12/17/2009 12:00AM

Zayat sued for unpaid $34M in loans

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Barbara D. Livingston
Fifth Third Bank claims in its lawsuit that owner Ahmed Zayat defaulted on two loans.

LEXINGTON, Ky. - Fifth Third Bank has filed a lawsuit against prominent racehorse and stallion owner Ahmed Zayat, alleging that he owes the bank more than $34 million on loans for his equine operations.

Zayat has been a major buyer and owner since entering the business in 2005, and Zayat Stables has grown to more than 200 horses, according to the National Thoroughbred Racing Association. His recent noteworthy horses include Zensational, who will enter stud at Hill 'n' Dale Farm in Lexington in 2010; 2009 Grade 1 winner Thorn Song; Pioneerof the Nile, who stands at Vinery in 2010; and 2009 Grade 2 winner Soul Warrior.

The suit filed Tuesday in U.S. District Court in Lexington alleges that Zayat Stables took out a total of $38,645,970 in seven loans with Fifth Third between Aug. 1, 2007, and Jan. 14, 2009, and agreed to give the bank a security interest "in all of Zayat Stable's then owned and thereafter acquired interests" in bloodstock, including horses, stallion shares, purses and breeders' awards, and stallion income. According to Fifth Third's lawsuit, the parties amended the loan terms in January to say that "if Zayat Stables defaulted on any of the Notes, such default would be considered a default under all of the notes thereby entitling Fifth Third to accelerate the principal balance and all accrued interest due and owing under all of the Notes."

Fifth Third now alleges that Zayat Stables defaulted on notes from Aug. 1, 2007, and Sept. 23, 2008, when it did not make payments due on March 1, 2009, and July 31, 2009. The bank says Zayat has since paid off the Sept. 23, 2008, note and made payments totaling about $1.3 million on other loans but remains in default on the Aug. 1, 2007, note.

"This shocks us as much as it shocks you, and we are surprised that they would do this to one of their strongest borrowers," Zayat said Wednesday afternoon.

Craig Robertson, the attorney for Fifth Third, declined to comment, saying, "The bank does not comment on pending litigation."

Zayat launched his racing stable in 2005 and immediately became a big player at auctions. His biggest purchases included Maimonides, a $4.6 million Keeneland September yearling, and Fasig-Tipton Saratoga's 2006 sale topper, the $1.6 million filly Mushka. At the 2009 Keeneland September auction, he spent just over $3 million as the sale's seventh-ranked buyer by gross expenditures.

Zayat also has sold some pricey bloodstock. At Keeneland's 2008 November breeding stock sale, through the Eaton Sales agency, he sold Mushka for $2.4 million, Baroness Thatcher for $1.8 million, and J Z Warrior for $1.125 million, among others.

Zayat currently owns, either outright or fractionally, stallions throughout North America. In addition to Zensational and Pioneerof the Nile, those include J Be K at Gainesway; Marcavelly at Colebrook Stallion Station in Canada; Maimonides at Vinery's Florida division; and E Z Warrior at Applebite Farm in California.

Executives at Fasig-Tipton and Keeneland said they have not been contacted regarding any potential sale of Zayat's bloodstock. Fasig-Tipton chief executive officer Boyd Browning said he was unaware of the lawsuit and declined as a matter of policy to comment on Zayat's account status at the auction house.

Keeneland vice president, Harvie Wilkinson, said Zayat "has been a good client over the years, and we have absolutely no problem with him right now."