Bank Files Suit Against Paulson Trust

Bank seeks to take possession and sell horses put up as collateral.

The Allen E. Paulson Living Trust has been sued by PNC Bank, claiming the breeding entity has defaulted on a loan totaling nearly $1.6 million. 

In the suit, PNC seeks to take possession of horses put up as collateral for the loan, which the bank claims is in default for a total of $1,578.996, plus interest.

According to documents filed in connection with the suit, the trust obtained a revolving line of credit for $7.2 million in May 2002 from National City Bank, which has subsequently been acquired by PNC. The loan has been renewed since, the most recent renewal coming in March 2009.

The suit claims the trust failed to make payments on the principal and interest, and that the trust was notified on Oct. 22, 2009, that it was in default "for the failure to sell certain equine collateral."

Included in the collateral listed by the bank, which it is seeking to take possession of and sell, are a 2009 filly by Ghostzapper  out of Horse of the Year Azeri and a 2009 colt by Shakespeare produced from Lola’s Dancer. The Azeri filly was nominated to this year’s Keeneland January sale and was later withdrawn. The Shakespeare colt failed to sell at the Keeneland November sale.

A leading owner and breeder, Allen Paulson died in 2000 and his sons were permitted to continue to operate the stable as part of a settlement with Paulson’s widow, Madeleine. Among the horses raced by Paulson were Cigar, Theatrical, Estrapade, Blushing John, and Arezi. He was survived by his sons Michael, Richard, and James. Richard Paulson died in 2007.

In March 2009, James Paulson and Vikki Paulson, the widow of Richard Paulson, were named trustees of the trust, replacing Michael Paulson.

The first foal produced from Azeri was an A.P. Indy colt bought back by the trust after a high bid of $7.7 million did not meet the reserve price. The price was a world Thoroughbred auction record for a buyback. The colt eventually sold for $1.9 million and is now racing under the name Take Control. The colt was previously named Vallenzeri.

Azeri herself was also bought back after failing to attain her reserve price at the 2009 Keeneland January sale and was subsequently sold for $2.25 million in November of 2009. According to the PNC suit, the bank required a $4.4 million reserve on Azeri when she was first offered at auction.

Efforts to reach attorneys representing the Paulson trust were unsuccessful.