Magna Entertainment Corp. said last night that it had defaulted on a loan for Pimlico Race Course, Laurel Park and the Maryland Jockey Club, but that the financial institutions were not yet going to take action.
The company said in a release after the markets closed that it hadn't met certain financial covenants associated with the loan with PNC Bank, but it did not disclose the amount or the requirements of the loan. This is the first time the company has disclosed troubles with a loan directly related to the Maryland properties. The company also said it had notified Wells Fargo Bank that it had defaulted on a loan.
Magna officials could not be reached for comment yesterday but said in the release that the banks could take action on the loans at a later date. Maryland Jockey Club spokesman Mike Gathagan did not return calls last night.
The financially beleaguered company also faces deadlines on two other loans. It said last week that its controlling shareholder, MI Developments, is abandoning a reorganization plan that had been criticized by the firm's minority shareholders. As a result, the due date on about $275 million in debt owed by Magna to MID had been moved up to March 20.
Magna Entertainment said it will not be able to repay the loans at this time unless it can raise money "through an alternative transaction with MI Developments, asset sales, by taking on additional debt or by some other means." The due date on its $40 million line of credit with a Canadian bank was moved up to Wednesday.
Magna's financial troubles have brought uncertainty to the racing industry and the future of the Preakness Stakes. Canada-based Magna, which has hired a restructuring and bankruptcy firm, hopes to develop a slot machine casino at Laurel Park. But the company's effort to secure a slots license was derailed when it failed to put up $28.5 million in required fees when it submitted its bid this month. Attorneys for the track are suing the state over the licensing process.