Posted: 8:09 pm Thu, April 22, 2010
By Liz Farmer
Daily Record Business Writer
WILMINGTON, Del. — Testimony during Thursday’s hearing to confirm Magna Entertainment Corp.’s reorganization plan for Maryland’s race tracks revealed more details on the company’s initial efforts to sell its assets and what could be in store for Laurel Park.
If Magna’s plan to transfer assets to parent MI Developments Inc. is approved, the future could include Penn National Gaming operating slots at Laurel Park — if the track succeeds in obtaining a gaming license.
“MI Developments has plans to have Penn National step in for the Maryland Jockey Club,” said Marc D. Puntis, managing director of investment banking firm Miller Buckfire & Co., which manages Magna assets.
The jockey club operates Laurel Park, Pimlico Race Course and Bowie Training Center and is owned by Magna. MID is slated to take on a large percentage of Magna’s portfolio, including the Maryland properties, Golden Gate Fields and Santa Anita Park in California and Gulfstream Park in Florida.
William B. Bayne, testifying on behalf of equity shareholders objecting to Magna’s plan, said that in his conversations with MID Chairman Frank Stronach, Penn National would be a majority interest holder in gaming.
“We know there’s a deal with Penn National,” he said. “They know there’s a deal with Penn National even though they can’t say that yet.”
That could be a problem because Penn National also holds the license to operate a slots parlor in Cecil County. According to the chairman of the state board that awards slots licenses, approval of such an arrangement could hinge on whether the contract gives the manager an ownership stake in the casino.
Chairman Donald C. Fry would not discuss the Laurel situation Thursday; however, ownership restrictions for a proposed slots parlor in Western Maryland were loosened this month by the General Assembly in order to drum up interest in that location. But state law still prohibits owning interests in more than one casino in Maryland.
Details also emerged Thursday about Magna’s efforts to sell its Maryland properties at auction before cancelling the sale last month in favor of the plan to transfer ownership of five tracks and other assets to its parent in exchange for MID assuming unsecured debt and settlements.
Stories varied on how diligent Magna was in finding a stalking horse bidder for its Maryland tracks. A stalking horse bid is an initial bid or purchase agreement that other interested parties may bid against at auction.
Nicholas P. Leone, senior managing director for Blackstone Advisory Services, testified on behalf of the unsecured creditors committee that Blackstone tried to get Baltimore developer David Cordish to agree to a stalking horse bid.
“Having spoken with Cordish a number of times, he was strongly encouraged a number of times to put in a stalking horse bid, which he didn’t do,” Leone said. “That’s despite him wanting the auction to go forward.”
Cordish was one of six interested bidders in the Maryland properties. According to Leone, Magna was unable to get any of them to commit to an initial purchase agreement.
Cordish also holds the only slots license for Anne Arundel County. His plans to build a casino near Arundel Mills were stalled after anti-slots groups, led by the jockey club, succeeded in petitioning for a November referendum that will allow county voters to approve or reject the development.
But Bayne, who said he has lost roughly $2 million after investing with Magna three years ago, countered Leone’s testimony.
“I don’t think it was a real auction setup,” said Bayne, who said he spoke with Cordish Thursday morning. “Cordish said he tried to put in four stalking horse bids, but you all wouldn’t allow him,” he said, motioning to executives.
During cross examinations of the shareholder witnesses, both sides were short-tempered, with Judge Mary F. Walrath telling both sides many times to stop interrupting each other. Magna and other parties behind the plan tried to emphasize the shareholders’ inexperience in real estate and gaming.
Closing arguments are set for Monday afternoon in U. S. Bankruptcy Court in Delaware.
Daily Record Business Writer Nicholas Sohr contributed to this article.