Judge approves Magna financial plan

A Delaware bankruptcy judge on Monday approved a plan that will allow Magna Entertainment Corp. to transfer the vast majority of its racing assets to its parent company and largest creditor, MI Developments.

Judge Mary Walrath approved the plan at a Monday hearing after two days of testimony from supporters and opponents of the asset-transfer plan, which was submitted to the court in January with the support of Magna's unsecured creditors. The approval will settle claims made by the unsecured creditors' committee in a lawsuit filed last year.

Under the plan, MI Developments will take possession of Santa Anita Park and Golden Gate Fields in California, Gulfstream Park and Palm Meadows Training Center in Florida, Laurel Park and Pimlico Race Course in Maryland, the account-wagering company XpressBet, and the bet-processing company AmTote. As a result of the transfer, Magna's $400 million debt to MI Developments will be wiped out, and Magna will cease to exist.

Both Magna and MI Developments are controlled by Frank Stronach, the auto-parts industrialist who built Magna Entertainment into the largest racing company in the United States, principally by using money borrowed from or provided by other public companies he controls. Opponents of the reorganization plan had argued in court that MI Developments had undervalued the tracks and had failed to make good-faith efforts to sell the properties so that Stronach could retain control.

"We are thankful that the bankruptcy process is drawing to a close and we have recovered value for our loams," said the chief executive officer of MI Developments, Dennis Mills, in a statement. "As we proceed to take ownership of the acquired assets, we look forward to implementing individual plans for each asset to improve and maximize their economic values." Mills is a former vice chairman of Magna.

Under the asset-transfer plan, Magna's unsecured creditors will receive at least $89 million in cash from properties Magna has already agreed to sell. The creditors, who were owed approximately $220 million, will also receive $1.5 million for expenses related to the lawsuit, which alleged that MI Developments had agreed to loan Magna hundreds of millions of dollars even though it was already aware that the company planned to file for bankruptcy.

Members of the creditors committee have said that they accepted the terms of the asset-transfer plan because they did not believe that Magna could have raised more than $90 million to pay off unsecured debt through a dispersal of its assets.

MI Developments has said that it will draft "funding limitations or other restrictions" regarding its management of the racing properties, but the company has not released any details yet of what those restrictions may entail.