MEC Gets Extension on $40-Million Loan

MEC received an extension on a $40-million loan.

Magna Entertainment Corp. has been granted a one-month extension on a $40-million loan that was due to mature March 31, a credit agreement that is secured by the assets of the company’s Golden Gate Fields and Santa Anita Park.

Described by MEC in public filings as a “senior secured revolving credit facility,” the loan’s scheduled maturity date has now been extended three times since the original deadline of Jan. 31. MEC said April 1, in a one-paragraph release, that it received the most recent extension, this time to April 30.

According to its annual report filed with the Securities and Exchange Commission, MEC as of Dec. 31, 2007, has borrowed $34.9 million under the credit facility, which is provided through an unnamed Canadian financial institution, and had issued letters of credit totaling $4.3 million, leaving about $800,000 unused and available.

The loan is secured by a first charge of assets on Golden Gate Fields in Albany, Calif., and on a second charge of assets on Santa Anita Park in Arcadia, Calif., and is guaranteed by certain MEC subsidiaries which own and operate those tracks, according to the annual report.

As part of a sweeping proposal announced March 31, MEC’s parent company, MI Developments, would transfer about $247 million in loans to a new entity controlled in a 51% majority by founder Frank Stronach. That proposal, which involves the selling of MI Development’s stake in MEC, would go into effect no later than July 30, if approved by shareholders.

Greenlight Capital, a major shareholder in MI Developments, has blasted the proposal as “outrageous.”

“Mr. Stronach and MI Developments have effectively put a gun to the head of the company's shareholders and convinced a majority to support an outrageous multi-hundred million-dollar payoff," Greenlight Capital president David Einhorn said in a written statement.

Greenlight Capital in 2006 lost a lawsuit in which it charged Stronach and others with shareholder oppression. The case is scheduled for appeal April 21 in Ontario Court of Appeal.

MID said in announcing the proposal that it had the support of more than 50% of holders of Class A shares, which are publicly traded on NASDAQ, and 95% of holders of Class B shares, which are privately held by Stronach and related entities.

"I think this proposal aligns MI's interests with the various stakeholders," MID president John Simonetti told the Toronto Star newspaper.