Magna, MI Developments terminate stalking horse bid; DIP loan amended

By Caroline Salls

Pittsburgh, April 20 - Magna Entertainment Corp. and MI Developments Inc. have agreed to terminate MI Developments' stalking horse bid to purchase some of Magna's assets, according to an MI Developments news release.

Although the stalking horse bid has been terminated, MI Developments said it will continue to evaluate whether to bid on Magna's assets through the Chapter 11 sales process.

"MID's principal concern with respect to the MEC Chapter 11 process is to maximize our recovery on our secured loans to MEC," MI Developments vice chairman and chief executive officer Dennis Mills said in the release.

"We made our stalking horse bid because we believe that MEC owns some very valuable and attractive assets.

"Although we continue to be interested in acquiring assets from MEC, we have agreed to withdraw our stalking horse bid in response to objections raised by a number of parties in the MEC Chapter 11 process and with the intent of expediting that process.

"As the process moves forward, MID will continue to evaluate all opportunities to preserve the value of our secured loans to MEC, which may include MID bidding for certain of MEC's assets."

According to the release, MI Developments also amended the terms of the debtor-in-possession financing being provided to Magna Entertainment.

Under the amendments, the maturity of the DIP loan was extended to Nov. 6, 2009 from Sept. 6 to allow for a longer asset marketing period and the available principal amount was reduced to $38.4 million from $62.5 million, with the reduction attributable to the fact that interest on the pre-bankruptcy debt owed to the MI Developments lender will accrue during the Chapter 11 process rather than being paid in cash.

The amendment also gives Magna until the week of May 4 to file a motion on the bid procedures for its asset sales.

MI Developments said its board of directors approved the stalking horse bid termination and DIP facility amendments after considering a favorable recommendation from a special committee of independent directors.

Magna, an Aurora, Ont.-based owner and operator of horse racetracks, filed for bankruptcy on March 5 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 09-10720.

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