04/26/2010 11:00PM

Eskendereya's stock drops, but not much


LEXINGTON, Ky. - Eskendereya's injury and withdrawal as favorite from Saturday's Kentucky Derby disappointed his fans, but how much did it damage his value?

The question is important, because Eskendereya is part of owner Ahmed Zayat's Chapter 11 reorganization plan. That plan projects a 100 percent sale of the horse by the end of the year. But bloodstock experts say Eskendereya's drop in value might not be very steep and could even be recouped if Eskendereya recovers and successfully returns to the races.

Before his withdrawal, some in the industry were placing Eskendereya's value in a wide range, between $8 million and $15 million, a price that factored in his role as Derby favorite, the prospect of future races, and his stud career. Today, many central Kentucky-based agents say, he is probably worth between $6 million and $10 million.

One reason Eskendereya's value might not take a long plunge: Uncertainties in today's stallion market mean many bloodstock experts are conservatively valuing even top stallion prospects these days to start with.

"It's quite hard for people to value stallion prospects, period, at this point, because of the uncertainties of the market," said Lincoln Collins of the Kern Thoroughbreds bloodstock agency.

The general consensus is that Eskendereya has done enough to prove a valuable stallion prospect, and most of the loss in value comes from lost racing potential and the loss of his stature as Derby favorite. Collins estimated "the Derby premium" at roughly 30 percent above of the horse's underlying value.

"That potential is now gone, but it doesn't mean that if he returns to the races he won't still make a very good stallion prospect," Collins said. "Even if he doesn't make it back, he's probably a very good prospect. If he comes back and wins races at a very high level, that 30 percent is potentially recapturable."

Jamie LaMonica of The Stallion Co. said: "As a stallion prospect, I don't see his value having dropped that much from what it was because he's injured. He's still a very interesting stallion prospect. Three years ago, we'd be talking about a different number, not just because of the economy, but also because freshman sires were perceived differently then."

As bloodstock prices plummeted in the last 18 months, breeders have turned away from first-year stallions and toward proven ones.

A crucial factor in valuing Eskendereya will be the injury's diagnosis and how long he is likely to be away from the races.

But such a long-term scenario probably will not satisfy Fifth Third Bank, which has sued Zayat for allegedly defaulting on about $34 million in loans and is part of the creditors' committee that will vote on the prominent owner's Chapter 11 reorganization plan. Earlier this year, Fifth Third had attempted to take over Zayat's bloodstock with an eye toward selling it. It dropped that attempt, but any weakening in star runner Eskendereya's value will probably make the bank less inclined to approve a long-term payoff plan. Zayat's current reorganization proposal calls for paying off Zayat Stables' creditors within five years.

A hearing on that plan is scheduled for June 8 in New Jersey bankruptcy court.