04/02/2010 11:00PM

Zayat wears his heart on his sleeve

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Benoit & Associates
Pioneerof the Nile made a splash for Ahmed Zayat last year, when he won the Santa Anita Derby and finished second in the Kentucky Derby.

LEXINGTON, Ky. - You couldn't make up a better story. Thoroughbred owner Ahmed Zayat, pursued by his bank for allegedly defaulting on $34 million in loans, files for bankruptcy and cheats the bank's attempt to take over his 200-horse stable, then turns up with Eskendereya, a hot prospect for the Kentucky Derby.

It's the kind of melodrama that's made Zayat one of Thoroughbred racing's most intriguing and controversial owners. He's also highly successful. A 47-year-old Egyptian entrepreneur, Zayat got into the game in 2005 and is North America's second-leading owner by earnings. He was among North America's top three leading owners in 2007 and 2009. Ask people who know him how they would describe Zayat, and the word you'll hear most often is "passionate." That's frequently followed by "tough," meant in both senses: strong but also potentially difficult to deal with.

Zayat, who resides in Teaneck, N.J., has countersued Fifth Third over their $34 million lawsuit. In interviews he's described the bank and its associates as "very bad people" trying to push him to financial ruin.

"My goal was to rise to the highest level of the sport by having the best-bred and best-raised horses, and I was going to commit a lot of my funds," Zayat said of his entry into racing. "And I put in a lot of money, tens of millions of dollars. People are mistaken about what happened to me. I was a very good businessman and still am. What happened to me financially was not a failure of Zayat Stable, it was a failure of the market. And there's a huge difference."

Eskendereya (pronounced ess-ken-DRAY-uh) could make some of those problems fade. He is slated to run in the April 3 Wood Memorial in his final prep for the Derby. He cost Zayat $250,000 at the 2008 Keeneland September yearling sale, but his value jumped into the millions after his 8 1/2-length victory in the Feb. 20 Fountain of Youth. Rumored suitors have included Stonestreet Stables owner Jess Jackson and International Equine Acquisitions Holdings, but Zayat won't name names.

It would seem a good time to sell, and Zayat acknowledges he could use the cash. But he says that, even if he sells, he'll retain a significant percentage of his Derby contender.

The Zayat Stables bankruptcy spawned another question when it revealed Zayat had loaned about $605,000 to brothers Michael and Jeffrey Jelinsky in 2006 and 2007. The two pleaded guilty to illegal bookmaking charges in 2009. The California Horse Racing Board has cleared Zayat of any wrongdoing, noting that the loans, which Zayat says were personal loans to family friends in hard times, took place well before the brothers' plea publicly revealed them as bookmaking felons. Racing commissions in the Triple Crown states of Kentucky and New York are still reviewing the relationship between Zayat and the Jelinskys. Zayat says he has provided all the information he can. In theory, the review could result in the loss of his racing license before the Derby, but Zayat said he is not concerned.

"Not a single person from any racing commission has called me saying we are under investigation," he said. "I'm not worried about this whatsoever. I haven't done anything wrong or inappropriate."

Bloodstock experts generally value Eskendereya, who is by Giant's Causeway, at $6 million to $8 million. The price would jump with a Wood victory, a Derby win, or, better yet, the Triple Crown. Horses with Derby chances still command top dollar, but a hard fall in prices for stallion prospects means Eskendereya would be a harder sell after the Triple Crown, unless he keeps winning and becomes a must-have for stud farms.

For his part, Zayat blames the Thoroughbred market crash - and the alleged bad banking practices - for his financial misfortunes.

"As a prudent businessman, once you start growing so much and you're putting in your own equity, it only makes sense that you borrow to leverage," Zayat said. "They teach that in business school. My company was very safe, where my equity was three to one, very respectable. This is not like a bad real estate deal, where people were putting down 10 percent and borrowing 90 percent. It was the opposite.

"I started by borrowing $5 million, then $10 million, then $3 million, and over the years as I am expanding and the business is going better, our collateral allowed us to buy more," he said.

Zayat said that when Fifth Third gave him his final loan, in January 2009, the bank's paperwork had appraised his operation with a collective worth of over $90 million.

"I went into this business in good faith and try to bring credit and passion and youth," he said. "I made mistakes, but made mistakes that could have been done in any business. Show me any assets anywhere that haven't depreciated 50 percent to 60 percent, regardless of what class - whether real estate, art, coin, commodities, or anything - after the meltdown. Anyone in the business who is knowledgeable would tell me, 'Mr. Z, had this been a normal market, you'd have had an ample amount of liquidity in your own company to pay your entire debt.'"

One asset certainly has appreciated: Eskendereya.

