Magna declares Drastic Action Coming

[ponypro]

http://news.bloodhorse.com/viewstory.asp?id=40157

Nice pick of a partner Evans, talk about due diligence.

[ddog]

good bye and good luck to them :jump:

[garyoz]

From the DRF story:

According to financial statements, Magna had revenues of $203.1 million in the quarter, up from $179.7 million in the second quarter last year. However, expenses increased at an almost identical rate, from $203 million to $222.6 million. Loss per share in the quarter was 22 cents.

Magna had negative cash flow of $21.6 million in the quarter. At the end of the quarter, the company's long-term debt and other long-term liabilities was $504 million. Interest expense on the debt in the quarter was $12.2 million.

Haven't had time to look at the actual financials--so not sure how they are defining "cash flow." If it is free cash flow or operating cash flow or some other flavor--(cash flow is an often misused term). If it is operating cash flow (EBITDA) then this is very bleak.

The real assets for the company are the underlying real estate--which maybe could be sold to developers to cover the debt. This sure looks like a candidate for Chapter 11 reorganization.

As an aside, if the new management at Churchill Downs is supposed to be so smart and savy how could they pick Magna as a partner? Maybe Churchill shareholders should ask about due diligence. Maybe Churchill is not that smart?

[betovernetcapper]

I love it when bad things happen to bad people.

[Edward DeVere]

As an aside, if the new management at Churchill Downs is supposed to be so smart and savy how could they pick Magna as a partner? Maybe Churchill shareholders should ask about due diligence. Maybe Churchill is not that smart?

Or maybe Churchill is VERY smart. There is ZERO chance Churchill wasn't aware of Magna's problems. Yet Churchill went ahead with an alliance (of sorts). There's a reason (or reasons) Churchill made that decision.

[Indulto]

Or maybe Churchill is VERY smart. There is ZERO chance Churchill wasn't aware of Magna's problems. Yet Churchill went ahead with an alliance (of sorts). There's a reason (or reasons) Churchill made that decision.What are some of the ways you think a MEC bankruptcy might work to CDI's advantage?

[highnote]

Or maybe Churchill is VERY smart. There is ZERO chance Churchill wasn't aware of Magna's problems. Yet Churchill went ahead with an alliance (of sorts). There's a reason (or reasons) Churchill made that decision.

It's more likely MEC teamed up with CD because Stronach saw the writing on the wall. Remember, MEC is a family run business, so they can turn on a dime. CD is not.

If the people at MEC and CD would read the PA board, their companies would be a lot better managed. Who among us did foresee this MEC scenario?

[garyoz]

Or maybe Churchill is VERY smart. There is ZERO chance Churchill wasn't aware of Magna's problems. Yet Churchill went ahead with an alliance (of sorts). There's a reason (or reasons) Churchill made that decision.


In a chapter 11 reogranization your partner becomes the bankruptcy judge. Doesn't sound VERY smart to me. They are going to take a good franchise/brand and run it into the ground.

I bet you think not releasing handle numbers (because it is no longer a "key" metric) is also VERY smart.

[ponypro]

Consider this. Evans knew that Frank was flaming out.

CDI's intention was to pick up Magna assets at reorganization Then they control everything right.

BUT: CDI gets leveraged a bit to accomplish this THEN;

Evans contunes to alienate industry people by the thousands.

Horseman begin Boycott of CDI tracks

A "Players" union is formed by whales you want a say in all the politics

Attendance and handle continues to decline.(but no one knows this)

Evans contunes to take no questions at quarterly shareholder meetings(everyone is kept in the dark)

"Drastic" Cost cutting and fee raises across the CDI organization(Frank stays on as consultant,he's now an expert in this)

STOCK BEGINS A STEEP DECLINE as shareholders finally become nervous

SEC begins investigation

JUSTICE DEPARTMENT looks intro Anti Trust allegations from competetors

STOCK goes into free fall, trading halted

Evans resigns, declares that "Industry wasnt ready for someone of my vision"

YOUBET, TVG, and PTC merge and buy the tech assets of Crapnet
AND: We all live happily every after with Open Source Signals, Universal Rebates, etc

Did I tell you I have a vivid imagination!

[richrosa]

Magna's financial situation is not a secret. They are public company reporting audited financials. Due diligence on these sorts of companies are much easier than small private companies, especially since the overreaching government controls that have been put in since Enron et all.

CDI very likely went in here with wide open eyes. You must consider that sometimes deals are made because there is no other suitable partner around to achieve the objectives that Evans had in mind. This might have been pitched to TVG too, and TVG might have declined. When you have a business objective and plan, sometimes you have to assume risk to achieve it.

