04/22/2010 11:00PM

Advisors support Magna bankruptcy plan


Creditors of the bankrupt racing operator Magna Entertainment Corp. will receive the best return on their money by allowing Magna to transfer the majority of its properties to its parent company, financial advisors for the company testified at a hearing in bankruptcy court in Delaware on Thursday, according to reports.

The financial advisors provided support for a reorganization plan currently before bankruptcy judge Mary Walrath that had earlier been approved by the company's unsecured creditors' committee. Under that plan, the unsecured creditors will receive at least $89 million in cash from Magna's parent company and largest creditor, MI Developments, compared to approximately $220 million in unsecured claims against the company.

Magna submitted the reorganization plan to the court earlier this year. The court has scheduled closing arguments for Monday, and Judge Walrath is likely to rule on whether to accept the reorganization plan on that date, according to Magna's advisors.

Under the plan, Magna will transfer Gulfstream Park and Palm Meadows training center in Florida, Santa Anita Park and Golden Gate Fields in California, Laurel Park and Pimlico Race Course in Maryland, and its interests in the account-wagering operation XPressBet and HorseRacingTV to MI Developments. The transfer will wipe out more than $400 million in secured debt to MI Developments.

According to the Associated Press, Marc Puntus, a managing director for the firm advising Magna in its bankruptcy, testified on Thursday that efforts by Magna to dispose of many of its assets were unsuccessful due to weakness in the racing industry and real-estate market. The inability to unload the properties made the asset-transfer plan the best available, Puntus testified.

"The racing industry is in significant decline," Puntus said, according to the AP.

Nicholas Leone, a managing director of Blackstone who is advising the unsecured creditors committee, testified that the unsecured creditors committee could hope for a 20-cent return on each dollar of debt if Magna had been successful in selling all of the properties, according to the AP. The creditors committee had earlier estimated that its share of the proceeds under the reorganization plan will pay off at approximately 40 cents on the dollar.

However, several shareholders also testified that they believed Magna did not make any good-faith efforts to dispose of its tracks, according to the AP. William B. Bayne Jr., a shareholder in MEC, testified at the hearing that he believed that Magna had undervalued its tracks and had not conducted good-faith attempts to sell the tracks.

"You all bait-and-switched us," Bayne replied to an attorney for Magna's creditors' committee, according to the AP. "We were told that this was a complete liquidation."