The Associated Press
WILMINGTON, Del. (AP) - Magna Entertainment Corp. chairman Frank Stronach lost out in the bidding Wednesday for about 490 acres his company, the largest horse track owner in the United States, owns in Florida.
At a bankruptcy court hearing, Magna attorney Brian Rosen said an auction Wednesday morning resulted in a top bid of more than $8 million for an undeveloped tract in Ocala, Fla., on which Magna had once hoped to build a race track or a horse training facility.
The price is less than half what Magna was offered in a deal that fell through last year, but more than $2 million higher than the $5.75 million bid Magna had accepted earlier this month from an entity indirectly controlled by Stronach, who is chairman of both Magna and its parent company, Ontario-based MI Developments, known as MID.
Magna's holdings include Remington Park in Oklahoma City, 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.
"At the auction this morning there was spirited bidding," Rosen told Judge Mary Walrath, who said she would enter an order approving the $8.1 million bid from Par Avenue Properties LLC.
Par Avenue had submitted an initial bid of $5.5 million for the property but had declined, prior to Wednesday's auction, to counter the $5.75 million bid from Stronach's Ocala Meadows Lands LLC.
In approving the purchase, which is expected to close by Sept. 15, Walrath also signed off on expense reimbursements of up to $50,000 for Ocala Meadows, which Rosen credited with engaging in a lively auction process that resulted in Par Avenue's higher offer.
Rosen said the sale proceeds would be set aside in an interest-bearing account whose use by Magna would be subject to court approval. Rosen said after the hearing that he did not know what Par Avenue, based in Orlando, planned to do with the property.
In other developments, Walrath approved bidding procedures for MEC's Remington Park facility, Oklahoma's largest horse track.
The judge previously had given permission for Magna to put Remington Park and other MEC assets up for sale, including Santa Anita Park in California, Thistledown in Ohio and Portland Meadows in Oregon, as well as Magna's interest in Lone Star Park.
Magna has accepted a so-called stalking-horse bid for Remington Park of $80.25 million from Global Gaming RP, a subsidiary of the Chickasaw Nation tribe. Such a bid sets the bar for rival offers. Under the procedures outlined Wednesday, competing bids are due by Sept. 3, with an auction scheduled for Sept. 8.
Rosen said if Magna accepts a higher bid, Global Gaming would get a breakup fee of 2 percent of the purchase price, which currently equates to $1.6 million, and expense reimbursements of about $500,000.
Attorneys said Wednesday that MID has agreed that it will not submit a bid for Remington Park, except to prevent a "fire sale" resulting from a low-ball offer.
Concerns about undue influence being wielded by MID, which has played a dual role as both a potential bidder for Magna assets and one of its primary lenders, prompted a hedge fund's request that Walrath appoint an examiner or Chapter 11 trustee to investigate ties between Magna and its parent company.
A previously postponed hearing on the request by Greenlight Capital Offshore Partners, which is both an unsecured creditor of Magna as well as a large shareholder in MID, was scheduled for Wednesday but was continued until next month.
Greenlight's attorney was not in the courtroom Wednesday, but Rosen said after the hearing that Greenlight's request for an examiner is moot because Walrath ruled last week that Magna's committee of unsecured creditors could prosecute claims against Stronach, MID and other individuals on behalf of Magna's bankruptcy estate.
In a lawsuit, the committee alleges that instead of selling certain assets to keep MEC afloat and out of bankruptcy court, current and former Magna directors allowed MID and Stronach to prop up Magna with equity infusions disguised as secured loans, ensuring that Stronach retained control of MEC assets.
The committee also alleges that Magna fraudulently transferred more than $125 million in loan payments to a subsidiary of MI Developments in the two years leading up to Magna's Chapter 11 filingin March.