04/13/2010 11:00PM

Court ruling favors Zayat

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At a hearing Wednesday, a New Jersey bankruptcy court judge denied Fifth Third Bank's claim that prominent Thoroughbred owner and breeder Ahmed Zayat's stable violated the terms of a cash collateral agreement.

The cash collateral order has been key to allowing Zayat to continue operating the stable since it filed for bankruptcy protection in February. That agreement allows him to use cash collateral through May 1.

Fifth Third had argued that Zayat defaulted on the agreement when he scratched four of nine juveniles he initially entered in Keeneland's recent April 2-year-old auction. Zayat responded in court filings that he had never committed to sell any horses "should circumstances dictate that such sales would be imprudent in the Debtor's business judgment."

Judge Donald Steckroth issued his ruling denying the certification of default that Fifth Third had filed on Monday.

Zayat Stables filed for Chapter 11 bankruptcy protection after Fifth Third sued the stable for allegedly defaulting on a series of loans totaling $34 million. Zayat has countersued Fifth Third, alleging deceptive and fraudulent lending practices.