Magna says it has defaulted on loan

Magna Entertainment Corp. said Friday it has defaulted on a loan that is secured by its Maryland racing properties, including Laurel Park and Pimlico Racecourse.

According to Magna, the bank that holds the loan, PNC Bank, has "chosen not to exercise its rights and remedies under such loan agreement at this time." According to Magna's most recent financial statements, the loan had net borrowings of $1.6 million as of Sept. 30, 2008.

Magna, the largest racetrack operator in the U.S., recently hired bankruptcy lawyers as advisers. The company has lost $500 million over the last five years and is in danger of defaulting on hundreds of millions of dollars in loans beginning in mid-March. The majority of the debt coming due is held by its parent company and controlling shareholder, MI Developments.

Magna also said that it has notified Well Fargo Bank that it has not met the financial conditions for a $40 million line of credit extended by the bank. Wells Fargo has also chosen not to exercise any of its options on the loan, the company said.