Despite the financial reporting, and even the public pronouncements, what we're not privy to is the boardroom talk and the actual intent of the deal, which I believe hasn't fully unfolded yet. There's a reason that Stronach and Evans looked at each other across the room and decided to dance. I think this will be interesting to see what they have in mind over time.

[Bruddah]

What are some of the ways you think a MEC bankruptcy might work to CDI's advantage?

There are many ways which CDI can come out of MAGNA's bakruptcy whole. However, I wonder if CDI did the proper due diligence prior to partnering with MAGNA? Certainly, they had contingencies should this happen, and you had to know it was going to happen, if you performed proper due diligence. It's hard for me to believe CDI was sleep walking through this deal. :sleeping: :confused:

[kenwoodallpromos]

"However, MEC also believes that the operating and regulatory environment in California needs to be improved and will continue to work with other stakeholders to ensure the long-term viability of horse racing in the state.”
Blame others if they cannot force CA to accept slots, malls, condemned backside buildings, and new property for tracks.
Ca just doesn't care for new digs for the rich and the slot players while the horsemen live in slums on the other side of the tracks.

[boomman]

I love it when bad things happen to bad people.

Ditto!!!! Wouldn't that have something to do with "what goes around comes around"? Love it when that comes to fruition! :ThmbUp:

Boomer

[Hosshead]

I wonder what CDI thought about the possibility of having the Russian Mafia as their "Partner" ?

[point given]

Didnot see this thread before i posted a new one. Cleanup in aisle one !

"Hodgson specifically targeted Gulfstream Park in Florida
among MEC's 11 tracks, all in the United States. The company
has made major investments at Gulfstream but "has no realistic
prospect of generating an acceptable return on investment in the
current operating environment," he said.

http://www.680news.com/news/business/article.jsp?content=b081051A

[cj]

Horsemen will love this one:

On the operational side, "I'm not suggesting that we're going to be able to change the state tax rules, but I think we certainly do need to sit down in the very immediate future with the horsemen and look at the overall economics of the operation."

[ponypro]

Imagine Frank and Crapnet going to the Horsemen with their hats in hand.

I Dont think that will be very warmly received.

Thats why its important in life to get along with people the best that you possibly can and;

Make as few enemies as possible because someday you may need some help!

Frank and Bob Evans never learned those very basic people skills and thats why this is guarenteed to end up butt ugly for them. And they will be shocked and amazed as to how many people will delight in their downfall

[Greyfox]

Much as I have a disdain for Stronach, there will be no glee in this corner if MEC goes under. If it appears in any way that they are going down, horse racing will go down as well. Each of their properties is prime real estate. If the track business isn't viable, the land can be sold. Bye bye Santa Anita, Gulf Stream and so on. Get the picture those of you who are gloating about the possibility?
Be careful of what you wish for.

[NoCal Boy]

It sounds so easy to say that Santa Anita could be sold or Gulfstream could be sold, but Santa Anita is on the historic registry and there is no way it will ever be sold for anything other than a track.

As for Gulfstream, for the right price perhaps a Harrahs would be interested.

As for the Florida horsemen, any chance they are going to allow Tracknet to dictate where their signal goes now?

[witchdoctor]

Unfortunately Greyfox, I think you are right. Two of the tracks we race on are LS and RP.
The horse industry is Oklahoma will go under if and when those 2 go under.

[highnote]

I certainly would not want any track to go out of business. There are too many people whose livelihoods depend on racing.

[Greyfox]

It sounds so easy to say that Santa Anita could be sold or Gulfstream could be sold, but Santa Anita is on the historic registry and there is no way it will ever be sold for anything other than a track.

?

Never say never.

[cj]

Unfortunately Greyfox, I think you are right. Two of the tracks we race on are LS and RP.
The horse industry is Oklahoma will go under if and when those 2 go under.

I think Remington is fine with the casino. Am I mistaken?

[ddog]

IF the business is running itself into the ground then it should/must fail.
Do you wish to subsidize it at any cost?

I still have the feeling there are too many tracks open.
Fewer tracks 2-4 extra races at the remaining ones per day I think is what it has to come to. Maybe some regular day-night racing at some.

Different types of races, the top of the class during the day on weekends? and bottom of the barrel at night?


Heartless,maybe. But then don't the employees generally suffer for the executive/mgmt foolishness?

[highnote]

Let's just hope current or future management will make better decisions.

[Zman179]

It sounds so easy to say that Santa Anita could be sold or Gulfstream could be sold, but Santa Anita is on the historic registry and there is no way it will ever be sold for anything other than a track.

There is a big difference between being on the National Registry and being designated a National Historic Landmark. A landmark cannot be developed and Santa Anita is not a federal landmark.

