10/19/2008 11:00PM

Magna stock up after debt offer


Shares in Magna Entertainment Corp., the large racetrack owner and operator, swung widely on Monday before closing at $1.69, up 10 cents, or 6.3 percent.

The swings – which took the stock as high as $2 – may have been related to the recent disclosure that Halsey Minor, a billionaire Internet entrepreneur, had offered to conduct due diligence on Magna’s debt to its parent company, MI Developments. Late on Friday, Minor released a letter he had sent to Magna reiterating that he intended to research the debt as part of a proposal to purchase the loans held by MI Developments. The loans were due earlier this year, but Magna has reached several agreements to extend the maturity dates.

In the letter, Minor – who has met this year with Hialeah Park owner John Brunetti over a proposal to purchase that closed Florida track – stated that a special committee set up by Magna to explore ways to reduce the company’s debt has ignored the proposal. Magna has over $500 million in debt, and approximately half of that is due to MI Developments.

“We fail to see how your inaction in response to our inquiries either satisfies your fiduciary obligations or is in the best interests of MI Developments’ various stakeholders,” Minor wrote in the letter. “Clearly our proposal provides full recovery for MI Development on the bridge loan and eliminates any future need for MI Developments to fund the operations of Magna Entertainment, both of which we expect will otherwise be extremely difficult given today’s challenging economic environment and financing market.”

Officials of Magna did not return phone calls on Monday. Minor could not be reached for comment.