Eskendereya sale part of Zayat plan

LEXINGTON, Ky. - A Chapter 11 reorganization plan filed by Thoroughbred owner Ahmed Zayat projects that he will sell 100 percent of Kentucky Derby favorite Eskendereya this year.

Zayat made this and other projections as part of detailed filings on Friday in a New Jersey bankruptcy court. The reorganization plan, which envisions paying off his creditors by the end of 2014, must be approved by a select creditors committee as well as by the court before it can come into effect.

In his projections, Zayat assumes the stable "will sell a sufficient number of horses, including 100 percent of Eskendereya in 2010, to achieve sales proceeds of $16.8M, $15.2M, $10.0M, $11.0M, and $11.0M in 2010, 2011, 2012, 2013, and 2014, respectively. A non-refundable deposit of $2.0M is assumed to be received in September 2010 from the sale of Eskendereya, with the remaining Eskendereya proceeds assumed to be received in December 2010."

Zayat Stables, one of North America's leading owners, filed for Chapter 11 bankruptcy protection in February after Fifth Third Bank sued the stable for allegedly defaulting on a series of loans totaling about $34 million. Zayat has countersued Fifth Third, alleging deceptive and predatory lending practices.

The question now is whether Fifth Third, Zayat's largest creditor, will agree to the terms Zayat has laid out. A major sticking point is likely to be the multi-year payoff time frame. Earlier this year, Fifth Third filed a motion to take over Zayat's stable, numbering more than 200 horses, but withdrew that motion after Zayat Stables filed for bankruptcy.

Eskendereya's value, which is not projected in the reorganization plan, could play a major role in the Fifth Third case. Even in a depressed stallion market, the 100 percent sale of a Grade 1-winning Triple Crown contender could bring in enough income to significantly offset the amount Fifth Third alleges Zayat Stables owes.

Zayat's projection to sell 100 percent of the colt is something of a departure from his previous handling of his top colts' stud careers. Zayat kept substantial interests in two previous multiple Grade 1 winners now at stud, Zensational and Pioneerof the Nile.

Zayat's projections also assume that, between 2011 and 2014, Zayat Stables' stud fees will "increases significantly from $65,000 in 2010 to $2.1M, $4.0M, $4.9M, and $4.9M in 2011, 2012, 2013 and 2014, respectively."

The projections also assume significant income from the stable's racetrack performances. The plan projects four starts per horse for 80 percent of the stable's juveniles and six starts for older runners.

"Purse income winnings assume 20 percent placing 1st and 30 percent placing either 2nd or 3rd place," the documents read. "The average purse size is assumed to be $38,500 (2010), with 3 percent annual increases thereafter. . . . In addition, 2010 assumes large purse wins of $2M and 2011-2014 assumes large purse winnings of $2.5M annually."

For lower-quality runners, the plan projects approximately $500,000 annually in revenue from horses sold through the claim box.

Under the plan, Zayat also intends to continue purchasing bloodstock for the stable. The projections "assume bloodstock purchases of $2.5M, $2.0M, $1.0M, $1.0M and $1.0M in 2010, 2011, 2012, 2013, and 2014, respectively" as well as "the birth of approximately 80 foals in the aggregate during the 2101 through 2012 period."