Top Thoroughbred owner Ahmed Zayat's creditors will vote in the next month on his proposal to bring his stable out of bankruptcy.
"It seems there is a light at the end of the tunnel, and finally the process is coming to an end," Zayat said Thursday. "I'm happy to get my plan heard and I'm very confident of it being confirmed."
U.S. Bankruptcy Judge Donald H. Steckroth on Wednesday ordered the vote and approved of Zayat's disclosure statement, over the objections of Fifth Third Bank.
Fifth Third does not comment on pending litigation.
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After a hearing in New Jersey on Tuesday, Steckroth found that the statement now contains adequate information for Zayat Stable's creditors, including the bank and Keeneland, to vote on his proposed plan.
The court set a voting deadline of 5 p.m. July 12; the results will be made public at a confirmation hearing July 15.
Fifth Third, which sued Zayat in U.S. District Court in Lexington, alleging that he defaulted on $34 million in loans, objected last month to the first disclosure statement. The bank said Zayat had not included sufficient information on proceeds from the sale of Esken dereya.
When the reorganization plan was filed, Eskendereya was a potential favorite for the Kentucky Derby and "a linchpin to the debtor's repayment of its debts," the bank stated.
But a week before the race, the colt was pulled out with an injury and later retired from racing. Zayat announced last month that he had sold a partial interest in the horse to winemaker Jess Jackson.
Zayat's original filing indicated he planned to sell 100 percent of the colt in 2010.
In response to the bank's objection, Zayat filed updated income projections last week. According to the new statement, Zayat has placed the proceeds from the sale in an escrow fund.
Although he said the sale price cannot be revealed because of a confidentiality agreement with Jackson, Zayat's projected income statements list $7.5 million in income in May 2010 from the sales of horses, with the same amount placed in restricted cash.
Zayat said Thursday that he has retained a significant share and breeding interests in Eskendereya, who is at Jackson's Stonestreet Farm in Lexington.
He said that he was "tickled pink" with the sale to Jackson and that they are weighing several offers for the horse to stand at stud.
The bank also claimed that Zayat's disclosure statement did not adequately address potential claims by the stable against Zayat.
According to the bank, Zayat withdrew more than $2 million from stable accounts, in addition to a salary of $650,000, in the year before the bankruptcy filing. Fifth Third said the stable paid, in Zayat's name, $1.2 million to New Jersey Account Wagering, $350,000 to the Las Vegas Sands, $150,000 to the Palms Casino and Resort, $100,000 to NHPlay.com and $515,000 to American Express.
The court overruled that objection as well.
Fifth Third has asked the court to allow the bank to subpoena Zayat's personal bank records. Zayat is fighting that move.
The judge has not ruled on that issue.
Zayat's proposed reorganization plan would pay off all the stable's debts, including Fifth Third's loans and $2.4 million owed to Keeneland. However, Zayat would hold Fifth Third's repayment in escrow until the court rules on cross-claims he's filed alleging fraud by the bank.