Chairman and interim chief executive officer Frank Stronach made the remarks in an earnings conference call in an attempt to clarify earlier company statements concerning assets listed for sale in a year-old plan to reduce debt.
An Aug. 6 press release detailing the company’s second-quarter financials only said the sale of certain assets was being “reconsidered,” and it was assumed by many to mean that certain previously-disclosed tracks on the market could be retained, such as Remington Park and Thistledown. Stronach instead said one of MEC’s premier holdings was apparently also available for purchase to help the company’s struggling bottom line.
"The assets--call it the fringe tracks, the smaller tracks--that will go ahead regardless," said Stronach in a response to a question from a financial analyst. "Look, if we have high debt, we might have to sell 50% of Santa Anita, right? Or 60%. In the final analysis, we want to get out of the debt. So that's what we mean. We still have a fall-back position to get the company back on a viable basis...but we still will go ahead in selling what isn't strategic to us. What we listed, that still goes ahead."
MEC, which posted a loss of $21.3 million in the second quarter, has lost $67.7 million year-to-date, and has an accumulated deficit of $577.8 million with a working capital deficiency of $151.1 million, according to financial disclosures. The company also said it has $229.8 million in debt due by June 30, 2009, including a $40-million senior credit facility guaranteed in part by Santa Anita Park that is now scheduled to mature by Aug. 15.
Stronach said, as he has in previous conference calls and press statements, that he is still committed to MEC.
“Keep in mind, I put money in this year and last year,” he said, referring to previously-disclosed stock purchases. “And I think I am reasonably intelligent. I wouldn’t throw money into an empty hole.”
MEC officials at first said they couldn’t discuss a controversial proposal to restructure the relationship between MEC, its parent company MI Developments, and controlling company Magna International, all of which Stronach heads as chairman. The complex proposal, which has been challenged by certain minority shareholders in MID, involves the sale of MID’s stake in MEC to a Stronach-led entity, or entities, which would also assume up to $250 million in loans made to MEC. The proposal, which was supposed to be put to a shareholder vote in July, was recently tabled by MID.
But Stronach later in the conference call said he was still looking at options with the reorganization plan, which includes the elimination of a dual-share voting structure the chairman controls.
“You have to understand, that MID is still a key to that,” he said. “MID shareholders would love to see only one class of share, and if there is a reasonable structure, I would have no problem with that. I can't get into details. I have some chips in my hand, which the MID shareholders would like to have. I have no problem giving up those chips if it is a fair thing for MEC.”
MEC a year ago unveiled its debt-reduction plan, which included marketing for sale various properties owned by the company, including racetracks. A few properties have since been sold to buyers other than company-related entities, most recently, the former Great Lakes Down facility in Muskegon, Mich.
The recent quarterly filing said “discussions” have also taken place with suitors interested in racetrack properties Remington Park in Oklahoma, Thistledown in Ohio, and the company’s ownership interest in Portland Meadows in Oregon. Additionally, land once designated for racetrack development in Ocala, Fla., was described as being “in negotiations with a potential buyer.”
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