Magna Bankruptcy Cuts Wide Swath

A reader sent me the court documents from the Magna bankruptcy filing (all public information, available, at a price, at the Pacer Service Center), and the breadth of the company's debt is breathtaking. A spreadsheet with the complete list of creditors runs 510 pages of 66 lines each. And though it contains numerous duplicate names, I'd say that the true number lies well into the upper range of the 10,001 - 25,000 box checked on their voluntary petition. One thing's for sure - their assets are for certain well at the low end of the More than $1 billion box selected, at $1,049,387....a subjective figure in any case, especially so at this point in time.

Bank of New York has, by far, the largest claims - some $127 million at an interest rate of 8.55% that is nearly usurious by today's standards; as well as nearly $76.2 million at an only slightly more acceptable 7.25%. And you wonder why they're in Chapter 11?

The list of the 50 largest unsecured creditors runs the gamut of companies and individuals both in and out of the racing industry. NYRA appears on the list twice, with two claims, both denoted as 'settlements,' in the amounts of $830,175 and $288,285. Magna owes the Maryland horsemen $3.8 million, the most owed to any such group; the Florida horsemen are in for over $2.1 million. The company is deeply in debt to, amongst others, insurance companies Aon Reed Stenhouse and Zurich North America, the Northern and Southern California off-track wagering companies, the Las Vegas Dissemination Company, Royal River Racing OTB in South Dakota, the Oklahoma Tax Commission, racetracks Louisiana Downs, Churchill Downs, Fair Grounds, Tampa Bay Downs and Gulf Greyhound, Juddmonte Farms, marketing consultants The Leffler Group, Ranger Construction in Florida, video surveillance company Aware Digital, Florida Power and Light, horsemen Jerry Hollendorfer, Bob Baffert, B. Wayne Hughes, and Cecil Peacock, Max International, and the Southern Service Company, which appears to be a shady Florida-based hotel cleaning and maintenance company, a Google search of which yields no website and a litany of complaints regarding the use of undocumented workers. Nice going there, Frank.

Also listed as creditors and of local interest here (and thanks to the reader for taking the time for weeding these out) we have the Daily Racing Form, NYC and other regional OTB's, the New York Times, the NY Turf Writers, the National Museum of Racing, lobbyist Patricia Lynch, the New York State Child Support Processing Center, the State Racing and Wagering Board, Friends of New York Racing, the Monticello and Saratoga harness tracks, the NY State Commission on Public Integrity, NY Corporate and Sales Tax, Specialty World Food in Albany, the NY Senate Republican Campaign Committee, and Angel Cordero, Jr. Gee, I should check to see if I'm on that list. Magna has left few segments of the already reeling economy unscathed.

Andy Beyer wrote about the situation in the Washington Post, and one point he made bears repeating, as it's an important distinction I believe during the still developing economic crisis.

The bankruptcy of the Magna Entertainment Corp.....was not another case of a company ruined by executive greed. On the contrary.

Magna's all-powerful chairman, Frank Stronach, loves horses and racing. He has invested countless millions of his own dollars in his personal breeding and racing operation, and his passion for the game led him to buy racetracks from Gulfstream Park to Santa Anita. He wasn't motivated by the desire to install slot machines or any other hidden agenda. He genuinely thought he could make horse racing more enjoyable and more popular.

But I wonder if Frank was ever really fully focused on his vision for the future of racetracks. I don't recall him ever really articulating a coherent vision, mostly just sound bytes about shopping malls and movie theaters. He's never been a spokesperson for the industry. He had so many things going on, in particular Magna International, his auto parts company, the one in which he actually made money. Over the last few years, he was working on his ill-fated deal with the Russian businessman Oleg Deripaska, which came after a lengthy campaign to win shareholders over for the deal. And that's aside of course from overseeing the operations of several companies, running his breeding operation, developing his energy drinks, and trying to keep the executive spots at Magna Entertainment filled. How is a guy like that supposed to spend any quality time at the races?

It's too bad, really. I always thought that Frank meant well; I think he had only the best intentions when he completely ruined Gulfstream. That's the real tragedy here I believe, aside of course from the prospect of some Magna racetracks soon becoming shopping malls or condos and the resulting livelihoods lost. Here was a guy who really did have the passion AND the money to really help the sport. Yet it's now entirely possible, depending on the eventual disposition of the tracks that are involved, that he will leave the game in significantly worse shape than how he found it.