Ahmed Zayat’s Zayat Stables announced July 15 that the United States Bankruptcy Court for the District of New Jersey has approved its Chapter 11 plan of reorganization. Approval of the plan, under which the prominent stable emerges from bankruptcy, brings to an end an contentious legal battle between the stable and Fifth Third Bank. He must remit all payments by Dec. 31, 2014.
According to the statement from Zayat, all creditors voted unanimously in favor of the plan, including Fifth Third Bank, in accordance with a settlement reached and approved by the bankruptcy court last month.
"I feel as though we’ve reached the light at the end of the tunnel," Zayat said in a prepared statement. "While Chapter 11 was a necessary step to take, Zayat Stables has emerged stronger and we are excited about building on our many recent successes in the racing industry. I look forward to carrying out our reorganization plan, and continuing to develop some of the best horses in the country."
Fifth Third had filed suit in late 2009, contending Zayat had defaulted on $34 million in loans. Zayat countered that bank lenders had assured him his line of credit would be extended, a decision that was overruled by higher executives at Fifth Third. Zayat said he was prepared to sell some of the more than 200 horses in his stable to cover the required minimum loan payments, but withdrew that plan based on the assurances the loan would be extended.
Zayat filed for Chapter 11 bankruptcy protection after the bank sought to appoint a receiver to manage the stable.
Under the reorganization plan, Zayat must make a minimum principal payment of $4 million, with the agreement stipulating that Zayat will pay Fifth Third 40% of proceeds from horses sold (up to $10 million), 50% of proceeds from the sale of horses in excess of $10 million; and 40% of proceeds from claiming races in excess of $495,000.
In 2012 and 2013, Zayat would make annual principal payments of 50% of proceeds from the sale of horses and from claiming race proceeds, to total $3.25 million. In 2014, Zayat would make a payment to cover the balance of the loan before the Dec. 31, 2014 maturity date.
Fifth Third Bank has consistently declined comment on the Zayat case.