NEWS
Magna losses mount in third quarter
Posted: Thursday, November 06, 2008 11:33 AM
by Frank Angst
After another quarter of significant income losses, Magna Entertainment continues to consider selling or moving into a joint venture on one or more of its core operations.
The Ontario-based racetrack owner reported a third quarter net income loss of $48,359,000. Its yearly losses moved into nine figures at $116,073,000. The company’s third quarter loss is about even with last year when it lost $49,811,000 for the three months ended September 30, but its yearly loss is way up compared with last year when it lost $70,779,000 for the nine months ended September 30.
Magna Entertainment has hired Miller Buckfire and Company as its financial adviser and investment banker to evaluate various strategic alternatives.
Magna has not carried out its previously announced debt reduction plan to sell Remington Park, Thistledown, and/or Portland Meadows. Chairman Frank Stronach blamed the poor economy on slowing that plan and said the company would consider sales or partial sales of core operations such as the Maryland Jockey Club, Santa Anita Park, and/or Gulfstream Park.
“Although [Magna Entertainment] has a strong asset base, we remain burdened with far too much debt and interest expense,” Stronach said. “Our previously announced debt elimination plan has been negatively affected by the weak real estate and credit markets, which have impacted our ability to sell non-core assets. As a result, we are evaluating [Magna Entertainment’s] core operations with a view to possibly selling or joint venturing one or more of [Magna Entertainment’s] core racetracks in order to strengthen [Magna Entertainment’s] balance sheet and liquidity position. Working with Miller Buckfire, we intend to develop and execute a plan to sell or joint venture certain core assets and enhance [Magna Entertainment’s] capital structure.”
Earlier this week, Magna received potentially good news when Maryland voters approved expanded gaming at several sites throughout the state. Magna has said that the Maryland Jockey Club would apply for a gaming license for Laurel Park. Magna’s Maryland operations saw revenue fall by $3.2-million because of decreased handle and attendance.
In October the Associated Press reported that Thoroughbred owner-breeder Halsey Minor sent a letter to the board of MI Developments Inc., which holds a controlling interest in Magna Entertainment, offering to buy Magna’s United States operations. At that time, Minor said he would oppose expanded gaming at the Maryland tracks.
In the third quarter, Magna did manage to increase revenue by less than 1% to $81,577,000, but revenue for the year is down 4.8% to $478.8-million.
“Although the weak economy will continue to present challenges in the near-term, we are very conscious of the fact that we must significantly improve our operating results,” Stronach said.
In the late morning hours Thursday, Magna stock was selling for $3.56 a share, nearly twice as much as its October 31 closing price of $1.89. The stock price jumped on Monday, one day before the Maryland vote.
Frank Angst is senior writer of Thoroughbred Times
