Budget Increases for Gulfstream; Magna Secures Loan

Magna Entertainment announced late Wednesday that the cost of rebuilding Gulfstream Park has escalated, forcing the need to secure a loan from the general contractor performing the work.

In a release, the company stated the capital budget for the work on the South Florida track has increased from $145 million to $171.5 million. The 18.3% increase, the release said, is attributed to "additional material and labor costs, changes in scope and damage and delays resulting from recent hurricanes."

An agreement will allow Magna to borrow up to $13.5 million from BE&K Inc., the parent company of Suitt Construction, and from general funds of MEC that include the net proceeds from the sale of Flamboro Downs.

Magna has completed the sale of Flamboro to Great Canadian Gaming Corp.

Magna had announced a recapitalization plan July 22 that included two binding agreements with its subsidiary, MI Developments, a plan that also included a bridge loan. Now, the agreement is being changed, with numerous amendments including the placement of up to $13 million from the sale of Flamboro into escrow for future Gulfstream costs.

The release states Magna is still trying to sell other assets to pay down the bridge loan, which was for up to $100 million. "In the event that MEC does not enter into definitive agreements prior to Dec. 1, 2005 to sell certain additional assets or repay the full balance of the bridge loan by Jan. 15, 2006, the MID lender will be granted mortgages on certain additional properties owned by MEC," the release said.

The lender made the second part of the bridge loan, $25 million, available Oct. 17. The total is currently $75 million, of which MEC has used $56 million.