Churchill Downs Inc. has moved to protect its interest in joint ventures with bankrupt Magna Entertainment Corp. by joining in a flurry of objections filed recently in a Delaware federal court.
CDI, which along with MEC controls 50% interest in content company TrackNet Media Group and broadcast entity HRTV, filed an objection March 27 against the bidding process proposed by MEC to sell its assets through court auctions.
Questioning the terms of the bid process also objected to by lien-holding banks and the state of Maryland, among others, CDI asserts that the MEC sales motions aren’t clear on how the assets it jointly holds with MEC will be handled in the proposed auctions. It also warns that any transfer of those assets could be contractually voided if sold in such a manner.
“The purpose of this objection is to (a) prevent assets not owned by the debtors from being marketed or sold pursuant to the sale motions, (b) prevent assets that cannot be assigned from being marketed or sold pursuant to the sale motions, and (c) alert potential purchasers to the fact that any sale of the joint venture interests will trigger uncurable breaches and dissolution rights under the LLC agreements,” CDI said in its filing.
The sale motions proposed by MEC include “cryptic references” that suggest the company has the right to auction its interests in TrackNet and HRTV, the objection claims. But CDI claims the interests cannot be sold without its consent per the terms under the joint-venture agreements.
“However, CDI's consent has been neither sought nor obtained. Thus, even if they were property of the estate, the MEC content and MEC HRTV membership interests cannot be assigned,” the complaint said. CDI also contends that the agreement allows it to dissolve the joint ventures under certain circumstances.
CDI and MEC announced the joint ventures in March 2007. TrackNet, in part, sells racing signals controlled by the companies to other wagering outlets. HRTV, which was launched by MEC in early 2003, provides racing programming to 16 million subscribers, according to court filings.
A court hearing on the bidding process is scheduled for April 3. The sale motions seek to hold the auction(s) in July.