Odds On Racing - Harness Racing

Stronach, MI Retain Three Racetracks

February 20, 2010

Frank Stronach and MI Developments Inc. MIM.A-T will hang on to a trifecta of racetracks and stay in the horse racing business while most of the equine empire the auto parts entrepreneur built up over a decade of expansion will be sold to raise money to pay off creditors.

MI Developments, the real estate arm of Mr. Stronach's realm and the parent company and lender of hundreds of millions of dollars to Magna Entertainment Corp., MEC.A-T will keep one track in Florida and two in California under a reorganization plan submitted to U.S. Bankruptcy Court in Delaware Thursday. The plan was submitted by MEC, which fell into U.S. Chapter 11 bankruptcy protection on March 5, 2009, amid a massive debt load and fallout from the credit crisis.

MEC considered a Chapter 7 liquidation of its assets, a regulatory filing made yesterday revealed, but the idea was rejected because payments to creditors would be smaller than under the Chapter 11 plan.

The retention of the three tracks by MI Developments permits Mr. Stronach, who has described MEC as a “labour of love,” to continue to try to realize his vision of reviving the declining horse racing industry by turning racetracks into destinations. He controls MI Developments and made his fortune by founding Magna International Inc., the auto parts giant of which he is still chairman and controlling shareholder.

His vision of the horse racing industry reversing its decades-long decline is being tested at Gulfstream Park near Fort Lauderdale, Fla., which celebrated the official opening last week of a high-end retail complex that will be followed by a hotel and residential development.

Gulfstream also has a large gambling parlour because Florida permits tracks to offer such activities as slot machines and other forms of wagering not related to horses.

A $500-million (U.S.) retail and commercial development is planned for Santa Anita Park near Los Angeles, which MI Developments will keep along with Golden Gate Fields in San Francisco.

But some of the other seven tracks of the 10 originally held by MEC have already been sold. The rest are up for sale as part of a deal between MI Developments and a committee of unsecured creditors, which launched a lawsuit against the real estate company, Mr. Stronach and some officers and directors of MEC alleging breaching of fiduciary duty. But they reached a settlement that paved the way for a reorganization plan filed Feb 19.

“The settlement resolves an extremely complex litigation regarding difficult claims, and a potential dispute over asset valuations, by providing equal recoveries to all general unsecured claimants,” MI Developments said in a regulatory filing accompanying the MEC plan.

The settlement gives unsecured creditors $76.5-million in cash and a share in the proceeds from the sales of three tracks.

Those include Lone Star Park near Dallas, which has been sold for $47.9-million in a deal that has not closed yet. Unsecured creditors will receive $20-million from that sale.

Creditors will receive another $69.5-million if the sale of Thistledown in Cleveland to Harrah's Operating Co. Inc. goes through. The settlement gives MI Developments $20-million from a Thistledown sale and the remainder to the creditors. The sale has not closed, however, because Harrah's is waiting for the state of Ohio to approve slot machines at racetracks and that approval has been delayed.

MEC had already sold Remington Park in Oklahoma City to Global Gaming RP LLC for $80.2-million. Mr. Stronach bought the money-losing Magna Racino in his native Austria from MEC last year.