The Feb. 3 Chapter 11 bankruptcy filing by Zayat Stables shows that Keeneland sales company, a handful of trainers across the country, and breeding farms are among the creditors of Ahmed Zayat’s racing operation.
Indeed, the bankruptcy filing offers a rare insight into the finances of one of North America’s largest and most successful racing stables. Zayat Stables was the leading owner of 2008 with more than $6.8 million in stable earnings and finished 2009 as fourth-leading owner in North America with more than $6.3 million in earnings.
Zayat’s bankruptcy filing is the latest volley in the owner’s legal battle with Fifth Third Bank, which is seeking to have Zayat Stable dispersed in order to pay off loans of $34.3 million. Zayat has filed a countersuit, contending he was misled by Fifth Third’s officers into believing his loan would be restructured and would be allowed to continue to borrow against the line of credit. A hearing scheduled in federal court in Lexington next week on the bank’s motion to appoint a receiver to oversee Zayat’s stable has now been cancelled as a result of the bankruptcy filing.
In the bankruptcy papers, Zayat listed liabilities that range between $10 million to $50 million, and assets within that same monetary range. The listing of creditors are not necessarily debts that are outstanding but include those that will need to be paid under terms of the bankruptcy. Zayat has said he plans to remain current on payments and that his trainers, farms, and other vendors will be paid what they are owed.
The top secured creditor listed by Zayat is Keeneland, for $2.4 million in loans to purchase yearlings at the September 2009 sale.
Zayat’s largest unsecured creditor is Sheikh Mohammed’s Darley Stud Management, with $174,900 that will be due for a stud fee. Next on the creditors’ list is the New York law firm of White & Case, for $150,000 in legal fees, followed by Adena Springs, with $143,100 on a stud fee.
Among the trainers on the creditors list are Steve Asmussen, $73,545, Mike Mitchell, $27,060, Nick Zito, $26,877, and Bob Baffert, $21,309.
Eaton Sales is a creditor $54,683 from Zayat for sale consignment expenses and Gainesway Farm is listed at $37,100 for boarding costs for a stallion. Other creditors are Tom VanMeter’s Stockplace Farm, $28,807 in boarding fees, the H. E. Sutton, Sallee, and Brook Ledge van companies, and an array of equine veterinarians and veterinary supply providers.
In the filing, Zayat asserted that he took the action because the stable is “far too valuable to its creditors and the industry as a whole to permit a single creditor, who has acted improperly in reneging on its promises, to cause a forfeiture of the debtor’s assets to the detriment of all creditors and myself as a $40 million investor.”
Zayat said the bankruptcy will permit him to reorganize the stable and to continue to operate it under a business model that includes racing top-class horses with some of America’s top trainers.
Zayat was chairman of Egyptian-based Al Ahran Beverages from 1995 to 2007 before selling the company to Heineken International for $287 million in 2002. Zayat acquired his first horses in 2005 and in 2009 purchased 77 horses at North American auctions for a total of $24.5 million. They included 35 yearlings purchased for $14.8 million, 39 juveniles for which he paid $8.7 million, and three broodmares that cost $985,000.
Among the top horses campaigned by Zayat in 2009 were Pioneerof the Nile , the Santa Anita Derby (gr. I) winner and Kentucky Derby Presented by Yum! Brands (gr. I) runner-up who will enter stud at Vinery near Lexington this year, and three-time grade I winner Zensational, who will enter stud at Hill 'n' Dale Farms near Lexington this year. His other top runners in 2009 included grade II winners Eaton's Gift and Soul Warrior, and grade III winner Heart Ashley.