04/16/2010 11:00PM

Zayat sets debt schedule

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LEXINGTON, Ky. - Racehorse owner Ahmed Zayat's Zayat Stables, owner of Kentucky Derby favorite Eskendereya, filed a Chapter 11 bankruptcy plan Friday that would pay off creditors, including Fifth Third Bank, within five years.

Fifth Third sued Zayat Stables last year, alleging that it had defaulted on a series of loans totaling more than $34 million. Zayat's attorney told the Bergen Record that Zayat disputes that amount and also claims he does not owe interest or other payments on Fifth Third loans.

Zayat has countersued Fifth Third, alleging predatory and deceptive lending practices.

The Zayat Stables reorganization filed Friday in a New Jersey bankruptcy court lays out a plan that would pay both Zayat's main creditors, Fifth Third and the Keeneland Association, by the end of December, 2014. Revenue from stable's regular business operations, including the sales of horses and their breeding rights, would help fund the repayments.

According to the reorganization plan, Zayat owes Keeneland $2,381,500, mainly related to purchases of 24 horses that are now 2-year-olds.

A core group of creditors, including Keeneland and Fifth Third, must vote to approve the reorganization plan, and the court also must approve it, before the payment plan can take effect.

Shortly after Zayat Stables filed for bankruptcy in February, Fifth Third moved to take over Zayat's bloodstock, which consists of more than 200 horses, and put them under the management of a court-appointed trustee. But the bank changed its position later that month, while reserving the right to file another motion for a trustee in the future.

More recently, on April 14 New Jersey bankruptcy court judge Daniel Steckroth denied Fifth Third's claim that Zayat had violated terms of an agreement allowing him to use cash collateral to help operate the stable.