11/01/2007 11:00PM

Magna posts loss of $49M in quarter

EmailMagna Entertainment Corp., the largest racetrack owner in the United States, lost $49.8 million in the third quarter of 2007 on revenue of $114.5 million, bringing the company's losses over the last 3 1/2 years to $375 million, according to financial statements released Thursday night.

The third-quarter loss was nearly identical to the company's third-quarter loss of $50.7 million last year. During this year's third quarter, Magna had negative cash flow of $20.8 million, and the company ended the quarter with $506 million in long-term debt.

During a conference call on Friday morning, Magna officials stressed that the company was hoping to reduce its debt in the next six months under a previously announced plan to sell three undeveloped properties and two racetracks, Great Lakes Downs in Michigan and Portland Meadows in Oregon. The officials also said that they had taken inquiries from potential buyers of Remington Park in Oklahoma City and Thistledown racetrack near Cleveland, but the officials declined to identify any of the buyers or estimate what any of the properties could bring in a sale.

"It is far too early to provide any detail about these discussions," said Thomas Hodgson, a consultant hired by Magna earlier this year to oversee the company's debt-elimination plan. Hodgson is a former chief executive officer of the company.

Magna owns or operates a number of high-profile racetracks in the United States, including Santa Anita Park and Golden Gate Fields in California; Gulfstream Park in Florida; Lone Star Park in Texas; and Laurel Park and Pimlico Racecourse in Maryland.

Magna's ongoing financial problems have raised considerable concern in the racing industry that the company will be forced to sell some of its premier racetracks in order to avoid bankruptcy. With the exception of Remington Park, which derives much of its revenue from slot machines, the racetracks that the company is attempting to sell are not profitable, and the proceeds from the sales likely will not make an appreciable dent on the company's balance sheet, which lists $1.2 billion in assets compared with the company's market capitalization of $213 million.

Magna officials said during the conference call that they are hopeful the Maryland legislature will legalize slot machines at Laurel Park in Maryland during an ongoing special session called by Gov. Martin O'Malley to address an estimated $1.2 billion budget shortfall for 2008. Past efforts to legalize slot machines in Maryland have failed, but momentum is building this year for approval.

On Friday, Laurel Park cancelled its live race card so that employees of the track and Maryland horsemen could attend a rally at the state capitol before hearings about the slots legislation. Laurel provided buses for the employees and horsemen.

In the third-quarter financial statements, Magna's auditing company repeated that the company's ability to continue operating was in substantial doubt unless the company can reverse its losses and meet its debt obligations. Most of the debt is owed to Magna's parent, MI Developments.

The performance of the company's slot-machine operation at Gulfstream Park continues to be a drain on Magna's cash flow, according to company officials. To address the problems with the casino, Magna has hired Steve Calabro, a longtime casino executive, to be its vice president of gaming operations, the company said.

Magna has been without a permanent chief executive officer since June, when Michael Neuman, the company's sixth chief executive since the company was founded in 1998, resigned after four months on the job. Frank Stronach, the founder of Magna and its interim chief executive officer, said during the conference call that Magna continues to search for a permanent chief executive officer, but said that Ron Charles, the president of Magna's California operations, has taken on additional duties in the meantime.

"He's not officially the chief operating officer, but he's acting like one," Stronach said.