10/28/2009 11:00PM

Magna asks judge to throw out slots pact

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Magna Entertainment Corp. has asked a bankruptcy judge to throw out an agreement with the former owners of the Maryland Jockey Club that would allow the former owners to keep a portion of slot-machine revenue at Maryland tracks, according to court papers.

In a motion filed on Oct. 23, Magna's bankruptcy attorneys argued that the agreements would limit the amount of money that bidders will offer for Magna's two Maryland tracks, Laurel Park and Pimlico Racecourse. Under the agreements, Magna's former owners, a group that includes brother and sister Joe and Karin De Francis, would receive more than half of the net revenue from any alternative gambling that is approved for the two tracks for 20 years.

"The existence of the agreements, and the risk that the participating members may seek to enforce the agreements against any new owner, places a considerable cloud over the amount that prospective purchasers may be willing to attribute to such revenue stream," the motion said.

Magna purchased a majority stake in the two tracks in 2002, along with options to purchase the minority stake. The side agreements on slot revenue were reached at that time. In 2007, Magna exercised the options to buy the remainder of the equity in the two tracks.

Maryland voters approved a referendum last year authorizing casinos in five different locations in the state, including Anne Arundel County, where Laurel is located. Though it was anticipated that Laurel would be the leading location for a casino, Magna's application for a casino license was thrown out when the company did not provide a licensing fee.

The leading applicant for the license in Anne Arundel is now the Cordish Cos., which has applied to build a casino at a local mall. The county's council has balked at providing the required zoning for the project, and council members have hinted that they may refuse to pass the zoning approvals. At the same time, David Cordish, the owner of the Cordish Cos., has said he is interested in bidding on the Magna properties.

Magna is seeking to sell most of its racetracks as part of its bankruptcy reorganization. The court has approved a plan in which bidders have until Nov. 2 to submit bids for the Maryland tracks. An auction would be held on Jan. 8.