David Einhorn of Greenlight Capital, which along with affiliate entities owns a 10.9% stake in MI Developments, made the assertions in a letter filed Aug. 26 with the Securities and Exchange Commission. Greenlight in the past has unsuccessfully sued MI Developments, founding chairman Frank Stronach, and others in Canadian court for alleged shareholder oppression.
In his letter, Einhorn asks the MID board of directors to look at its options in dealing with MEC’s estimated $267 million in debt, suggesting the foreclosure of senior debt to “position” for sale to a third party.
“MID’s Board of Directors has a fiduciary duty to protect the shareholders of MID, not to focus as Mr. Stronach says on what’s a ‘fair thing for MEC,’ " Einhorn wrote.
Einhorn, who also used Greenlight’s large minority stake in MID to challenge a since-postponed reorganization plan, called on directors to “protect our interests from Mr. Stronach’s continued irresponsible, uneconomic, and self-serving support of MEC.
“The facts are obvious and beyond dispute: MEC has utterly failed as a business enterprise,” he wrote. “More money, time, and resources will not resuscitate it under Mr. Stronach’s leadership or anyone else he appoints to pursue his so-called vision.”
A reaction from MID or MEC officials was not immediately available. But MID interim chief executive officer Dennis Mills told the Baltimore Sun Aug. 26 the companies were working on relevant issues “with the speed of Olympians.
"Make no mistake, Frank Stronach didn't build a reputation over 50 years to all of a sudden have it stained," Mills told the Sun.
MEC, which has posted losses of more than $580 million since 2002, implemented a debt-reduction plan in August 2007, a move which Einhorn claims has only reduced debt by $21.6 million.
“MID’s Board must stop expending any more funds to prop up the value of the MEC equity,” he wrote.
Einhorn and Greenlight Capital first sued on the grounds of shareholder oppression in 2005, an Ontario Superior Court of Justice case which MID and others won in 2006. An appeals court affirmed the lower-court ruling in July, ruling Greenlight Capital was liable for $2.1 million in indemnity costs.
In morning stock-market action, MID shares were trading at $20.25, up 0.7%, while shares of MEC were trading at $7.39, up 0.5%