Magna Entertainment Corp., North America's largest racetrack operator, announced Thursday it had filed for Chapter 11 bankruptcy protection in Delaware and intends to sell off such assets as Gulfstream Park in Florida, Lone Star Park in Texas and Golden Gate Fields in California.
Magna's day-to-day operations will continue uninterrupted throughout the Chapter 11 process while it tries to sell its assets and implement a reorganization, according to the company's news release.
Financial struggles are nothing new for Magna Entertainment as the company had lost around $500 million the past five years.
With total loans of $275 million due by March 20, company chairman and chief executive officer Frank Stronach said the operation had no choice but to file.
"Simply put, MEC has far too much debt and interest expense," Stronach said in a statement. "MEC has previously pursued numerous out-of-court restructuring alternatives but has been unable to complete a comprehensive restructuring to date due, in part, to the current economic recession, severe downturn in the U.S. real estate market and global credit crisis.
Stronach went on to say, "We expect that all employees, customers and horsemen will continue to be paid in the normal course along with all post-petition vendor obligations."
In addition to Gulfstream, Golden Gate and Lone Star, Magna Entertainment also owns Pimlico Race Course, home of the Preakness Stakes, Laurel Park, Remington Park, Portland Meadows, Thistledown and Santa Anita Park.
Santa Anita, which hosted the 2008 Breeders' Cup World Championships, is scheduled to hold the 2009 event again this November.
Greg Avioli, president and chief executive officer of Breeders' Cup Ltd., said that since the Breeders' Cup contract is with the Oak Tree Association — a non-profit organization that holds its meet at Santa Anita — he does not foresee having to move this year's event.
"Our agreement is with Oak Tree, which is on very solid financial footing, and they have the right to operate their event at Santa Anita Park," Avioli said Thursday. "Barring any unforeseen circumstances, we fully expect to stage the 2009 Breeders' Cup there."
Though the two companies were once fierce rivals in the battle to acquire the most racetracks, Magna Entertainment and Churchill Downs Inc. had partnered in recent years on the racing channel HRTV and TrackNet Media Group, which controls the distribution and broadcast of the companies' horse racing content.
"HRTV and TrackNet Media were joint ventures that were not included as part of the Magna filings today," said Kevin Flanery, senior vice president of communications and national public affairs for Churchill Downs Inc. "We will be monitoring the proceedings as they progress and hope the final resolution will be one that strengthens the Thoroughbred racing industry over the long term."
MI Developments Inc., a property-management company that is Magna's controlling shareholder as well as its largest secured creditor, hopes to buy some of the racetrack company's assets for $195 million. Among the items included in that deal are Magna's interest in The Village at Gulfstream Park in South Florida, Palm Meadows Training Center in Boynton Beach, Fla., Lone Star Park in Grand Prairie, Texas, and XpressBet, an account wagering company.
Magna Entertainment, based in Aurora, Ontario, said it has between $500 million and $1 billion in liabilities and more than $1 billion in assets, according to court filings.
It has between 10,000 and 25,000 creditors, including MI Development, which is owed $372 million.
Magna Entertainment was spun off from auto parts company Magna International in 2000 while MI Developments was spun off by Magna International in 2003.
MI Developments said it would offer Magna a six-month, $62.5 million loan so it can continue to operate while undergoing bankruptcy proceedings.