Magna can’t bundle properties

Daily Record Business Writer
April 20, 2009 8:31 PM

The state’s position in its fight to keep the Preakness Stakes got a little stronger Monday after a judge ruled that Magna Entertainment Corp.’s Maryland properties could not be bundled with its out-of-state properties in the bankruptcy auction process.

If bankruptcy judge Mary F. Walrath hadn’t ruled in Maryland’s favor, there’s no way the state could have matched bids for the Preakness, Pimlico Race Course and Laurel Park, said Raquel Guillory, spokeswoman for the Office of the Attorney General.

“It seems clear that the company is now seriously taking into account the importance of the state’s regulatory and public interest of the racing industry here in the state and it’s certainly a welcome move,” she said.

Greg A. Cross of Venable LLP, who argued for Maryland in the U.S. Bankruptcy Court of Delaware Monday, called the ruling a “step forward for the state.” But he noted the main fight for Preakness is yet to come, as a hearing on Maryland’s other two objections to the proposed auction procedures by Ontario-based Magna, the nation’s largest racetrack owner, was postponed until May 4.

Those issues include asking the court to reaffirm the state’s right of first refusal to the Preakness Stakes, which is owned by the Maryland Jockey Club, a subsidiary of Magna.

Laurence Coppel, a bankruptcy attorney at Gordon, Feinblatt, Rothman, Hoffberger & Hollander LLC in Baltimore, said while it wasn’t unusual to group assets together in an auction — as Magna had proposed — that made it difficult for Maryland to assert its right to match an offer for just one or two properties.

“People might bid one amount for a number of tracks as opposed to separate bids for each track, so in order for the state to exercise its right of first refusal as it pertains to Preakness and not to the other tracks, you’d need to know the amount for that particular asset,” he said.

Also delayed until May 4 was a hearing on the proposed auction procedures for approximately 15 properties and assets Magna is selling. The hearing, which was scheduled for Monday, was postponed after parent MI Developments Inc. announced that it was backing off as the stalking horse bidder for some of Magna’s assets. A stalking horse bid is an initial bid on assets from a buyer of the debtor’s choosing.

Magna then withdrew its motion pertaining to that sale and auction procedure.

MI Developments said in a release that it abandoned its offer in response to objections filed by creditors and potential bidders that questioned its close financial involvement.

“We made our stalking horse bid because we believe that [Magna] owns some very valuable and attractive assets,” Dennis Mills, MI Developments’ vice chairman and CEO, said in a statement.

Mills added the company will continue “to evaluate all opportunities to preserve the value of our secured loans” to Magna.

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