Bankruptcy judge approves Magna financing

A bankruptcy judge on Monday agreed to grant final approval of a modified financing plan for horse-track owner Magna Entertainment Corp.

Ontario-based Magna Entertainment is the largest horse track owner in the United States. Its holdings include Golden Gate Fields in Northern California, Gulfstream Park in Florida, Lone Star Park in Texas and Baltimore's Pimlico racetrack — host of the Preakness Stakes, the second leg of the Triple Crown.

The financing plan calls for $38.4 million to be provided to MEC by a subsidiary of its parent company, MI Developments. The amount was reduced from the $62.5 million initially proposed, and the maturity extended 60 days until Nov. 6, allowing a longer marketing period for potential sales of MEC's assets.

Attorneys said the amount of financing needed was reduced because interest on debt owed by MEC to MI Developments, also known as MID, prior to the bankruptcy filing will accrue during the Chapter 11 proceedings rather than being paid in cash.

Meanwhile, a hearing on a motion to approve sale procedures for certain MEC assets was postponed from Monday until May 4. MID simultaneously withdrew a related motion seeking approval of its stalking-horse bid for other MEC assets, including Gulfstream Park and Golden Gate Fields. While citing objections from other parties as the reason it withdrew the motion, MID nevertheless said it would continue to evaluate whether to bid on Magna Entertainment assets.

In other developments, Judge Mary Walrath agreed to postpone consideration of a hedge fund's request for the appointment of an examiner in the case until the May 4 court date.

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Greenlight Capital Offshore Partners argued that an examiner or a Chapter 11 trustee is needed to investigate ties between Magna Entertainment and MID, in its dual role as both a bidder for MEC assets and one of its primary lenders.

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Mark Kenney, an attorney for the U.S. Trustee, also called for the appointment of an independent examiner, noting the potential conflicts posed by Frank Stronach, who is chairman of both MEC and MID.

"No matter how you look at it, there's one person who is in control of everything ... . Basically, there are one person's fingerprints on too many aspects of this case," Kenney said.

But MEC attorney Brian Rosen noted that the company has replaced Stronach as chief executive with Greg Rayburn, a senior managing director of FTI Palladium Partners who has served as CEO or chief restructuring officer in other bankruptcy cases, including WorldCom and Muzak Holdings LLC.