Zayat confounded some racing pundits when he announced March 16 that he wouldn't run Eskendereya in the logical next step, the Florida Derby, pointing him to the Wood instead. Zayat said he would prefer to run Eskendereya four weeks before the Derby - the Florida Derby is six weeks before - and thinks the Wood will present a better test.

Others view the Wood decision as a typically capricious move by Zayat that could devalue his colt. Zayat forges ahead despite the critics, and the proof will come on the racetrack.

An all-or-nothing personality

Depending on whom you ask, Zayat is either a madman or a genius, a savvy businessman or a man who's lost his head over horses.

"He's highly intelligent, but he's also highly emotional when he's dealing with his Thoroughbred business," said one man who spoke on condition of anonymity out of concern for potential business dealings with Zayat. "Sometimes that emotion creates some difficulty, because his head and his heart can often be in conflict."

"I'm kind of a compulsive guy," Zayat said. "I can't do things halfway. If I'm in, I'm totally in. I can't just have two or three horses. And, honestly, I'm very competitive in nature like all of these beautiful equine athletes, and I want to be number one."

Among Zayat's successes are Pioneerof the Nile, a Zayat homebred who was second in last year's Kentucky Derby and has won two Grade 1's; and Zensational, a three-time Grade 1-winning sprinter. Both are at stud, with Pioneerof the Nile standing for $20,000 and Zensational for $25,000, prices that Zayat considers a sign of their overall appreciation in value.

Zayat Stables: Graded winners

Horse Price Earnings Graded wins
Mushka $1,600,000 $229,823* Demoiselle (G2)
E Z Warrior 1,200,000 238,468 Hollywood Juvenile (G3)
Point Ashley 725,000 237,200 Del Mar Derby (G1)
Zensational 700,000 669,300 Pat O'Brien (G1), Bing Crosby (G1),
Massive Drama 485,000 236,232 Hollywood Prevue (G3)
J Be K 350,000 440,200 , Bay Shore (G3)
Heart Ashley 320,000 205,696
Soul Warrior 290,000 634,700
Pioneerof the Nile 290,000 1,634,200
Eskendereya 250,000 275,700
Z Humor 240,000 722,955 Delta Jackpot (G3)
Thorn Song 200,000 1,132,700 Shoemaker Mile (G1), Shadwell Turf Mile (G1), Firecracker (G2), River City (G3)
Got the Last Laugh 190,000 249,227 Arlington-Washington Futurity (G3)
Eaton's Gift 150,000 471,715 Smile Sprint (G2), Swale (G2)
High Again 140,000 270,546 Bonnie Miss (G2)
Baroness Thatcher 130,000 531,889* Santa Ysabel (G3)
Kays and Jays 120,000 308,030 Hurricane Bertie (G3)
Sherine 85,000 220,662* Comely (G2)
Z Fortune 80,000 432,025 Lecomte (G3)
Marcavelly Private 332,963 Hill Princess (G3), Transylvania (G3)
Downthedustyroad Private 227,130 La Brea (G1)
* Sold privately - earnings are for Zayat only  |  Click underlined race names to view replays

That Zayat thinks in terms of value appreciation is no surprise. In his corporate life, he became known as a successful turnaround artist. His most famous operation so far is Al Ahram Beverage Company, an Egyptian distributor of beer, wine, and nonalcoholic beverages. After leaving Harvard with a public health degree, Zayat worked a stint with real estate mogul and leveraged buyout investor Zev Wolfson, then created a partnership to buy the 150-year-old brewer in 1997. He modernized and expanded before selling to Heineken in 2002 for $280 million. By 2005, Zayat was in semi-retirement and looking for a new pastime.

In racing, Zayat rekindled his lifelong love of horses. The son of a physician and his philanthropic-minded wife, Zayat grew up in the leafy affluence of Cairo's so-called "garden suburb," Ma'adi, where he rode show-jumpers in competition. In racing, Zayat found everything he liked: horses, risk, and an arena for his aggressive competitiveness. He threw himself into the game headfirst, making lavish purchases such as a $4.6 million bid for Maimonides. They didn't all pan out. Maimonides started only twice, winning his maiden and finishing third in the Grade 1 Hopeful, and other high-priced runners such as E Z Warrior ($1.2 million) haven't earned their purchase prices on the track. But Zayat has turned some of his horses into moneymakers. Mushka, a $1.6 million yearling, earned just under $230,000 but later sold for $2.4 million as a broodmare prospect.

Zayat still has manufacturing interests overseas, but his Thoroughbreds have become a beloved, full-time occupation from his New Jersey base.

"A lot of my businesses are overseas, so from 5 a.m. until about 9:30 a.m. I'll focus on that," Zayat said. "When they close, I open my office at Zayat Stable and stay here from 9 a.m. to 7 p.m. doing horse business. So I'm able to manage both businesses."

