Magna Entertainment Corp., the financially troubled owner of Laurel Park and Pimlico Race Course, faces a crucial loan deadline today that, if unmet, could force the racetrack operator to declare bankruptcy, according to SEC documents.
Magna executives have warned that lenders could call in virtually all of its debt if it misses payments to banks and others. Magna has more than $600 million in debt, according to documents filed with the Securities and Exchange Commission.
The loan due today is a $40 million credit line from the Bank of Montreal. Magna has received at least eight extensions on that loan. But this marks the first payment due since a reorganization plan involving its controlling shareholder dissolved last month.
The Canadian company, which hopes to put slot machines at Laurel Park, hired debt restructuring and Chapter 11 bankruptcy consultants last fall. And Magna said last week that it defaulted on a loan tied to Pimlico, Laurel and the Maryland Jockey Club because it hadn't met certain financial covenants.
Though PNC Bank has yet to take action on that loan, it can do so at any time. And Magna's stock is scheduled to be delisted from the Toronto Stock Exchange April 1 - its shares trades for pennies on the Nasdaq.
When asked whether the company would file for bankruptcy protection, Magna chief executive Frank Stronach said in a brief telephone interview from Europe last night that SEC rules prevent him from making statements about future actions. But he said, "I will do everything I can do to see that racing will get on a healthy footing."
Magna owns Santa Anita Park in Southern California and Gulfstream Park in Southern Florida, among others. And Baltimore's Pimlico is host to the Preakness Stakes, the second leg of the Triple Crown.
A source familiar with the situation told The Baltimore Sun that Maryland Jockey Club employees were paid yesterday, two days ahead of their regular Friday payday. And sources told the Los Angeles Daily News that Magna employees had been told to turn in their timecards last Monday and were scheduled to be paid yesterday or today.
Companies typically pay employees before filing for bankruptcy protection because subsequent payments must be approved by a judge. Magna outlined its difficulties late last year to the SEC, saying any defaults could trigger a series of loan payments unless it obtains waivers or extensions from lenders.
