Magna Entertainment Corp. Files For Chapter 11 Protection

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Magna Entertainment, Racetrack Company, in Bankruptcy (Update3)

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By Dawn McCarty and Michael Bathon

March 5 (Bloomberg) -- Magna Entertainment Corp., the money-losing operator of Pimlico Race Course and six other tracks in the U.S., sought bankruptcy protection after defaulting under a loan agreement with PNC Bank NA and said it plans to sell assets.

The Canadian company, controlled by Frank Stronach, chairman of auto-parts supplier Magna International Inc., today listed assets of more than $1 billion and debt of $958.6 million as of Dec. 31 in U.S. Bankruptcy Court in Wilmington, Delaware. Magna, North America's largest thoroughbred racing company, owes about $500 million under secured financing agreements and about $225 million under unsecured notes, court papers show.

Sales have fallen because of declining attendance at horse races, competition from casinos and lotteries, and the economic recession that began last year, Aurora, Ontario-based Magna said. The seven thoroughbred tracks run by Magna in the U.S. include Pimlico in Baltimore and Santa Anita Park in Arcadia, California.

Pimlico is home to the Preakness Stakes, the second leg of horse racing's Triple Crown. The track, which opened in 1870, was also the home for the match race in which Seabiscuit beat 1937 Triple Crown winner War Admiral in the second Pimlico Special.

Santa Anita

Santa Anita, which opened in 1934, is the oldest racetrack in Southern California and was the site of equestrian events at the 1984 Olympic Games, while Gulfstream opened in 1939.

Wagering on U.S. horse races fell 11.6 percent in February from the same month a year earlier, according to Equibase Co., a Lexington, Kentucky-based company that provides racing statistics and information to North American tracks. Betting on U.S. races totaled $999.8 million last month, down from $1.131 billion in February 2008, Equibase said this week.

The company plans to borrow as much as $62.5 million from a unit of MI Developments Inc., the real estate arm of Stronach, to help fund operations as it restructures, according to court papers. MI Developments was spun off in 2003 from Magna International.

Magna said its business won't be interrupted and obligations to customers and workers will be fulfilled while it reorganizes. Its XpressBet business didn't seek protection. XpressBet allows customers to bet on horse races through the Internet or by phone at more than 100 racetracks in North America, Australia, South Africa and Dubai.

Churchill Downs

Magna also has joint venture with Churchill Downs Inc., owner of the Kentucky Derby, called TrackNet Media Group LLC that distributes the companies' content. The companies co-own HorseRacingTV, a television channel dedicated to horse racing that is available to more than 13 million subscribers, according to Magna's Web site.

The 50 largest consolidated creditors without collateral backing their claims are owed a total of $235.9 million, court papers show. Magna said Feb. 27 that several of its units defaulted under the loan agreement with Pittsburgh-based PNC Bank. Twenty-three affiliates also sought protection, including Pimlico Racing Association, Remington Park, Santa Anita Cos. and Prince George's Racing.

The largest unsecured creditor is Bank of New York, which has claims of $127.3 million, as trustee for holders of 8.55 percent notes due in 2010, and $76.2 million, as trustee for holders of 7.24 percent notes due in 2009. The Maryland Thoroughbred Horsemen's Association Inc., based in Baltimore, has a claim of $3.8 million.

The case is In re Magna Entertainment Corp., 09-10720, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net; Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net.

Last Updated: March 5, 2009 17:13 EST

 


 
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