Zayat loves to gamble. But in selecting and preparing his Thoroughbreds, he tries to hedge his bets by using as much science as he can in identifying runners. A hands-on owner, he applies analytical technology to his horses' early training, calling it "an added tool and an edge in a guessing game."

"We film every breeze, even on the farm, and try to analyze nanoseconds," he said. "Some people say it's corny, wacky-wacky stuff, but, for example, we do heart measurements, too. It's all about the amount of oxygen you're pumping out, and if you have a better heart function, you're better able to carry speed at a higher distance and get a classic horse."

Zayat generally distributes his 2-year-olds to trainers in April. Before that, he brings the trainers in to look at his horses, take notes, and compile a wish list. Eskendereya was on Todd Pletcher's wish list, and Zayat said he liked the match.

"I thought he'd be a master with a Giant's Causeway, considering he trained plenty of them for Coolmore," Zayat said. "I felt knowing the sire was a big benefit."

"What's not to like?" Zayat said of his first impression of Eskendereya at the September yearling sale two years ago. "His walk, his conformation, everything. I was surprised the price was that low. He was bred on a $300,000 stud fee, but the market was soft. He was a standout for us."

Zayat's business and sporting mindsets are similar. Ten years ago, Forbes magazine asked what company he feared most as chairman of Al Ahram, and his answer could have applied to his attitude about racing, as well.

"Fear?" he said. "I don't fear anybody. ... We have a very strong management, we know what we want, and we set the trend. It is for others to fear us!"

Never one to mince words

Zayat's flamboyant entry in racing attracted attention, but so did his outspokenness, as Del Mar CEO Joe Harper discovered in a 2007 altercation with Zayat one morning on the backstretch.

Zayat, unhappy about the variable and slow nature of Del Mar's new synthetic surface, stopped Harper to lodge a protest and demand a change in the track's maintenance. Harper declined, and the exchange became heated. In the end, Zayat pulled 25 horses from Del Mar, where he had been leading owner in 2006. He sent them to Saratoga and won the owner title there instead.

"Yeah, that was fun," Harper said wryly. "He came back in '09. I ran into him two days before we opened, and he said, 'Joe! It never happened, it never happened.'

Zayat Stables: Performance

Year Starts Wins Seconds Thirds Win % Earnings
2010 125 30 25 9 24 $818,017
2009 573 113 86 68 19.7 6,323,286
2008 741 116 113 111 15.7 6,883,902
2007 522 99 90 78 19 6,180,916
2006 208 41 36 32 19.7 2,345,733
2005 30 7 6 5 23.3 224,505
Total 2,185 403 352 303 18.4 22,702,217
* Through March 23

"He's a real treat for a racetrack, because he loves to bet, and he bets pretty good," he said. "We want to make him as comfortable as possible. You know, he's an Egyptian. I lived in Egypt for three months when I was younger, my sister married an Egyptian, and a lot of my friends are Egyptian. They have a certain passion.

"The first day I was in Cairo, we were driving, and there were two men on the street screaming at each other," Harper said. "I asked the Egyptian driver what they were arguing about, and he said, 'They're not fighting. They're just talking.' "

In 2009, Zayat angered Rachel Alexandra fans. In an interview with HRTV, Zayat said he had received a call from Derby winner Mine That Bird's connections, who discussed entering other horses in the Preakness to block Rachel Alexandra. Zayat said he agreed to enter a second horse, but changed his mind and entered only Pioneerof the Nile.

"I'm a very competitive guy by nature, and I would love to beat her," Zayat said at the time.

But some also see an upside in Zayat's passion for the game.

"He's not always rational, and he's a guy who can be very demanding," said one source who, like others, spoke anonymously to protect business interests that sometimes involve Zayat. "But he's got a great love for the business."

Zayat said he's here to stay and will meld that passion into a force for positive change in Thoroughbred racing, possibly by purchasing a racetrack someday.

"The way our tracks are being run, the experience of it, the last people who are respected at these tracks are the customers - meaning the bettors - and the horsemen," he said. "It's a joke."

Zayat said industry fragmentation is the source of most problems, from medication rule differences to television signal disputes. He said he feels he could improve things, in time.

"I have my own issues right now, but when my head is clear and my confidence is back in racing, I'm young enough that I'd like to play a role in trying to spend my own money back in rectifying things and have this industry, hopefully, turning in the right direction," he said.

In the meantime, despite the Fifth Third cloud, Zayat is enjoying Eskendereya's progress toward the Derby. And he's letting his horses and his standing in the owner rankings answer his critics.

"They have tried to character-assassinate me, and they're not going to be successful," he said of Fifth Third. "It's as simple as that."

Asked what he'd like people in racing to know about him, Zayat laughs before saying, "People know all the bad things. I am a human being, and I have a beautiful family, and I care about things other families care about. I laugh, and I cry. I have my strengths, and I have my weaknesses. I am human."

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