NEWS
Zayat Stables files for bankruptcy protection
Posted: Wednesday, February 03, 2010 4:45 PM
by Jeff Lowe
Zayat Stables filed for Chapter 11 bankruptcy protection on Wednesday, a month after Fifth Third Bancorp requested a court-appointed receiver to manage the stable’s day-to-day operations.
Fifth Third sued Zayat Stables on December 15, claiming Ahmed Zayat’s operation defaulted on two loans and owed the Cincinnati-based bank $34,265,970.
Zayat filed a countersuit, claiming Fifth Third’s own “misconduct and predatory lending practices” caused Zayat Stables to default on the notes. On January 4, the bank asked Karen Caldwell, United States District Judge for the Eastern District of Kentucky, for a receiver to protect Zayat’s horses, which he used as collateral. Zayat, who was not available for comment on Wednesday, has opposed that request.
According to documents Fifth Third submitted to the court, Zayat Stables projected a cash-flow deficit of $3,101,402 for 2010 and net operating losses of $65,468,808 since 2006. Zayat led all North American owners with $6,883,902 in stable earnings in 2008 and finished third in ’09 with $6,323,286.
Zayat filed the bankruptcy petition in New Jersey. His office is in Hackensack, and he lives in Teaneck.
“The debtor seeks the protection of this court so that it can continue to operate its business and build on its successes for the benefit of all its creditors in the face of predatory practices by its primary secured lender, Fifth Third Bank,” Zayat said in the filing affidavit.
“Given the rapid pace at which Fifth Third has moved to appoint a receiver and its apparent desire to ‘fire sale’ the horses, the debtor has been forced to file for Chapter 11 protection to preserve its business as a going concern, protect its assets, and maximize value for the benefit of all creditors,” Zayat continued.
Zayat said his brother, Sherif El Zayat, paid $750,000 to Keeneland Association on February 2 toward a loan of $3,131,500 that relates to Zayat Stables’s purchase of 24 horses in the Keeneland September yearling sale.
“As consideration for that payment, Keeneland has agreed to the debtor's use of its cash collateral and to provide support to the debtor relating to the Keeneland Horses," Zayat said.
Zayat Stables listed additional debt totaling approximately $1.2-million. The largest unsecured claim is for $174,900 to Darley Stud Management for stud fees. Other listed creditors include Adena Springs for stud fees, trainers Steve Asmussen, Mike Mitchell, Bob Baffert, and Nick Zito, consignor Eaton Sales, boarding operation Stockplace, veterinarians and equine clinics, and van companies.
“The debtor intends to quickly file a plan of reorganization that will pay claims of creditors over a reasonable period of time as it continues to execute on its sound business plans that have thus far produces stellar racing results and, based on prior performance, will continue to do so,” Zayat said in the affidavit.
Jeff Lowe is a Thoroughbred Times staff writer
