Racetrack owner Magna Entertainment Corp. could default on loans as early as March after its parent company decided not to proceed with a reorganization proposal.
MI Developments, parent company of Magna Entertainment, announced late Wednesday that it would not proceed with a reorganization proposal that would have infused the racetrack owner with $50-million in cash for daily operations and $75-million to fund expanded gaming plans in Maryland.
While Frank Stronach is chairman of both companies, investors in MI Developments opposed the proposal that would have infused money into Magna Entertainment and restructured the racetrack owner. In a February 9 letter, David Einhorn of Greenlight Capital urged the MI Developments Board of Directors to not approve the plan.
“The majority of shareholders of MID do not support the use of MID’s valuable cash flows to fund Magna Entertainment Corp,” Einhorn said in the letter. “The plan is just one more egregious attempt to further erode MID’s value.”
With the decision by MI Developments to not move forward on the plan, Magna will be in danger of defaulting on several loans totaling about $250-million.
In accordance with its loan terms, Magna Entertainment could face a March 20 deadline for repayment of a $126-million bridge loan owed to an MI Developments subsidiary, $100-million in financing of its Gulfstream Park project, as well as an additional loan of $48.5-million owed to the MI Developments subsidiary. That additional loan was made in December 2008.
Magna also faces a March 5 due date on a $40-million credit facility with a Canadian chartered bank.
.
