Magna plans $134.2 million in new loans as part of recapitalization

By Sara Rosenberg

New York, July 22 - Magna Entertainment Corp. signed term sheets for $134.2 million in new loans as part of a planned recapitalization that will be provided by a subsidiary of MI Developments Inc., the company's controlling shareholder, according to a news release. The loans are expected to close within the next week.

One loan is a $34.2 million 10-year facility that replaces the existing $77 million construction loan for The Meadows racetrack and slot facility in Pennsylvania and will be used to fund the development, design and construction of an alternative gaming facility at Remington Park in Oklahoma. Prior to completion of Remington Park, the loan will carry an interest rate of Libor plus 255 basis points. After completion, the interest rate will be fixed at 10.5%.

In connection with the Remington Park loan, the company's existing $115 million Gulfstream Park loan will be amended to shorten the interest deferral period to one year and to amend certain restrictive covenants.

The other loan is a $100 million 13-month bridge loan for a non-revolving general credit facility that carries an interest rate of Libor plus 650 basis points with a 250 basis point floor and has an undrawn commitment fee of 100 basis points, the release said.

Of the total bridge loan amount, $50 million is available at closing, $25 million is available on or after Oct. 17 and the last $25 million is available on or after Jan. 16, 2006. The $25 million draws will be subject to certain conditions including Magna's achievement of milestones under the recapitalization plan, specifically related to progress in asset sales efforts, pursuit of a gaming partnership, and achievement of certain EBITDA targets for the third and fourth quarters of 2005.

A condition of the closing of the bridge loan is that Magna's existing $50 million senior secured revolver be amended so that the facility expires no earlier than 12 months after the closing.

Under the recapitalization plan, Magna plans to over the next 12 months recapitalize its balance sheet through the sale of non-strategic real estate, racetracks and other assets to generate about $150 million in proceeds. The asset sale proceeds will be used to reduce debt, including the bridge loan.

The plan also contemplates a possible partnership to pursue alternative gaming opportunities at Magna racetracks, and the possible raising of equity in 2006. The proceeds of an equity offering would be used to further reduce debt and for general corporate purposes.

Magna is an Aurora, Ont.-based owner and operator of horse racetracks and related pari-mutuel wagering operations, including off-track betting facilities.

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