AURORA, ON, Sept. 13 /CNW/ - MI Developments Inc. (TSX: MIM.A, MIM.B;
NYSE: MIM) ("MID") today announced that it has agreed to provide a short-term
bridge loan to Magna Entertainment Corp. (TSX: MEC.A; NASDAQ: MECA) ("MEC") of
up to US$80 million. The bridge loan, together with a US$20 million private
placement of MEC Class A Subordinate Voting Stock to Fair Enterprise Limited
(a company that forms part of an estate planning vehicle for the family of Mr.
Frank Stronach, "Fair Enterprise"), will provide immediate funding to support
the debt elimination plan announced today by MEC.
MID also announced that the existing project financing facilities
provided in connection with MEC's racing and alternative gaming facilities at
Gulfstream Park racetrack in Florida and Remington Park racetrack in Oklahoma
are to be amended by, among other things, requiring repayment of at least
US$100 million under the Gulfstream Park facility by May 31, 2008 and waiving
the make-whole payment, if applicable, for any repayments made under either
facility prior to that date.
MEC Debt Elimination Plan
MEC announced today a plan designed to eliminate its net debt by December
31, 2008 through: (i) the sale of certain real estate, racetracks and other
assets; (ii) the sale of, or entering into strategic transactions involving,
MEC's other racing, gaming and technology operations; and (iii) a possible
future equity issuance, likely in 2008.
MEC's plan is intended to generate aggregate proceeds of approximately
US$600-700 million. These proceeds are to be used to fund MEC's operations and
applied to eliminate MEC's net debt, including amounts owed to MID under the
bridge loan and the existing Gulfstream Park and Remington Park project
financing facilities. At June 30, 2007, MEC had debt of approximately US$550
million, of which approximately US$195 million was due to MID under the
project financing facilities.
"We have been closely monitoring our MEC investment and actively
considering potential alternatives to the current MID-MEC relationship for the
last couple of years," said John Simonetti, Chief Executive Officer of MID.
"We believe that the best option for MID at this time is to provide the bridge
loan to MEC to facilitate its debt elimination plan, which if successfully
implemented would enable MEC to execute its long-term strategy independently."
The real estate properties MEC has announced it intends to sell include
those situated in the following locations: Dixon, California; Ocala, Florida;
Aventura and Hallandale, adjacent to Gulfstream Park in Florida; Porter, New
York; adjacent to Laurel Park in Maryland; and adjacent to the Magna Racino in
Ebreichsdorf, Austria. MEC has also announced that it intends to explore
selling its membership interests in the mixed use developments at its
Gulfstream Park racetrack in Florida and Santa Anita Park racetrack in
California that it is pursuing under joint venture arrangements with Forest
City Enterprises and Caruso Affiliated, respectively. As previously disclosed,
MID may consider the acquisition of certain of these real estate assets,
including the joint venture membership interests. Potential purchases of any
of these assets would be subject to review by MID's Special Committee of
independent directors and the approval of the MID board of directors.
The racetracks that MEC has announced it intends to sell include: Great
Lakes Downs in Michigan; Thistledown in Ohio; and its interest in Portland
Meadows in Oregon. In addition, MEC has announced that it will cease horse
racing for its own account at the Magna Racino in Austria after the close of
the 2007 meet and that it is exploring a contractual arrangement for a third
party to utilize the racing facilities.
MEC also announced that it intends to explore strategic transactions
involving other racing, gaming and technology operations. These potential
transactions may include: partnerships or joint ventures in respect of the
existing gaming facility at Gulfstream Park and potential alternative gaming
operations at other MEC racetracks; the possible sale of Remington Park in
Oklahoma City; partnerships or joint ventures relating to other racetracks,
such as Santa Anita Park; and transactions involving MEC's technology
operations, which may include one or more of the assets that comprise MEC's
PariMax business. MEC expects to engage an investment bank to assist with its
evaluation and implementation of these transactions.
