Fifth Third Bank has filed a lawsuit against Gulf Coast Farms, North America’s fourth-leading breeder for 2010, and related entities alleging they are in default on loans made in 2009 and 2010.
Named as defendants in the suit are Gulf Coast Farms, Gulf Coast Farms Investments, Gerald “Jerry” Bailey, and Lance K. Robinson, as well as related entities and individuals including Jefferson T. Dunford, Gary W. Millett, Jeffrey Collet, and Timpanogas Stallions. The corporate entities and individuals are either based in Kentucky or Utah.
Additional defendants, which are either owed money or have liens against Gulf Coast horses, are named in the suit.
According to the suit, as of Nov. 10, 2010, Gulf Coast owed $6.87 million on a note from 2009 and $7.59 million on a 2010 note. The bank is also owed an additional $664,500 on a “swaps” transaction, according to the filing.
Formed by Robinson and Bailey, Gulf Coast Farms was among the leading breeders in 2010, with horses it bred earning $5.6 million. The most prominent horse representing Gulf Coast last year was Lookin At Lucky , the champion 2- and 3-year-old male of 2009 and 2010, respectively.
Gulf Coast also bred, campaigned, and/or purchased dual classic winner Thunder Gulch and grade I winners Henny Hughes, Is It True, and Honour and Glory.
With Taylor Made Sales Agency as agent, Gulf Coast began dispersing its horses at Keeneland auctions in late 2010 and earlier in January. In announcing the dispersal, Bailey said the current economic environment within the industry was not conducive to the mare-leasing programs in which Gulf Coast was involved.
The Fifth Third suit seeks proceeds from the Gulf Coast dispersal, less amounts owed to Taylor Made Sales, Taylor Made Farm, and Keeneland in connection with the dispersal. Also, any stallion nomination fees would be paid to the respective farms/breeders before the bank receives its money.
Fifth Third also seeks the sale of any stallion shares owned by the defendants as well as proceeds from sale of Gulf Coast’s 25% ownership in the horse Kensei.
The suit notes that proceeds from the Gulf Coast dispersal at the 2010 Keeneland September yearling sale were distributed by the sale company, and that Keeneland is holding sale proceeds from Gulf Coast horses sold in November.
Richard Getty, an attorney representing Gulf Coast, said more than $6 million in revenue was gleaned from the dispersal. It is uncertain how much will be applied toward the Fifth Third notes, since the aforementioned obligations will be taken care of first. There is also a question about liens on the Gulf Coast horses held by another financial entity, Utah-based Celtic Bank Corp.
Getty said Gulf Coast is in the process of drafting its counterclaim in the Fifth Third suit, but he declined to specify what his clients’ response would be. He did say Gulf Coast has a dispute with Fifth Third “forcing horses being sold without reserve in a terrible market rather than waiting to sell at a more favorable time in a more favorable market.”
Mike Meuser, an attorney representing Fifth Third, said his client would have no additional comment on the suit.
Gulf Coast is at least the third suit filed by Fifth Third in recent years against prominent Thoroughbred stables and farms. In the most prominent of those cases, Fifth Third sued Ahmed Zayat’s Zayat Stables for more than $34 million after it declined to renew a line of credit held by the stable.
The two parties settled the litigation after Zayat filed for Chapter 11 bankruptcy protection and filed a reorganization plan that was accepted by the bank and bankruptcy court.
During the protracted legal proceedings, Zayat contended that equine lenders in Fifth Third’s Lexington offices agreed that Zayat’s loans would be continued, but that executives at the bank’s headquarters in Cincinnati, Ohio, demanded that the loans be called in and settled. Zayat contended that if he had known the bank was demanding payment on the loans, he could have sold enough horses to satisfy the obligations.
Fifth Third won a $15.4 million judgment against Stonewall Stallions and various entities owned by Richard and Audrey Haisfields. The Haisfields eventually filed for bankruptcy protection, with most of their horses sold. Stonewall also placed its Kentucky property for sale and relocated operations to Florida.