[witchdoctor]

I think Remington is fine with the casino. Am I mistaken?
Remington is doing great now but if Magna goes under they might do better as a shopping center or something. Actually, I would love to see the Cherokees get their hands on it. They are doing great at WRD.

They might have the money. Their casino in Catoosa is averaging 5000 people a day who are losing an average of $175 per person.

[boomman]

I certainly don't think there is anyone anywhere that loves the sport of horse racing more than I do! I have spent the last 30 years of my life doing my very best to support and promote the "sport of kings", including 10 seasons at Fair Meadows in Oklahoma (thought I would point that out since there's a lot of talk of RP on this thread). I used to say that ANY racetrack closing was a horrible thing, but given what Magna has done (and Churchill to a lesser degree), corporate conglomerate ownership has proven time and again that they can't run racetracks, and if it involves mass closings to get them into individual hands again of horseplayers like Ron Geary at Ellis Park and Mike Pegram who tried to buy the Fairgrounds, then so be it! Corporations could care less about the player, and until that attitude is changed by individuals and fair entities (who have run horse racing for many years and for the most part cater to the player anyway they can) we will not see improvements in the critical area of customer service. That is the LONE item that must be addressed immediately (and yes that means cleaning up the game parimutuelly and drug testing wise as well). INTEGRITY is a must if we are to attract new customers!

Boomer

[gIracing]

I still have the feeling there are too many tracks open TO ACCOUNT FOR THE INTREST IN THE SPORT AT THIS PRESENT TIME


The rack tracks are actually needed with the amount of horses we have.. I wish all tracks would go to a 4 day week instead of 5 to make for larger fields..


but... there is only so much betting dollar to go around unless extra business can be drummed up.

anyway you cut it, slice it, dice it.. there aren't that many people making bets. it's not that hard to figure out

[Zman179]

They might have the money. Their casino in Catoosa is averaging 5000 people a day who are losing an average of $175 per person.

WAIIIIIIT A MINUTE!!!! :eek:

$175 per person?!? :faint: You mean that the slot machines are retaining on average $175 a day per machine, right? I hope?

[point given]

I certainly don't think there is anyone anywhere that loves the sport of horse racing more than I do! I have spent the last 30 years of my life doing my very best to support and promote the "sport of kings", including 10 seasons at Fair Meadows in Oklahoma (thought I would point that out since there's a lot of talk of RP on this thread). I used to say that ANY racetrack closing was a horrible thing, but given what Magna has done (and Churchill to a lesser degree), corporate conglomerate ownership has proven time and again that they can't run racetracks, and if it involves mass closings to get them into individual hands again of horseplayers like Ron Geary at Ellis Park and Mike Pegram who tried to buy the Fairgrounds, then so be it! Corporations could care less about the player, and until that attitude is changed by individuals and fair entities (who have run horse racing for many years and for the most part cater to the player anyway they can) we will not see improvements in the critical area of customer service. That is the LONE item that must be addressed immediately (and yes that means cleaning up the game parimutuelly and drug testing wise as well). INTEGRITY is a must if we are to attract new customers!

Boomer

Well said Boomer. I think you nailed it. Corporate ownership dooms race tracks. Look at the difference in approach from the "OLD Gulfstream Park" to the New Gulfstream slots and restaurants. Then compare what progress Tampa Bay has accomplished in the past few years by catering to horse racing customers instead of slots players. Northerners are now migrating their winter racing week vacations to TAmpa , instead of Gulfstream. Oaklawn, has also developed their business the past few years as well. These operations also take care of their regular customers by keeping out the offshore rebaters. This stuff aint rocket science !

[Zman179]

Well said Boomer. I think you nailed it. Corporate ownership dooms race tracks. Look at the difference in approach from the "OLD Gulfstream Park" to the New Gulfstream slots and restaurants. Then compare what progress Tampa Bay has accomplished in the past few years by catering to horse racing customers instead of slots players. Northerners are now migrating their winter racing week vacations to TAmpa , instead of Gulfstream. Oaklawn, has also developed their business the past few years as well. These operations also take care of their regular customers by keeping out the offshore rebaters. This stuff aint rocket science !

You know, if anything, if the business trend at Gulfstream is any indication, there is a slim possibility that Hialeah could come back to life for vacationing racetrackers who want the real track experience.

[witchdoctor]

WAIIIIIIT A MINUTE!!!! :eek:

$175 per person?!? :faint: You mean that the slot machines are retaining on average $175 a day per machine, right? I hope?


That is the number the general manager told me.

[Dave Schwartz]

On a comparative note, about 2 years, in the Reno Gazette Journal, the did a story about the average win per customer, per day in Washoe County (Reno) versus the largest of the nearest Indian casinos.

It seems the Indian casinos averaged $289 per day while Reno averaged only $89 per day.