Mr. Simonetti commented that, "The success of MEC's plan is strategically
important for MID and therefore, pursuant to a consulting agreement between
MID and MEC, MID management will assist the MEC management team and board in
its implementation. Fair Enterprise has committed to make an equity investment
in MEC and we are providing MEC with the bridge loan to address immediate
liquidity issues and provide MEC with an opportunity to sell assets in an
orderly manner for the benefit of all MEC stakeholders, including MID. The
bridge financing will not limit our options with respect to our core real
estate business or our investment in MEC, and we will continue to evaluate our
relationship with MEC as its plan progresses."
Fair Enterprise Equity Investment in MEC
The MEC plan includes a private placement of MEC Class A Subordinate
Voting Stock ("MEC Class A Stock") to Fair Enterprise, a company that forms
part of an estate planning vehicle for the family of Mr. Frank Stronach, MID's
Chairman and MEC's Chairman and Interim Chief Executive Officer, in an amount
of US$20 million.
Fair Enterprise has executed a definitive subscription agreement to
purchase MEC Class A Stock at a price per share equal to the greater of: (i)
90% of the volume-weighted average price of MEC Class A Stock on NASDAQ for
the five trading days commencing on the announcement of the plan and the Fair
Enterprise equity investment; and (ii) US$1.91 (being 100% of the
volume-weighted average price of MEC Class A Stock on NASDAQ for the five
trading days immediately preceding such announcement). The purchase is subject
to various regulatory approvals, and MEC anticipates the closing taking place
in October 2007.
MEC Bridge Loan
The bridge loan of up to US$80 million will be made available through a
non-revolving facility provided to MEC by a wholly-owned subsidiary of MID.
The bridge loan proceeds may only be used by MEC in accordance with the plan
and will be available solely to fund: (i) operations; (ii) payments of
principal, interest and costs, fees and expenses due under the bridge loan and
the Gulfstream Park and Remington Park project financing facilities; (iii)
mandatory payments of interest in connection with permitted debt under the
bridge loan; (iv) mandatory capital expenditures; and (v) capital expenditures
required pursuant to the terms of the joint venture arrangements between MEC
and Forest City Enterprises and Caruso Affiliated.
The MEC bridge loan has a maturity date of May 31, 2008 and bears
interest at a rate per annum equal to LIBOR plus 10%, subject to increase in
the event MEC does not reach certain specified milestones in connection with
the plan. The bridge loan will be secured by certain assets of MEC and
guaranteed by certain subsidiaries of MEC. The guarantees will be secured by
charges over the lands owned by Santa Anita Park, Golden Gate Fields and
Thistledown and by charges over the lands owned by MEC in Dixon and Ocala, as
well as by pledges of the shares of certain MEC subsidiaries.
MID will receive an arrangement fee of US$2.4 million (3% of the bridge
loan commitment) at closing and an additional arrangement fee on February 29,
2008 of 1% of the then current bridge loan commitment. MID will also receive
an annual commitment fee equal to 1% of the undrawn facility. The interest
rates and fees reflect MID's assessment (with the benefit of advice from its
financial advisors) of the credit risk associated with MEC, taking into
consideration, among other things, MEC's revised business plan pursuant to its
plan and the security package for the bridge loan. The bridge loan must be
repaid with, and the commitment will be reduced by, amounts equal to all net
proceeds realized by MEC from asset sales and issuances of debt or equity
(other than the issuance of US$20 million of equity to Fair Enterprise Limited
announced as part of the MEC plan), subject to amounts required to be paid to
MEC's existing lenders.
The MEC bridge loan is subject to customary funding conditions, as well
as the extension to at least January 31, 2008 of MEC's US$40 million secured
revolving bank credit facility.
Amendments to the Project Financing Facilities
The terms of the existing Gulfstream Park project financing facility made
available to the wholly-owned subsidiary of MEC that operates Gulfstream Park
will also be amended such that: (i) MEC will be added as a guarantor under
this facility; (ii) the borrower and all of the guarantors (including MEC)
will agree to use commercially reasonable efforts to implement MEC's plan
(including the sale of specific assets by the time periods listed in the
plan); and (iii) the borrower will be required to repay at least US$100
million under the facility by May 31, 2008.
