Failed plan results in Magna's loans coming due

MI Developments has abandoned a complex proposal to spin-off the troubled racing company Magna Entertainment Corp., according to both companies, a decision that leaves Magna with few options to retire a crushing debt load.

In a release, MI Developments said it had canceled the plan because of "current global economic conditions." The plan, which was announced in late November but was immediately opposed by several large shareholders, would have transferred all of MI Development's stock in Magna Entertainment to a company controlled by Magna's founder, Frank Stronach.

Magna Entertainment owes MI Developments approximately $175 million under three loans. As a result of the cancellation, a loan worth $75 million will become due on March 13, and a $100 million loan will now become due on March 20, 2009. Under the spin-off plan, Magna Entertainment would not have had to begin to repay the loans until the end of the year.

According to the companies, if Magna Entertainment defaults on any of those loans, all of its other long-term debt will immediately become due.

Magna Entertainment, which owns 10 tracks, including Santa Anita Park and Gulfstream Park, has lost more than $500 million over the past five years and holds $500 million in debt. It recently hired a company specializing in bankruptcy reorganizations as an advisor.

Magna Entertainment was spun-off in 2000 from the auto-parts company Magna International. In 2003, MI Developments, a property-holding company, was spun-off from Magna International as well, and became Magna Entertainment's parent.