MI Developments abandons planned reorganization due to debt financing troubles, Magna loans accelerated

New York, Feb. 18 - MI Developments Inc. said it has abandoned its planned reorganization announced on Nov. 26.

The decision accelerates loans owed by Magna Entertainment Corp.

Aurora, Ont.-based MI Developments said in a news release that it doubts it can arrange the debt financing that was part of the plan due to "among other things, current global economic conditions, the continued disruptions in the financial markets and ongoing uncertainty in the automotive industry."

While the proposal allowed for the debt to be arranged after closing, MI Developments added that it "does not believe that it would be prudent to raise the new debt until such time as the ongoing uncertainty in the automotive industry has been resolved."

MI Developments added that it is in discussions with Magna Entertainment Corp. about alternatives for its investment in Magna Entertainment.

Under the terms of the agreements, MI Developments' bridge loan to Magna and the first tranche of the new loan to Magna will be accelerated to March 20 as will the deadline to repay $100 million under the Gulfstream project financing. The maturity of the second tranche of the new loan has already been accelerated to May 13.

There is $48.5 million outstanding on the first tranche of the new loan, $0.7 million on the second tranche and $126.2 million on the bridge loan.

The maturity of Magna's credit facility with a Canadian bank is accelerated to March 5.

Under the proposed reorganization, Magna Entertainment entered into an agreement with controlling shareholder MI Developments and entities affiliated with Magna chairman and chief executive officer Frank Stronach for transactions including the spinoff of Magna to MI's existing shareholders.

Magna said the agreement includes a multi-step series of transactions designed to recapitalize and reposition the company to enable it to follow through with its strategy of horse racing, gaming and entertainment on a stand-alone basis.

Upon completion of the transactions, Magna will ultimately be directly controlled by the Stronach Group, MI Developments will no longer have any ownership interest in Magna, and MI will be prohibited from investing any additional funds into, or entering into any new transactions with Magna without the approval of the minority MI Developments class A shareholders.

Magna Entertainment is an Aurora, Ont., owner and operator of horse racetracks.

MI Developments is a real estate operating company engaged in the ownership, development, management, leasing and acquisition of industrial and commercial real estate properties located in North America and Europe.

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