In consideration of these amendments, and subject to certain conditions,
the MID subsidiary that is the lender under the project financing facilities
has agreed to waive the make-whole payment for any repayments made under the
project financing facilities prior to May 31, 2008 and to adjust the
amortization schedule for the Gulfstream Park project financing facility
following receipt of the US$100 million repayment.
MID Special Committee
The MEC bridge loan and the amendments to the project financing
facilities were approved by the MID Board after considering, among other
things, a recommendation from a Special Committee of independent directors of
MID comprised of Messrs. Neil Davis, who acted as Chairman, John Barnett,
Philip Fricke and Manfred Jakszus. The Special Committee engaged CIBC World
Markets Inc. as independent financial advisor and Goodmans LLP as independent
legal advisor. TD Securities Inc. acted as financial advisor, and Davies Ward
Phillips & Vineberg LLP acted as legal advisor, to MID.
MID will file a material change report immediately upon filing of this
press release. The material change report will be filed less than 21 days
before the date of the closing of the MEC bridge loan and the amendments to
the project financing facilities, which, in MID's view, is both reasonable and
necessary in the circumstances as the terms of the bridge loan and the
amendments to the project financing facilities were settled, and approved by
MID's Board of Directors, on September 12, 2007, and MEC requires immediate
funding to address its short-term liquidity concerns. For more details on the
bridge loan and the project financing facilities amendments, please refer to
the material change report. In addition, the bridge loan agreement and the
amendment to the Gulfstream Park project financing facility will be filed by
MID on SEDAR at www.sedar.com and on the SEC's website at www.sec.gov.
MID is a real estate operating company engaged in the ownership,
development, management, leasing and acquisition of industrial and commercial
real estate properties located in North America and Europe. Virtually all of
our income-producing properties are currently under lease to Magna
International Inc. and its subsidiaries. MID also holds a controlling
investment in MEC, North America's number one owner and operator of horse
racetracks, based on revenues, and one of the world's leading suppliers, via
simulcasting, of live racing content to the growing inter-track, off-track and
account wagering markets.
The contents of this press release may contain statements that, to the
extent they are not recitations of historical fact, constitute
"forward-looking statements" within the meaning of applicable securities
legislation, including the United States Securities Exchange Act of 1934.
Forward-looking statements may include, among others, statements regarding the
Company's future plans, goals, strategies, intentions, beliefs, estimates,
costs, objectives, economic performance or expectations, or the assumptions
underlying any of the foregoing. Words such as "may", "would", "could",
"will", "likely", "expect", "anticipate", "believe", "intend", "plan",
"forecast", "project", "estimate" and similar expressions are used to identify
forward-looking statements. Forward-looking statements should not be read as
guarantees of future performance or results, and will not necessarily be
accurate indications of whether or the times at or by which such future
performance will be achieved. Undue reliance should not be placed on such
statements. Forward-looking statements are based on information available at
the time and/or management's good faith assumptions and analyses made in light
of our perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate in the
circumstances, and are subject to known and unknown risks, uncertainties and
other unpredictable factors, many of which are beyond the Company's control,
that could cause actual events or results to differ materially from such
forward-looking statements. Important factors that could cause such
differences include, but are not limited to the risks set forth in the "Risk
Factors" section in MID's Annual Information Form for 2006, filed on SEDAR at
www.sedar.com and attached as Exhibit 1 to MID's Annual Report on Form 40-F
for the year ended December 31, 2006. The "Risk Factors" section also contains
information about the material factors or assumptions underlying such
forward-looking statements. In addition, the bridge loan is expected to be
repaid through the sale of MEC assets as part of the MEC plan. If MEC is
unable to sell assets in a timely manner or for the prices contemplated by its
plan, MEC may be unable to repay the bridge loan by May 31, 2008 or at all,
which could have a material adverse effect on MID's financial condition.
Forward-looking statements speak only as of the date the statement was made
and unless otherwise required by applicable securities laws, MID expressly
disclaims any intention and undertakes no obligation to update or revise any
forward-looking statements contained in this press release to reflect
subsequent information, events or circumstances or otherwise.
For further information:
For further information: about this press release, please contact John
Simonetti, MID's Chief Executive Officer, at (905) 726-7619