08/05/2009 11:00PM

Magna in discussions with possible buyers

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The consulting firm representing Magna Entertainment Corp. in its bankruptcy reorganization is "in discussions" with potential bidders for several of its racetracks, an official with the company said on Thursday.

Michael Wildish, a managing director of the bankruptcy-consulting company Miller Buckfire, would not identify the companies or the tracks in which the bidders had expressed interest. The discussions revolve around whether bids submitted by the companies by a July 31 deadline would qualify as "stalking-horse bids" for an auction scheduled for early September, Wildish said.

Magna, which owes $370 million to its parent company, MI Developments, has offered five of its racetracks for sale at auction - Santa Anita Park in Southern California, Lone Star Park near Dallas, Remington Park in Oklahoma City, Portland Meadows in Oregon, and Thistledown near Cleveland. The company filed for bankruptcy in early March.

In previous court filings, Magna said that it would identify the stalking-horse bidders by Aug. 8. The stalking-horse bid will represent the bid that other potential buyers would have to exceed at the September auction.

However, Wildish said on Thursday that the company may not identify any stalking-horse bidders by the Aug. 8 date due to the complexities of structuring deals for any one or a combination of the tracks.

"Selling Santa Anita, for example, is a complex undertaking," Wildish said. "A stalking-horse bid has to be firm, fair, and final, and that is a difficult place to get to."

Even if no stalking-horse bidders are identified, the auction scheduled for early September would proceed, Wildish said. Magna may also identify stalking-horse bidders after the Aug. 8 date, Wildish said. In addition, Magna may not identify a stalking horse because the company does not believe the bidder has offered a fair price for the property.

"If you don't reach a threshold value, then we don't have to take it," Wildish said.

Magna arrived at the plan to auction the five properties after creditors objected to an earlier proposal that would have transferred Gulfstream Park, Golden Gate Fields, Lone Star Park, Palm Meadows Training Center, the bet-processing company Amtote, and the account-wagering company XpressBet to MI Developments in a $195 million deal that included debt forgiveness of $135 million. Both Magna and MI Developments are controlled by Frank Stronach, and creditors revolted at what appeared to be a cut-rate transfer of Magna's assets to another Stronach company.

In a related development, Magna filed documents in bankruptcy court this week asking the judge to block the release of XpressBet's financial documents to an unidentified company. XpressBet was pulled from Magna's auction plans under its revised proposal, but Magna has said that it would entertain serious offers for any of its assets, including Laurel Park and Pimlico Race Course in Maryland, two tracks that have attracted interest from developers in the state.

XpressBet illustrates Magna's bankruptcy quandary. In order to survive, the company will have to sell valuable properties to pay down its debt, but it cannot survive unless it retains some properties that are able to restore the company to financial stability. XpressBet has tremendous value to companies already operating in the account-wagering marketplace, including TVG, Churchill Downs Inc.'s twinspires.com, and Youbet.com, but the company is also one of the few properties owned by Magna that has a solid upside and consistent cash flow.