04/19/2009 11:00PM

Magna drops 'stalking-horse' bid plan


Magna Entertainment Corp. and its parent company and largest creditor, MI Developments, have canceled a plan in which MI Developments would have submitted a "stalking-horse bid" for a handful of Magna Entertainment's racing properties, the two companies announced early Monday before a scheduled bankruptcy court hearing.

The stalking-horse bid had been criticized by creditors and shareholders in MI Developments through formal objections filed with the courts. Magna had been expected to ask the court to approve the bid and other auction processes for its properties at the Monday hearing, but those plans have now changed.

Under the stalking-horse bid, MI Developments would have offered $195 million, in a mix of cash and credit, for Gulfstream Park, Golden Gate Fields, an operating lease and the racing assets of Lone Star Park, Palm Meadows Training Center, Amtote, and XpressBet. In order to acquire or build those properties, and including renovations to Gulfstream Park, Magna spent approximately $700 million.

In a statement, Dennis Mills, the chief executive officer of MI Developments, said that the company had dropped the plan because of the objections to the plan. Magna owes MI Developments $370 million.

"MID's principal concern with respect to [Magna's] Chapter 11 process is to maximize our recovery on our secured loans to [Magna]," Mills said. "We made our stalking-horse bid because we believe [Magna] owns some very valuable and attractive assets." Mills added that MI Developments will "continue to be interested in acquiring assets" from Magna.

Magna Entertainment was also scheduled to seek final approve for $62.5 million in financing from MI Developments at the Monday hearing. In the release issued before the hearing, however, MI Developments said that it had reduced that amount of the request to $38.5 million. The court has already approved the distribution of approximately $16 million of the money requested.