02/29/2008 12:00AM

Magna losses continue: $113 million in 2007


Magna Entertainment Corp., the largest owner and operator of racetracks in North America, lost $113.8 million in 2007, including $43omillion in the fourth quarter, according to financial documents the company released on Friday morning.

The 2007 results underscore the significant difficulties Magna is facing in 2008. The company has more than $500 million in debt and has lost more than $500 million since being founded in 1998. In the financial statements, Magna's auditor reiterated that the company cannot continue to operate without a substantial turnaround in its financial performance.

Last year, Magna officials said that the company would seek to sell some of its properties in order to reduce its debt. The company has been actively seeking buyers for Portland Meadows in Oregon, Great Lakes Downs in Michigan, Remington Park in Oklahoma, and Thistledown in Ohio, but no buyers have emerged. Remington Park, which derives the majority of its revenue from slot machines, is the only track of the four that is profitable. Magna has already closed Great Lakes Downs.

Thomas Hodgson, a former chief executive of the company who was hired as a consultant last year to oversee the debt-reduction plans, said during a conference call with analysts on Friday morning that the company was having difficulty selling the properties because of weakness in the real estate market and tightening credit conditions across the U.S.

Still, Hodgson said the company was committed to reducing its debt.

Frank Stronach, the founder of Magna and its interim chief executive since last year, said during the conference call that the company was also seeking partnerships for its racetracks. Stronach also maintained that Magna would not conduct a "fire sale" of its properties, which include Santa Anita Park in Southern California, Gulfstream Park in Florida, Golden Gate Fields in Northern California, Laurel Park and Pimlico Race Course in Maryland, and Lone Star Park in Texas.

Magna's stock closed on Friday at 79 cents, down 9 cents. The stock has been trading below $1 for several months, and the company recently received a warning from Nasdaq that the stock would be delisted if it does not trade above $1 for 10 consecutive trading days prior to

Aug. 11.

Stronach said Magna is considering a reverse stock split to boost the price of the shares. A reverse stock split typically gives shareholders one share of stock for each two they already own. The tactic usually has no impact on a company's market capitalization or cash flow.

Magna has several large loans totaling $209.4 million that come due this year, much of it owed to its parent company, Magna Developments. The company does not have the cash to pay off those loans, and Stronach and Hodgson said that Magna would seek extensions to the loans and may have to offer more equity later this year. In 2007, Stronach used a family-planning trust he controls to buy $20omillion worth of new stock to inject cash into the company.

According to the financial statements, revenue for the year was $625.7 million, up 8.9 percent compared to revenue of $574.2 million in 2006. But expenses for the year increased 11.3 percent, from $660.9omillion to $736.2 million.