Magna Entertainment Corp. officials said Sept. 13 the company’s debt-reduction plan isn’t a “fire sale,” and they hope the racetrack operator will be in the black in 2009.
MEC officials the past two years have discussed debt reduction, but during an afternoon teleconference with analysts, company consultant Thomas Hodgson, a former chief executive officer of the company, said it’s a “matter of urgency.”
Said MEC chairman Frank Stronach: “I’m very determined to really crack the whip.”
MEC earlier in the day released a plan to eliminate net debt by Dec. 31, 2008, by generating $600 million to $700 million from the sale of assets. The company also will arrange $100 million in bridge funding to avoid “liquidity concerns” and to give the plan time to work, including a $20-milion private placement of stock from Stronach’s family.
MEC earlier said it plans to vacate Michigan by relinquishing a Detroit-area racing license and selling Great Lakes Downs; and selling Portland Meadows in Oregon and Thistledown in Ohio. It now intends to sell real estate in Dixon, Calif., where it planned to build a racetrack; Ocala, Fla.; Aventura and Hallandale, Fla., where Gulfstream Park is located; Laurel, Md., where Laurel Park is located; and Austria.
MEC has added Remington Park in Oklahoma as a potential sale candidate, and hopes to find partners for company projects, including those at Gulfstream and Santa Anita Park.
Hodgson, who runs Greenbrook Capital Partners, the consultancy, said MEC opted for a bridge loan “so we’re not required to take fire-sale prices. These are very valuable properties.” He also said his company’s review, unanimously approved by the MEC board of directors, ensures “we could anticipate MEC being cash flow-positive in 2009.”
The other $80 million would come from MI Developments, parent company of MEC. The bridge loan matures May 31, 2008, and is non-revolving.
“We were running out of cash,” Stronach said of the need for the bridge loan and his family’s contribution. “It was not an easy thing to do. MID is the largest shareholder and said, ‘What about you, Stronach? How much faith do you have in the company?’ ”
MEC will continue to update the market on any sales of properties, officials said, but won’t comment on the value of the properties at this time.