"If you get the slots and run them properly -- this ship is the Titanic now and it will change it into the" Queen Elizabeth II, Franzone said. "That would reverse their fortunes dramatically and allow them to gain profitability."
Magna's stock fell 9 cents yesterday, with a closing value of 79 cents per share. On Feb. 14, NASDAQ warned the company its stock would be delisted if the share value didn't rise above $1 by this summer.
"No one can be happy with our financial performance during the fourth quarter of '07 or the year as a whole," said Magna Chairman Frank Stronach during a conference call with investors.
"It's like 'Groundhog Day,' " said Tim Rice, president of Rice Voelker, an investment firm in Louisiana. "Every quarter, the results are disappointing. Every quarter, [Magna says,] 'We're going to sell assets and reduce debt,' and nothing ever happens."
-- John Scheinman