03/18/2009 12:00AM

Magna parent intends to bid


MI Developments, the parent company of bankrupt Magna Entertainment and its largest creditor, will likely bid on properties still owned by Magna if and when they are offered at auction later this year, the chief executive of the company said on Tuesday.

Dennis Mills, a former chief executive of Magna and the current chief executive of MI Developments, said that MI Developments had its eye on Magna properties "with a huge real estate upside" if those properties go to auction. Magna, which filed for bankruptcy last Thursday, asked a bankruptcy court to approve a plan to offer Santa Anita Park, Laurel Park, Pimlico Racecourse, and other properties at auction in August through a motion filed on Tuesday.

The interest by MI Developments in the Magna properties could result in the near total consolidation of Magna's former assets under MI Developments. In a separate agreement that was reached as part of its bankruptcy filing, Magna agreed to sell Gulfstream Park, Golden Gate Fields, Lone Star Park, the bet-processing company AmTote, the account-wagering company XpressBet, and several other racing-related properties to MI Developments for $44 million in cash, the rights to a $15 million lease, and the forgiveness of $136 million in debt, for a total consideration of $195 million. Under terms of the agreements, the bid can be matched or exceeded by a competing entity.

Added together, the companies included in the MI Developments bundle cost Magna Entertainment approximately $800 million to acquire and build, when including a $170 million renovation to Gulfstream Park that was funded by a loan from MI Developments. According to court filings, Magna owes MI Developments a total of $369 million.

Several racing officials who are owed money by Magna said this week that they believed the intent of the bankruptcy reorganization was to place the Magna assets under the control of MI Developments. Both companies are controlled by Magna's founder and chairman, Frank Stronach.

In filings with the bankruptcy court, Magna has said that a bankruptcy advisory company, Miller Buckfire, has "contacted numerous parties to discuss the availability of the assets" in an attempt to find buyers. Officials for Miller Buckfire have not returned phone calls. When asked if MI Developments intended to offer the individual properties within the agreement to buyers, Mills referred questions to Magna's general counsel, Will Ford, who did not return phone calls. Mills also said that he did not know if MI Developments had assigned specific valuations to the properties within the bundle.

In the motion to get approval for the auction of Santa Anita, Laurel, and Pimlico, Magna has asked the court to approve a deadline of July 8 for entities to submit bids, with an auction for any or all of the assets scheduled for Aug. 7. Magna said in the motion that the court should allow the company to disqualify any of the bids or withdraw any of the assets from the process if it is "contrary to the best interests of the debtors or debtors' estates or creditors."

The motion to conduct the auction is scheduled to go before the bankruptcy court on April 3. Several large shareholders in MI Developments, including the hedge fund Greenlight Capital Inc., have filed objections to MI Developments continuing involvement in Magna's racing businesses, citing the drain on the company's financial positions.

On Wednesday, seven entities were appointed to the creditors' committee that will oversee the reorganization, according to officials in attendance. The entities were Bank of New York, which holds $200 million in notes issued by Magna; GLG Partners; Madison Partners; Sunrise Partners; the New York Racing Association; the Jockeys' Guild; and the Florida Thoroughbred Breeders and Owners Association.

Daily Racing Form is a creditor of Magna.