Magna Entertainment Corp., which owns Laurel Park and Pimlico Race Course, received another reprieve on loan repayments and more cash infusions as it struggles to pay down debt and sell assets to stay in business.
The Canadian company had owed $180 million to parent MI Developments Inc., which has a 59 percent stake in Magna, by the end of the month. In addition, Magna's $40 million line of credit with a Canadian bank was due Friday.
But Magna announced late Friday that the bank, which had extended its deadline twice, will provide another extension through July 30. MID also extended the deadline for repayment to Aug. 31 and increased the amount available under a bridge loan that had been due from $80 million to $110 million.
However, the new financing agreements are contingent on the outcome of a reorganization proposal that would separate MID from the racetrack company. MID is considering a proposal to sell its stake in Magna Entertainment for $25 million to an unidentified buyer whom analysts say is Frank Stronach, the founder of the racetrack company and MID.
MID's board has not made a recommendation, and no shareholder meeting has been scheduled to vote on the matter.
"This proposal is currently being considered by MID's special committee of independent directors, and, in the circumstances, we believe that it is in the best interests of MID to enter into these amendments," MID Chief Executive Officer John D. Simonetti said in a statement.
If the proposal is not approved, the maturity dates of all the loans will be accelerated, Magna said. For instance, the MID loans would be due within a month after MID notifies Magna Entertainment that the proposal is not moving forward. And the bank loan would be due 14 days earlier than that.
Magna said in a statement that a special committee reviewed and recommended the amended financing agreements to the board.
Magna has lost money since 2002, including $114 million last year, and has survived on infusions from MID and Stronach. It had hoped to sell a number of racetracks and other property to help eliminate its debt, but slumping real estate and credit markets have hampered that effort.
"Although MEC continues to implement its debt elimination plan, the sale of assets contemplated under the debt elimination plan is taking longer than originally contemplated and the success of the debt elimination plan is not assured," Magna said in a statement.
It is also in danger of being delisted from the Nasdaq stock market.
Shares of Magna closed at 41 cents yesterday.
Despite such financial struggles, Stronach has maintained that Magna will turn itself around.
In Maryland, Pimlico is the home of the Preakness, the second leg of horse racing's Triple Crown, which took place this month.
And Laurel Park racetrack could get slots if a November referendum on legalizing slot-machine gambling is approved by voters.
Magna officials said the company plans to bid on a license designated for a part of Anne Arundel County that includes Laurel Park if the referendum is approved.