Maryland's thoroughbred racetracks, Preakness Stakes out of auction,

Daily Record, The (Baltimore), May 5, 2009 by Liz Farmer

Although Maryland's thoroughbred racetracks and the Preakness Stakes have been scratched from the auction block, the tracks' bankrupt owner and its creditors would still entertain bids for the properties, their attorneys told a Delaware bankruptcy judge Monday.

"By no means are we abandoning the possibility that we can sell those assets in the future," said Magna Entertainment Corp. attorney Brian S. Rosen of New York-based Weil, Gotshal & Manges LLP. "We are going to permit parties to do due diligence, and in the extent that a bid comes in that is attractive, the debtors will consider it."

Kenneth H. Eckstein, who represents the unsecured creditors committee, said that although Magna was withdrawing some highly prized assets from its auction plan -- namely, Pimlico Race Course, Laurel Park and the Preakness -- the group approved of streamlining the process for now.

"The creditors will be revisiting in the next several weeks what is appropriate with these assets," he said. "There may be a second stage to this process, but it will be very useful to know what the interest is in the current assets. ... There's no need to flood the market."

Lone Star Park in Texas, Remington Park in Oklahoma City and Santa Anita in Southern California, which Rosen said are the Canadian-based company's most valuable properties, will be included in the auction. He and Eckstein said they would rather gauge the market interest of those properties first instead of overloading the auction, which is scheduled for this summer in New York.

Rosen added Magna was still unsure of Pimlico's exact value as being host track for the Preakness, and therefore the company was hesitant to place it up for auction before it could asses a market price.

"Preakness is a great day," Rosen said after the hearing. "The problem is Preakness funds that property for the whole rest of the year."

Reached by phone Monday, Pikesville developer Carl Verstandig said the recent developments have not changed his plans to bid on Magna's Maryland tracks.

"We still expect to submit a bid some time this summer," he said.

Greg Cross, a Venable LLP attorney representing the state of Maryland, told The Daily Record after Magna submitted its revised auction procedures on Friday that the state would continue to "actively pursue" its interests. But he was ambiguous about whether Maryland would continue with plans to submit a bid.

"We are going to continue to be active in protecting the state's interest in Preakness and horse racing in Maryland," he said.

Delaware-based attorneys for the city of Baltimore and the state said at the hearing they reserve the right to object again to bid procedures if Magna decided to auction off the Maryland tracks at a later date.

Before Pimlico, Laurel and the Preakness were removed from the auction, the city and state were seeking clarification on their statutory rights regarding the properties, including the state's request that the court reaffirm its right of first refusal on the Preakness.

The auction schedule and procedures for Magna's remaining properties, as approved by Judge Mary F. Walrath Monday, require expressions of intent by May 27 with bids due by July 31. Bids must include a deposit worth 10 percent of the bid price and proof of the bidder's ability to close the transaction.

Magna will take the highest bid for each property and enter it as the stalking horse bidder, which competitors can bid against at a Sept. 8 auction. A stalking horse bid is an initial bid on assets from a buyer of the debtor's choosing.

MI Developments Inc., Magna's parent company, was the stalking horse bidder for Magna's interest in tracks in California, Florida and Texas and the wagering company XpressBet in the original proposed auction procedures that included the Maryland properties. But MI Developments said last month it was abandoning its initial offer in response to objections filed by creditors and potential bidders that questioned its close financial involvement. Magna submitted its revised auction procedures Friday afternoon.

At Monday's hearing on the new proposal, Walrath ordered that MI Developments and Magna's lender, MID Islandi SF, take no part in the sale process after objections were raised by Greenlight Capital Inc.

Greenlight, a minority shareholder with MI Developments, also asked for a separate bankruptcy court examiner to be appointed Monday but the judge delayed that motion until the May 27 hearing to allow the unsecured creditors committee time to conduct its own investigation before determining the need for a third party.