01/19/2011 4:45PM

Bank files suit against Gulf Coast Farms for default of $15 million in loans

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Fifth Third Bank has filed suit against prominent breeder Gulf Coast Farms, its principals Jerry Bailey and Lance Robinson, and others, alleging loan defaults totaling about $15 million.

The loans were made in 2009 and 2010, according to court documents Fifth Third filed Jan. 5 in Fayette Circuit Court in Lexington, Ky. The bank is seeking payment and a judgment by the court that it holds a first-priority secured loan interest in Gulf Coast’s horses, stallion interests, and other related assets. It also is seeking that Keeneland transfer proceeds from a recent Gulf Coast dispersal to the court to be paid out as the court directs.

Gulf Coast was North America’s fourth-leading individual breeder last year with almost $5.6 million in earnings. Runners the operation bred include 2010’s champion 3-year-old male and 2009 juvenile champion Lookin At Lucky. Gulf Coast also bred, raced, or purchased Grade 1 winners Thunder Gulch, Henny Hughes, Yes It’s True, and Honour and Glory, among other graded winners.

Gulf Coast began dispersing its bloodstock in 2010. At the time, Bailey said the dispersal was due to the poor economy, which he said made Gulf Coast’s mare-leasing programs “not a viable option.”

Gulf Coast attorney Richard Getty said the dispersal raised more than $6 million but that Gulf Coast plans to file a counter-claim “based upon certain conduct which we believe was inappropriate, including forcing every horse to be sold at the Keeneland November sale without reserve, over the objection of Gulf Coast.”

Getty also said there are competing lien claims between Fifth Third and another bank, Celtic Bank Corp., on six mares sold in November.

“Celtic Bank has the first, prior, and superior lien, but, despite Fifth Third acknowledging Celtic Bank has a first lien, they’ve continued to try and hold up dispersal to Celtic Bank, which would substantially pay off Gulf Coast’s loan to that entity, insisting that funds be paid to them,” Getty said. “I assume there is going to be significant dispute over the priorities involving a number of the horses that Fifth Third claiming the proceeds of, including a number of horses that were owned by lessees.”

Getty said Gulf Coast and Celtic Bank also dispute Keeneland’s distribution of more than $360,000 to Fifth Third from sales proceeds.

“I assume all these issues are going to be resolved by the court as expeditiously as possible,” Getty said.