Though he plans to remain in the Thoroughbred business, prominent horse owner Ahmed Zayat said Feb. 3 he has filed for Chapter 11 bankruptcy protection for his Zayat Stables.
Zayat said the legal move is designed to protect his horse operation from efforts by Fifth Third Bank to have a receiver appointed to oversee Zayat Stables, which owns more than 200 horses. Zayat said he will make sure all bills related to the stable, including payments to trainers, suppliers, and farms where his horses are boarded, will be paid during the time he reorganizes under Chapter 11.
“This action is aimed only at one entity,” Zayat said in a telephone interview.
The owner said his business plan remains unchanged—to operate a stable at the highest level, with top trainers—and that he will continue to pursue his goal of winning the Kentucky Derby Presented by Yum! Brands (gr. I).
Fifth Third has filed suit against Zayat seeking payment on more than $34 million in loans. Zayat has filed a counterclaim against Fifth Third in which he alleges the bank’s officers engaged in "misleading, deceptive, and predatory practices" that have "positioned Zayat Stables for financial ruin."
Zayat has contended that appointment of a receiver is not necessary because the bank has failed to show that the horses’ care is being neglected or that he is not paying for their care. Zayat Stables provided statements from its trainers and farms where its horses are maintained, attesting that the bills were current and that the horses’ care had not been compromised.
"I had no other option but to use my federal right and to go to federal court for protection,” noting that his plan of reorganization is designed to keep him in the horse business.
A hearing on Fifth Third’s request for a receiver had been scheduled in Lexington on Feb. 8 before U.S. District Court Judge Karen Caldwell.
Zayat’s bankruptcy filing in Newark, New Jersey, will likely mean the hearing will be postponed or cancelled. The Chapter 11 filing has the effect of halting all actions in the Fifth Third case, said attorney Dick Downey.
“A bankruptcy filing imposes an automatic stay on all pending collection measures, including lawsuits to collect money and enforce security agreements,” Downey said. “The stay prohibits further litigation in other cases unless and until the stay is lifted by an order of the bankruptcy court. This means that the Feb. 8 hearing will be canceled unless the bankruptcy court orders the stay be lifted in the meantime.”