Zayat, Fifth Third reach settlement
Top Thoroughbred owner Ahmed Zayat announced Thursday that his stable has reached a settlement with Fifth Third Bank, ending legal wrangling that at one time ensnared a Kentucky Derby hopeful.
The proposed settlement calls for a restructuring of Zayat's loans with Fifth Third that spreads out payments over nearly five years. In an interview, Zayat said the settlement is close to his stable's initial bankruptcy reorganization plan.
He said the settlement allows him to manage the stables as he sees fit, noting, "I can buy and sell and expand and do whatever I want."
Under the settlement, Fifth Third would not stand in the way of the reorganization plan, ending a series of objections it had filed. The settlement calls for Zayat Stables to pay down the principal of $28.15 million that will remain on the loans as of June 30. As the years pass, Zayat Stables will pay Fifth Third a flat fee on the loans or a certain amount as determined by factors including proceeds from the sale of horses during the year.
The settlement deal will be considered by the bankruptcy court in Newark, N.J., on Wednesday.
Zayat Stables declared bankruptcy in New Jersey in February to block a move by Fifth Third to take over the stable of more than 200 horses, including onetime Kentucky Derby hopeful Eskendereya. A week before that race, the colt was pulled out with an injury and later was retired from racing. Zayat announced last month that he had sold a partial interest in the horse to wine maker Jess Jackson. Proceeds from that already have been used to help pay down the loans.
Zayat has retained a significant share and breeding interests in Eskendereya, who is at Jackson's Stonestreet Farm in Lexington.
Zayat's stable, established in 2005, is one of the most successful in the country. As of Thursday, Zayat Stables was the second-leading owner in the country with more than $2.04 million in earnings in 2010, according to Equibase statistics. Last year, Zayat's Pioneerof the Nile finished second in the Kentucky Derby, and the stable made more than $6.3 million on the track alone.
"We have one of the best equine stables, and I'm going to continue to operate as I see fit and build on our success," Zayat said Thursday.
A representative of Fifth Third said the bank declined to comment on the settlement.
The settlement comes after a decision recently by bankruptcy Judge Donald H. Steckroth that called for creditors to vote on the reorganization plan, above the objections of Fifth Third.
The settlement also will end wrangling in U.S. District Court in Lexington, where Fifth Third had sued Zayat, alleging he defaulted on loans he had guaranteed personally. Fifth Third was later countersued on claims that the bank reneged on an agreement to restructure the loans, costing Zayat thousands in potential sales at Keeneland's 2009 auctions.
Tom Miller, a Lexington attorney whose specialties include equine law but who is not involved in the case, said the settlement is a positive for the industry, which has struggled during the recession.
"The industry has enough internal problems that neither the adverse publicity nor the infighting is good," Miller said, "and Mr. Zayat is one of the most successful racehorse owners, and we want him and others ... to continue to invest in them."
This story was originally published June 25, 2010 at 12:00 AM with the headline "Zayat, Fifth Third reach settlement."