At Laurel Race Course, a jockey leave the paddock and heads to… (Baltimore Sun photo by Algerina…)
The bankrupt owner of Laurel Park and Pimlico Race Course has called off an auction of the horse tracks because it has come to an agreement with creditors where its parent company would become the owner, according to parties involved with the deal.
Magna Entertainment Corp., which filed for Chapter 11 bankruptcy protection last March, had been scheduled to auction off the tracks Thursday, but now ownership would go to MI Developments, which owns Magna. The deal would be a part of Magna's reorganization plan, which must be approved by a bankruptcy judge.
Six bidders had expressed interest in the tracks, including the Cordish Cos., Penn National Gaming Inc. and Joseph A. De Francis and his family, the former owners of the Maryland tracks. Blow Horn Equity LLC, a Pennsylvania horse breeder and racing consultant backed by private equity, had also bid on the tracks.
To acquire the assets of the Maryland Jockey Club, MID will pony up $89 million to settle a lawsuit filed by Magna's unsecured creditors committee. That money will be used to pay general unsecured claims against Magna and its other debtor entities.
MID also will pay about $13 million to cover secured claims of PNC Bank, about $6 million for holders of unsecured claims against the jockey club and $5 million to the former owners of Laurel Park and Pimlico.
Plans to sell the track had raised concern about the future of the racing in Maryland and the fate of Preakness, the second leg of horse racing's Triple Crown.
"There is no indication at this point that anything would be happening to the Preakness," said Greg Cross, a Venable bankruptcy attorney who is representing Maryland.
Cross said the state still has all the protections it has had all along. The General Assembly passed legislation last year that gave the state the right to review the bids and match any bid for the race. The state also had the authority to exercise a "right of first refusal" and acquire the tracks and Preakness through eminent domain.
MID has not yet agreed to state covenants that would guarantee the Preakness will remain in Maryland, said Dan Friedman, an assistant attorney general.
Attorneys for the state are continuing to work with MID in hopes of finalizing those covenants in the next week, Friedman said.
"We're looking for covenants that are enforceable that will survive any transfer, not just Magna to MID" but that would apply to any future sale or transfer, he said.
He said he believes that before MID could hold any races at the tracks it would need to go through a process to obtain a license from the Maryland Racing Commission, as would any new owner.
Bidders who had planned to compete for the tracks said they were disappointed by the decision.
David Cordish said the Cordish Cos. had put in a bid that was "substantially more than what the tracks were going for."
"I will leave it to others to judge what kind of steward Magna has been of horse racing in Maryland, and why they did not put up their money to apply for a casino," Cordish said. "We can only hope for Maryland's racing sake for the best."
Cordish said his company's plans to build a slots casino at Arundel Mills remain unchanged despite a movement to stop plans through a voter referendum.
Jeffrey Seder, managing director of Blow Horn Equity, said he got an e-mail about the cancellation around noon Tuesday. He had heard rumors about a deal in the works with MID, but said that he talked with Magna attorneys Monday who assured him the auction was still on.
"I'm very disappointed," Seder said. "I know that we were going to bid much higher than what they gave the assets back to (MID)."
Seder said that MID hasn't invested in the tracks in years and he doubts that would change.
"They haven't put in a new ashtray in 35 years," Seder said. "They have been losing more and more money. It's been going down the tubes. We were going to fix it up and had a lot of innovative ideas. Now we won't get the shot."
The group that represents the state's horsemen said it was more comfortable with MID as owner because the chances are better that live horse racing would remain. There was concern that a new owner might turn the tracks into a more profitable venture, such as a shopping center.
"I haven't had a chance to talk to Magna about their plans, but all things being equal, we know that (the owner of the company) has had a desire to run races," said Richard Hoffberger, president of the Maryland Thoroughbred Horsemen's Association.
Hoffberger said that Magna has invested money in the tracks over the years, but could have spent more on marketing. He also said that slots would help the tracks financially.
"Did they do everything right?" asked Hoffberger. "I don't even think that MID will tell you that they did everything right. At least we know these guys and we can work with them on a racing program."
Staff reporter Lorraine Mirabella and the Associated Press contributed to this article.