Magna Entertainment files plan based on committee lawsuit settlement

By Caroline Salls

Pittsburgh, Feb. 18 - Magna Entertainment Corp. filed a plan of reorganization and related disclosure statement with the U.S. Bankruptcy Court for the District of Delaware in conjunction with its official committee of unsecured creditors and MI Developments Inc., according to an MI Developments news release.

MI Developments said the plan includes a settlement of an action filed by the committee on July 21, 2009 against MI Developments and Magna.

As previously reported, under the settlement, Magna's unsecured creditors will receive $75 million in cash in exchange for dismissal of the lawsuit, plus $1.5 million as reimbursement for lawsuit-related expenses.

In addition, the parties have agreed that MI Developments will receive the first $20 million of the proceeds of the sale of the company's Thistledown property, and Magna's unsecured creditors will receive the rest.

MI Developments will also receive the first $20 million of the proceeds from the sale of the Maryland Jockey Club property, with MI Developments and the unsecured creditors splitting any excess proceeds.

Upon the sale of Magna's Lone Star Park property, Magna's unsecured creditors will receive the first $20 million of proceeds, and MI Developments will receive the rest.

MI Developments said it will also have the right to receive the assets or proceeds from the sale of Portland Meadows.

According to the release, the companies and the committee have entered into a plan support agreement under which Magna has agreed to seek approval of the disclosure statement by March 31 and obtain confirmation of the plan by April 30.

Under the plan, Magna's non-real estate related assets will be transferred to MI Developments.

Creditor treatment

Treatment of creditors will include:

• Holders of administrative claims, priority tax claims and priority non-tax claims will be paid in full in cash;

• MI Developments will receive the sale proceeds outlined in the settlement or related operating trust interests, as well as the non-real estate assets;

• Holders of Wells Fargo claims, BMO claims and secured claims will be paid in cash or will receive the proceeds from the sale of the property securing the claims or the return of that property;

• Holders of PNC claims will be paid in full in cash from sale proceeds, plus interest if the sale of the Maryland Jockey Club assets closes after the plan effective date;

• Holders of 8.55% note claims, 7¼% note claims and non-Maryland Jockey Club general unsecured claims will receive a share of creditor cash and, if an operating trust is established, trust interests;

• Holders of Maryland Jockey Club claims will either be paid in full in cash from Maryland Jockey Club sale proceeds or receive a share of the sale proceeds after the PNC claims are satisfied; and

• Holders of existing equity interests will receive no distribution.

Magna, an Aurora, Ont.-based owner and operator of horse racetracks, filed for bankruptcy on March 5, 2009. Its Chapter 11 case number is 09-10720.

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