Magna Entertainment Corp. announced Nov. 26 an agreement with MI Developments, the company’s controlling shareholder, which will allow it to “recapitalize and reposition MEC to enable it to pursue its strategy of horse racing, gaming, and entertainment on a standalone basis.”
If the plan is implemented, MEC will ultimately be controlled directly by MEC chairman Frank Stronach. MID would no longer have any ownership interest in MEC and would be prohibited from investing any additional funds into, or entering into any new transactions with, MEC without the approval of the minority MID Class A shareholders.
MEC said it has extended the maturity date of its $40-million senior secured revolving credit facility with a Canadian chartered bank from Nov. 28 to March 16, 2009, subject to certain acceleration provisions. MEC incurred a fee of $1.75 million in connection with the extension of the loan.
Initially, the proposal will give MEC a $50-million loan from MID for operations, and another $75-million loan from MID to fund the licensing of a potential slot-machine parlor at MEC-owned Laurel Park in Maryland.
MID has extended to March 31, 2009, the maturity date of the existing bridge loan from an MID. MEC has said it would use “commercially reasonable efforts to sell or enter into joint ventures in respect of its assets, including its core racetrack assets.” Real-estate assets in California and Florida would be sold by MEC to MID for fair market value.
The $75-million loan for Maryland operations includes $45 million to pay for a slots license, and $30 million to construct a temporary slots facility at Laurel. The Maryland legislature still hasn’t officially picked Laurel as a slots location, and if it does, local approvals will be necessary.
“We are thrilled with this announcement,” Tom Chuckas, president and chief operating officer of the Maryland Jockey Club, said in a statement.“The full financial commitment from MI Developments will allow the Maryland Jockey Club to have the resources to pursue the (slot-machine) application and the strength to make Laurel Park the best possible facility for alternative gaming.”
As for the real estate, MID will purchase for cash from MEC land in Aventura and Ocala, Fla.; Dixon, Calif.; additional acreage at the Palm Meadows Training Center in Florida; and MEC membership interest in — and land underlying — the company’s joint venture with Forest City Enterprises at Gulfstream Park.
The “fair market” purchase price for the assets is $100 million to $120 million in total, MEC said in a release.