06/15/2010 11:00PM

Fifth Third can pursue Zayat funds

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LEXINGTON, Ky. − A U.S. District Court judge's order has cleared the way for Fifth Third Bank to seek payment from Zayat Stable guarantors Ahmed Zayat and Pioneer of the Nile Ltd., a related entity.

Judge Karen Caldwell's order Monday vacated a stay that had prevented Fifth Third from pursuing funds from Zayat personally and from Pioneer of the Nile after Zayat Stables filed for bankruptcy in New Jersey. Fifth Third filed a motion in March asking that the stay be lifted for Zayat and Pioneer of the Nile. In finding for Fifth Third, Caldwell wrote that Zayat and Pioneer of the Nile "have not offered sufficient support for their argument that Zayat Stables' bankruptcy proceeding should operate as a bar for Fifth Third's attempts to recover from Zayat Stables' solvent guarantors."

Fifth Third's attorney, Craig Robertson, and Barry Hunter, the attorney who filed Zayat and Pioneer of the Nile's opposition to lifting the stay, declined to comment on the order.

"If the Zayat Stables reorganization plan is approved by the bankruptcy court on July 15, there will be a temporary injunction prohibiting Fifth Third from pursuing Mr. Zayat on his guarantees, provided that the stables meets all of its obligations under the plan, which Mr. Zayat intends to do," said Matthew Hiltzik of Hiltzik Strategies, who is acting as a spokesman for Zayat.

In the opposition filed April 5, Hunter had argued that the stay be maintained in "the interests of judicial economy and avoidance of piecemeal, duplicative litigation and potentially conflicting results" between the Zayat Stables bankruptcy case and Fifth Third's lawsuit alleging the stable defaulted on a series of loans totaling about $34 million.

Fifth Third initially sued Zayat Stables, Zayat, and Pioneer of the Nile in December. Zayat, currently the nation's second-leading owner by purse earnings with $2,012,878, has countersued, alleging the bank engaged in fraudulent and predatory lending practices.