08/05/2008 11:00PM

Stronach: Magna's marquee tracks may be sold

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The chairman of Magna Entertainment Corp., the struggling racetrack owner and operator, acknowledged on Wednesday that the company would be unable to retire its debt as planned by the end of this year and may need to put its most high-profile tracks on the sales block, citing the downturn in the real-estate market.

Frank Stronach, who founded the company in 1999, said that the company's ambitious plan to retire more than $550 million in debt would be impossible to complete this year. Still, Stronach said that the company "remains committed" to the plan, while also acknowledging that Magna faced serious difficulties in righting the company after an overall loss exceeding

$500 million over the past four years.

In financial statements released Tuesday night, Magna said that it posted a $21.3 million loss in the second quarter of 2008, a $2.1 million improvement over its 2007 second-quarter results. The result brought Magna's loss this year to $67.7 million, or $11.60 per share.

Magna's accountants continue to prepare the company's financial statements under a "going-concern" warning. The warning is an acknowledgment that the company cannot continue to operate unless Magna makes significant improvements to its financial performance.

Magna's performance is being closely watched by the racing industry because of the company's numerous high-profile racetrack holdings, which include Santa Anita Park, Gulfstream Park, Laurel Park, Pimlico Race Course, and Golden Gate Fields. In addition, the

company owns the assets of Lone Star Park in Texas, though not the land under the track, and owns and operates an account-wagering operation, XpressBet, and a horse racing television channel, HorseRacing TV, in partnership with Churchill Downs Inc.

Last year, Magna identified

several small unprofitable tracks as targets for sale, and this year it reached an agreement to sell Great Lakes Downs, a track it shuttered in Michigan. On Wednesday, Stronach indicated during a conference call that all of the company's properties would be put on the block if Magna does not find buyers for the distressed properties soon.

"If we have high debt and we can't find any buyers, then we might have to sell 50 percent of Santa Anita, or 60 percent," Stronach said.

Of Magna's $543.9 million in debt, $181.3 million is due this year. Of that total, $170.2 million is due to its parent, MI Developments, which earlier this summer shelved a plan to transfer the debt to a new jointly controlled company because of shareholder opposition to the plan. The proposal would have likely given Magna a lifeline in marketing its racetracks.

Stronach said that the plan to transfer the debt was still in play, but he said that the company could not address any questions about the proposal during the conference call.

According to the financial statements, revenues in the quarter were $166.9 million, a slight decline from revenues of $167.4 million in the second quarter of 2007. Expenses rose from $183.6 million in the second quarter of 2007 to $188.7 million in the second quarter this year.

The company recently authorized a 1-to-20 reverse split of its stock in order to get the share price over $1 and comply with trading requirements of the Nasdaq stock market. Even though the company lists assets of $1.19 billion, its market capitalization - the value of all of its outstanding stock - is only $42 million.