Magna Entertainment, Owner of Pimlico and Laurel Horse Tracks, Files for Bankruptcy Court Protection
Friday, March 6, 2009
Magna Entertainment Corp., the troubled owner of Maryland's thoroughbred tracks, filed for bankruptcy protection yesterday and essentially put all its racetracks up for sale, including Laurel Park and Pimlico Race Course, home of the Preakness Stakes.
Asked whether Magna would sell Pimlico, Laurel and California's storied Santa Anita Park, Frank Stronach, Magna's chairman and chief executive, said in a brief telephone interview, "If the price is right."
The Chapter 11 filing was expected. The company defaulted last week on a bank loan tied to Pimlico, Laurel and the Maryland Jockey Club, which operates the tracks, and it had a $40 million loan payment due yesterday. Still, the prospect of an auction for Magna's assets heightens concerns about the future of thoroughbred racing in Maryland and, in particular, about the Preakness, the second jewel of the Triple Crown and the state's biggest one-day sporting event.
Slots were legalized in Maryland in large part to save the horse racing industry and help keep the Preakness in Baltimore. But Laurel Park's bid for slots was disqualified last month because Magna failed to pay a mandatory licensing fee. Magna has sued the state; a judge's decision is expected soon.
Heavily burdened with debt, Magna has lost $638 million since 2002 as track attendance fell and casino and slots venues siphoned off wagering revenue. At the same time, some critics said mismanagement and bad timing played a part in Magna's financial struggles.
"It's an unfortunate and sad circumstance," said Timothy Capps, a former Maryland Jockey Club official who is now executive-in-residence at the University of Louisville's Equine Industry Program. "At least it's out there, and we'll see how it unfolds. The marketplace will have its day."
Magna said day-to-day operations at its tracks will continue while it seeks to sell assets and restructure. It plans to borrow up to $62.5 million from its largest shareholder, MI Developments (MID), to fund operations while under bankruptcy protection. It also has an agreement to sell MID many of its properties for $44 million. Those properties include AmTote International, the Baltimore area company that pioneered electronic bet-processing systems, and the Gulfstream Park racetrack in south Florida.
Magna is required to hold a federal bankruptcy court auction for those assets, and other bidders could top MID's offer, which also would cover much of Magna's debt to MID.
The deal with MID does not include Pimlico, Laurel or the storied Santa Anita track, where movie stars once joined the masses to watch such champions as Seabiscuit, Affirmed and Spectacular Bid. Magna paid $126 million for Santa Anita in 1998 and invested millions more in restoring and improving the complex.
"Frank Stronach is convinced they are going to come through this, get the company restructured and move forward," said Rick Caruso, a Los Angeles developer who has a joint venture deal with Magna to build a shopping mall adjacent to Santa Anita. "Nothing is changing from our end."
In recent years, Magna survived on cash infusions from MID and Stronach. Minority shareholders accused Stronach of using MID as Magna's banker of last resort and increased their pressure on MID to foreclose on Magna's loans.
Horsemen, breeders and even state regulators said the Chapter 11 filing was too fresh to predict what it would mean for them. The Preakness is scheduled to be held May 16.