Daily Record Business Writer
March 4, 2009 7:32 PM
On the day before many believe it will declare bankruptcy, the Canadian-based company that owns Laurel and Pimlico racetracks has notified the federal government its stock will be delisted from the Toronto Stock Exchange.
Magna Entertainment Corp.’s stock, which opened at 30 cents a share on Wednesday, will be delisted on April 1. Following the news, shares fell more than 31 percent for the day, closing at 20 cents. Two years ago, the stock was worth $76 a share.
Magna received the delisting notice from the Toronto Stock Exchange Tuesday, two days before its payment on a $40 million loan to a Canadian bank is due — the first of three loans totaling $226 million due this month for the financially distressed company. After watching Magna accumulate more than $600 million in losses over the last six years, racing industry analysts and officials have said they expect the company to declare bankruptcy as early as Thursday.
“It’s a huge deal [for the racing industry],” said Tim Rice, who follows the horse racing industry at Rice Voelker LLC in Louisiana. “If you talk to people that owe their livelihoods to racing horses at tracks, there’s a lot of fear out there about where all this is going to end up.”
In addition to Laurel and Pimlico, Magna’s U.S. operations include Santa Anita Park and Golden Gate Fields in California and Gulfstream Park Racing and Casino and the training facility Palm Meadows in Florida. The California Horse Racing Board called an emergency meeting for Friday after new broke of the company’s upcoming delisting. The loan due Thursday is guaranteed by unspecified assets of Magna’s two California tracks.
If the company declared bankruptcy this month, its tracks would stay open but Magna Chairman Frank Stronach’s control would be limited as the company undergoes reorganization procedures.
“If it can’t come up with some kind of alternative financing, the tracks will keep operating for some time, but the quarterbacking will revert to the debt holders and not to Stronach unless he’s able to work out some kind of deal,” said Rice.
That means that while Pimlico’s Preakness Stakes, the largest race in Maryland and the second leg of racing’s Triple Crown, would go on this year, next year is “an open question,” according to Rice.
“The race will absolutely happen next year, but where it will be and
who will run it are unknowns right now,” he said.
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