NEWS
No independent examiner for Magna bankruptcy
Posted: Monday, April 20, 2009 8:46 PM
by John Scheinman
In an effort to mollify a variety of parties and stakeholders objecting to the course of the Magna Entertainment Corp. bankruptcy proceedings, the company’s primary lender, MI Developments, discontinued plans for a “stalking horse” bid to purchase company assets.
As well, in a hearing at the United States Bankruptcy Court in Wilmington, Delaware, recently hired Magna Entertainment Corp. Chief Executive Officer Greg Rayburn worked hard to assure creditors Magna Chairman Frank Stronach would have no part in the business decisions related to the sale of properties.
Magna Entertainment also announced it has restructured its debtor-in-possession (DIP) financing from MI Developments, reducing a loan to fund continuing racing operations from $62.5-million to $38.4-million.
Judge Mary Walrath, who is presiding over the bankruptcy case, said she viewed the steps in a positive light and dismissed requests by Magna’s shareholder Greenlight Partners, an unsecured creditor, to have an independent examiner appointed to the case.
“There has been much progress,” Walrath said in rejecting the request for an immediate appointment. She said she would reconsider the request on May 4, when MEC is scheduled to introduce plans for bidding procedures for the sale of Santa Anita Park, Pimlico Race Course, and Laurel Park as well as other properties.
Three days later, the court will hear MEC’s plans for the sale of Gulfstream Park, Golden Gate Fields, Palm Meadows training center, Lone Star Park, AmTote, and XpressBet.
Kenneth Eckstein, an attorney representing the creditor’s committee in the case, said, “We feel the introduction of Mr. Rayburn and having Mr. Stronach step aside … around deliberations and sales processes is very critical.”
Eckstein said, and Walrath agreed, that the hiring of Miller Buckfire, an investment bank specializing in bankruptcy cases, as well as financial advisor Blackstone will give potential buyers confidence.
“We think this case has taken a dramatic step forward,” he said. “We can relay the confidence to third parties” interested in purchasing the Magna tracks and other assets.
The DIP funding of Magna Entertainment, which was given an extended maturity date—until November 6—also heartened Eckstein, who said the sale of tracks and other assets can go forward without intense pressure to quickly repay the loan.
“We wanted to make sure the company would not have to conduct a fire sale,” Eckstein said.
Attorney Greg Cross, representing the state of Maryland, also said the state’s concerns about the proceedings had been resolved with the addition of an extra $1.4-million in the DIP loan being dedicated to preparations for the Preakness Stakes (G1).
The state General Assembly passed emergency legislation on April 13 giving it the right to exercise eminent domain over Laurel Park, Pimlico and the Preakness Stakes. The state did not believe its interests were being adequately represented in the court proceedings.
John Scheinman is a Maryland-based Thoroughbred Times correspondent
