The Canadian owner of Pimlico and Laurel racetracks reaffirmed yesterday its commitment to Maryland's thoroughbred racing even as the corporate parent faces concerns about its ability to stay in business.
Officials from Magna Entertainment Corp. met with the Maryland Racing Commission in a closed session to discuss the company's finances as the state's pro-slots groups prepare a campaign for a November referendum.
Several lawmakers have questioned whether Magna can successfully operate slots at Laurel Park, which could be granted a license under the ballot measure.
The company has lost money since 2002, including $114 million last year and $87.4 million in 2006. It faces deadlines to pay debt obligations, including nearly $30 million due at the end of the month and two other loans totaling $180 million due May 31.
A plan to sell racetracks and other property to generate cash for those payments isn't progressing fast enough amid slumping real estate and credit markets.
But Scott P. Borgemenke, Magna's executive vice president for racing, said the Maryland Jockey Club is healthy and stable. The club is the umbrella organization for Pimlico and Laurel tracks. Borgemenke added that Magna continues to put resources into the Preakness Stakes, the middle leg of racing's Triple Crown. The Pimlico race is set for May 17.
Responding to how Magna's financial troubles impact the Jockey Club, Borgemenke said: "There are interconnections there."
"The example I use is the Maryland Jockey Club continues to rise on our Christmas tree. It's an ornament that we're proud of and we continue to hang it toward the top of the tree so everyone could see it. ... The tree analogy is strong. We've had our difficulties and challenges but so has the whole industry. This is not just Magna specific."
Pimlico reported net income of $1.36 million in 2006, down from $3.5 million in 2005, according to financial statements submitted to the Maryland Racing Commission. Laurel reported a net loss of $3.6 million in 2006, compared with a loss of $41,499 in 2005. The Jockey Club is expected to submit its financial reports for 2007 next month.
Borgemenke also said yesterday that Magna has yet to decide whether to contribute to the pro-slots campaign being led by former Maryland Budget Secretary Frederick W. Puddester.
The company views the slots referendum as less than ideal because a license at Laurel would not be guaranteed. Foes of slots also are gearing up to lobby citizens to vote against the referendum.
"We're getting advocates to make the image of Laurel that we could do the job, and we could come in with an efficient bid that will make money for us, the horsemen and the state," said Borgemenke, who is meeting with various stakeholders to shore up support.
John B. Franzone, chairman of the racing commission, said he could not comment on what was discussed with Magna officials yesterday.
The meeting was held behind closed doors, according to the commission, because the discussions involved confidential commercial or financial information, which is exempt from the Maryland Public Information Act.
Based on a meeting last week with Borgemenke and other Magna executives, including company founder and Chairman Frank Stronach, Franzone said he believes Magna has a "greater sense of urgency and better management commitment" to turn its operation around.
But because the sale of its assets, including racetracks, is taking longer than expected, Magna likely needs to find other sources of financing and seek extensions on loan payments due in the next few months to stay afloat, according to regulatory filings.
W. Thomas Hodgson, adviser to Stronach and former Magna chief executive officer, said yesterday the company is making progress.
Magna's shares, which face delisting from Nasdaq, closed at nearly 40 cents yesterday.
hanah.cho@baltsun.com