Daily Record Business Writer
March 5, 2009 1:54 PM
The future of horse racing in Maryland lurched further toward uncertainty Thursday after the owner of Laurel Park and Pimlico Race Course filed for bankruptcy.
To raise cash, Magna Entertainment Corp. said it was selling its race tracks in Florida, California and Texas to its parent company, and would seek court approval to market its “other” assets — including Laurel and Pimlico — during the Chapter 11 process.
The prospect of Pimlico, home of the Preakness Stakes and the biggest racing day in Maryland, and Laurel Park being up for grabs to the highest bidder has state racing officials upset.
“The thing that concerns me is we don’t know who that could be, and someone could come in and ... run [races for] three weeks at Pimlico because the Preakness is a gold mine, then stay dark the rest of the year,” said John Franzone, chairman of the Maryland Racing Commission. “And that’s not acceptable by any means.”
Tom Chuckas, president of the Maryland Jockey Club, a subsidiary of Magna that operates Laurel and Pimlico, said Thursday the reorganization will not affect the racing schedule this spring, including Preakness on May 16.
Magna said its day-to-day operations will continue and it has sought emergency relief to ensure the continued payment of employee wages and benefits as well as racetrack purses.
Thursday’s bankruptcy filing was expected by many in the racing industry— the financially troubled company was in default on one loan, had another $40 million loan due Thursday and had two other loans totaling $186 due later this month. Last month Ontario-based Magna Entertainment, which has lost more than $600 million in the last six years, issued a statement notifying its lenders it would not be able to pay its loans in time.
Wednesday, the company informed the Securities and Exchange Commission its stock was being delisted from the Toronto Stock Exchange.
In the past, Magna Chairman Frank Stronach has received extensions of deadlines or has refinanced to keep his company operating. But last month, when real estate company MI Developments Inc., Magna’s controlling shareholder, which is also chaired by Stronach, rejected a reorganization plan, the company’s financial troubles came to a head.
“[Magna] has previously pursued numerous out-of-court restructuring alternatives but has been unable to complete a comprehensive restructuring to date due, in part, to the current economic recession, severe downturn in the U.S. real estate market and global credit crisis,” Stronach said in a statement.
According to the filing in the U.S. Bankruptcy Court for the District of Delaware, Magna’s debt totals more than $958.6 million, including $203.5 million in unsecured debt. Its largest unsecured creditor is The Bank of New York — owed nearly $129 million — but others on the list of unsecured creditors include individuals and associations in the racing industry, city and state tax agencies, utility companies and the Baltimore advertising agency that promotes Preakness.
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