11/17/2008 12:00AM

Curlin's value as sire debated in court

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FRANKFORT, Ky. - An attorney representing a court-appointed receiver charged with liquidating a 20 percent share of 2007 Horse of the Year Curlin argued in court on Monday that the colt's majority owner, Jess Jackson's Stonestreet Stable, should be allowed to purchase the share for $4 million.

The attorney, Sylvius von Saucken, called one witness to testify during the hearing, which took place in Franklin County District Court. The witness, Ric Waldman, a well-known Thoroughbred industry consultant, said an analysis of current market trends and Curlin's prospects as a stallion justified a total valuation of $20 million for the colt.

Jackson announced on Saturday that Curlin would enter stud in 2009, though he said in a release that the 4-year-old colt could race once more this year "if an appropriate venue and purse are offered."

The location of where Curlin will stand has not been announced, though Jackson's statement was widely seen as a way to put the breeding community on notice that Curlin would be available for stud next year.

The Monday hearing was the first of two in which District Court Judge Roger Crittenden will decide whether the sale of the 20 percent share will be approved. The second hearing has been scheduled for Dec. 1.

Waldman's testimony during the Monday hearing revealed that he had valued Curlin at $30 million in August. However, Waldman cited two factors - the rapidly deteriorating economic conditions both in the bloodstock industry and in the U.S., and the late start that the colt's owner will get in marketing matings to Curlin - for revising the figure downward by 33 percent.

Under Waldman's analysis of the colt's value, Curlin would stand his first year for a $75,000 stud fee for 120 paid matings. In his second year - as is common for new stallions - his fee would drop to $60,000 for 100 paid matings, according to Waldman's testimony. In his third and fourth year, his fee would drop to $50,000 for 80 paid matings.

"I don't think any new horse can stand for a six-figure stud fee in this current economic climate," Waldman said. "I don't think that he may be able to stand for $75,000, in fact."

The 20 percent share is currently held by Shirley Cunningham Jr. and William Gallion, two disbarred lawyers from Lexington. Along with another attorney, Cunningham Jr. and Gallion lost a civil-court judgment last year contending that they defrauded former clients out of $42 million in a $200 million settlement with the manufacturer of the diet-drug combination fen-phen in 2002. As a result of the judgment, the judge in the case, Crittenden, put the lawyers' assets in receivership.

The attorney for Cunningham Jr. and Gallion, Andre Regard, attempted on Monday to cast doubt on Waldman's analysis of the colt's value. On behalf of his clients, Regard is seeking as high a price as possible for the 20 percent share in order to raise money to satisfy the claims against the two lawyers.

While cross-examining Waldman, Regard pointed to the current stud fees and book size of several established stallions as he sought to cast doubt on Waldman's $20 million estimate. Regard also raised the possibility of syndicating Curlin or selling the 20 percent share in open auction, pointing to the recent sale of a 30 percent share of the broodmare Better Than Honour at the November Fasig-Tipton sale.

In that auction, the 70 percent owner of the mare - who has foaled three graded stakes winners, including back-to-back winners of the Grade 1 Belmont Stakes - bought out the minority partner at a final bid of $14 million, a world record. (Because one partner bought out the other, $4.2 million of the $14 million changed hands. In addition, the two partners dissolved their partnerships on several other horses at the sale.)

When asked whether he would recommend either selling Curlin at auction or by syndication, Waldman maintained that the best way to maximize the value of a minority share in a new stallion is to sell the stake privately. He repeated that he thought that the $4 million price for the 20 percent share represented fair market value.