Preakness rights assured for Maryland

Posted: 8:05 pm Tue, April 20, 2010
By Liz Farmer
Daily Record Business Writer

WILMINGTON, Del. — Tuesday’s hearing seeking approval for the sale of Laurel Park and Pimlico Race Course was marked by extensive testimony on the tracks’ financial details and their potential value with slots, as well as an assurance that the state would keep its right of first refusal to the Preakness .

 Ontario-based Magna Entertainment Corp., the bankrupt owner of the tracks, is seeking confirmation of its reorganization plan after canceling an auction to sell its Maryland properties last month. That plan includes the transfer ownership of five of its race tracks and other assets to parent company MI Developments Inc. in exchange for assuming unsecured debt and settlements.

After hearing more than four hours of testimony in the U. S. Bankruptcy Court in Delaware from two company officials and a representative for the unsecured creditors committee, Judge Mary F. Walrath continued the hearing to Thursday morning.

“It’s been a long and windy road to get to this point,” said Magna’s attorney, Brian Rosen. “And without one brick, this plan will falter and the foundation will not survive.”

Magna did settle some objections Tuesday, most notably satisfying the state of Maryland’s concerns that its right to first refusal to the Preakness Stakes would be protected. The company also said it will add language to include the city of Baltimore.

“MID parties will not move the Preakness from the state of Maryland and otherwise keep Preakness in Maryland,” Rosen said. “The Preakness covenant shall be binding [for] the successors of MID parties, too … and will include the sale of all assets of MID.” Much of the testimony centered on a group of equity shareholders’ objection to the reorganization plan. Donna Harris, an attorney for the shareholders, questioned Magna interim CEO Gregory F. Rayburn, for more than 30 minutes about the entities MID would be receiving in the deal.

In her questioning, she took issue with the fact that Magna’s assessments of its properties were of the lands’ value rather than also considering their gaming value or potential.

Several times, she asked whether Magna had independently assessed the value of the Preakness Stakes. Rayburn said Magna had not but that it was not worth as much as she was insinuating.

“I can tell you its financial performance, and [the Maryland Jockey Club] probably makes something on the order of $8 [million] to $9 million in relation to Preakness,” Rayburn said. “But last year [the tracks] lost $11 million in Maryland including Preakness. So it’s a money-losing property.”

MID is slated to take on a large percentage of Magna’s portfolio, including Golden Gate Fields and Santa Anita Park in California, Gulfstream Park in Florida as well as Laurel and Pimlico. Under the deal MID also plans to develop Magna’s 34-acre parcel in Ontario, a 64-acre property adjacent to Laurel, a 157-acre parcel in Florida adjacent to the Palm Meadows Training Center and 205 acres in California.

Rocco Liscio, chief financial officer of MID, testified that the company was taking on a total of $698 million in secured debts and settlements across all properties.

For the Maryland properties, which includes Bowie Training Center, Magna parent MI Developments will pay $89 million to settle a lawsuit filed by Magna’s unsecured creditors committee. That money would be used to pay general unsecured claims against Magna.

MID also will pay about $13 million to cover secured claims of PNC Bank, about $6 million for holders of unsecured claims against the Maryland Jockey Club and $5 million to the former owners of Laurel Park and Pimlico.

MID would also acquire and AmTote International.

Rosen said after court adjourned that he hopes to have a ruling on the hearing after Thursday’s testimony. Two more executives are slated to testify after getting through three on Tuesday.