It was just November 2006 when Gulfstream Park opened its doors as Florida’s first racino. This was in the good times, when Pennsylvania’s Mohegan Sun at Pocono Downs had opened the day before with all 1,100 slot machines in play within 10 minutes. Gulfstream Park did not wait for the start of its advertising campaign – the level of public interest already displayed by then was enough for the operation to commence.

By June 2007 it was already evident that Florida’s high gambling tax regime and strong competition from the Seminole tribal casinos, albeit still with only Class II gaming machines, were having a detrimental affect on Gulfstream profits. Legislative victories for more slot machines at the Broward County pari-mutuels, longer hours of opening and ATMs on site made little difference, and in early 2008 operator Magna Entertainment signalled that if revenues did not increase the facility would have to close.

Magna Entertainment Corp (MEC), based in Ontario, together with certain of its wholly-owned subsidiaries, yesterday announced that it had filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware and will seek recognition of the Chapter 11 proceedings from the Ontario Superior Court of Justice under section 18.6 of the Companies' Creditors Arrangement Act in Canada.

In connection with the Chapter 11 filing, MEC announced that it has arranged a six-month secured debtor-in-possession (DIP) financing facility in the amount of $62.5 million from a subsidiary of MI Developments Inc. (MID), the company's largest secured creditor and controlling shareholder. The company will use the proceeds from the DIP Financing to fund its operations during the Chapter 11 proceedings.

MEC also announced that it has entered into an agreement with MID to sell its interests associated with the following assets (the "Stalking Horse Bid"): Golden Gate Fields; Gulfstream Park, including MEC's interest in The Village at Gulfstream Park (a joint venture with Forest City); Palm Meadows Training Center; Lone Star Park; AmTote International, XpressBet; and a holdback note associated with the sale of The Meadows. The aggregate offer price for the assets is $195 million and is payable in the form of $44 million cash, MID's assumption of a $15 million capital lease and a $136 million credit bid of MEC's existing indebtedness to MID.

Under the agreement, MEC will seek Court approval of a process to market these and other MEC assets and MID's offer may be topped by third parties during the Chapter 11 auction process. MID will not receive any termination fees if MEC sells any assets to a third party, but may receive reimbursement for its expenses in connection with the Stalking Horse Bid. The terms of the Stalking Horse Bid were reviewed and recommended by the independent directors of MEC and approved by the board of directors of MEC. After extensively exploring alternatives following thorough consultation with its legal and financial advisors, MEC's board of directors determined that an orderly sale of the Company's assets through a Chapter 11 process is the most prudent and effective way to maximize value for MEC's stakeholders.

Frank Stronach, MEC's Chairman and Chief Executive Officer, commented, "Simply put, MEC has far too much debt and interest expense. MEC has previously pursued numerous out-of-court restructuring alternatives but has been unable to complete a comprehensive restructuring to date due, in part, to the current economic recession, severe downturn in the U.S. real estate market and global credit crisis.” (E-03.06.09)

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