[ddog]

You know, if anything, if the business trend at Gulfstream is any indication, there is a slim possibility that Hialeah could come back to life for vacationing racetrackers who want the real track experience.


I would be there in a second if it ever did!

[joeyreb]

Unfortunately Greyfox, I think you are right. Two of the tracks we race on are LS and RP.
The horse industry is Oklahoma will go under if and when those 2 go under.

I don't about Remington

I don't think the City of Grand Prairie will let Lone Star be anything but a Race Track, they have built complete intrastructure around the track and will soon build a minor league Baseball park near by. Lone Star is important to the city.

Magna has done very little for Lone Star Park, Lone Star would be better served having local ownership. They bought a triving track in 2002 set to host Breeders Cup in 2004, and done jack with it since...

"In March, MEC entered into an agreement with Lone Star Race Park, Ltd. and LSJC Development Corporation to acquire the racing assets of Lone Star Park at Grand Prairie, Texas' premier horseracing facility. The GPSDC, a seven-member board appointed by the City of Grand Prairie to serve as the landlord of Lone Star Park at Grand Prairie, voted unanimously on Sept. 16 to approve a resolution, which allowed the execution of the transfer of documents, including Lone Star Park at Grand Prairie's master lease agreement, to MEC."
taken from Lone Star Press Release

http://206.27.12.154/press/pr_item.asp?iPRID=1809

[PaceAdvantage]

I remember when Stronach first started buying up tracks left and right, and there were a core group of folks who thought this (Frank Stronach) was the best thing that ever happened to racing.

Then there were folks like me who were not only cautious about this, but wondered aloud if it really was a good thing to have all these tracks under one umbrella. What if the umbrella snapped in the wind?

I guess we're about to find out...

[CryingForTheHorses]

Ditto!!!! Wouldn't that have something to do with "what goes around comes around"? Love it when that comes to fruition! :ThmbUp:

Boomer


Im ashamed at both of your posts!!!!...Granted things may not have turned out the way they were invisioned, But at leat Magna has tried to inprove racing.No matter what you do someone isnt going to be happy. :confused:

[betovernetcapper]

Im ashamed at both of your posts!!!!...Granted things may not have turned out the way they were invisioned, But at leat Magna has tried to inprove racing.No matter what you do someone isnt going to be happy. :confused:

Great one McSchell-Magna trying to improve racing :lol: :lol: :lol:

[Jeff P]

It seems the Indian casinos averaged $289 per day while Reno averaged only $89 per day.Several years ago a girlfriend of mine dragged me into an Indian Casino on the way back from a day at the lake. The place had a party atmosphere and was packed with young 20-30 something gamblers, the kind of crowd I wish tracks everywhere could draw day in and day out. Being the cheap bastard that I am I found a NICKEL 5 card draw video poker machine and sat down with ONE roll of nickels. About 10 minutes later I was down to my last 4-5 nickels. I put one of them into the machine and was dealt a pair. I kept the pair... drew three new cards... and ended up with a Full House!!!

The machine started flashing and its siren went off. Then FIVE... count 'em FIVE... shiny new nickels dropped into the tray.

I was stunned.

I called the attendant over thinking there must be some mistake. She explained to me that I had only played ONE nickel and that I had received the correct payoff... Had I played THREE nickels I would have received a better payoff... 75 nickels. :bang:

When I got home that night I looked up the odds of being dealt a full house in a five card draw game... about 600-1.

I have not set foot in an Indian Casino since.

It amazes me how racing - a thrilling sport to watch and a gambling game that CAN be beaten - has trouble attracting new fans.


-jp

.

[JimG]

It amazes me how racing - a thrilling sport to watch and a gambling game that CAN be beaten - has trouble attracting new fans.
-jp

.

Most 20 somethings are more interested in having a good time than winning. If they happen to win, that's just a bonus. I guess all the lights and sounds help in creating that illusion of a "good time"

[ceejay]

Remington is doing great now but if Magna goes under they might do better as a shopping center or something. Actually, I would love to see the Cherokees get their hands on it. They are doing great at WRD.

Not really the right part of town for a mall. ;)

I agree with you on the Cherokee's!

[kenwoodallpromos]

Im ashamed at both of your posts!!!!...Granted things may not have turned out the way they were invisioned, But at leat Magna has tried to inprove racing.No matter what you do someone isnt going to be happy. :confused:
"Overall, the entertainment company has lost more than $400 million in the past five years."
Stronach recently told the Ca racing board he spent over $350 million on Ca racing with little return.
Tom, here is your chance to answer as to what ways Stronach has actually improved racing. Thanks.

[highnote]

"Overall, the entertainment company has lost more than $400 million in the past five years."
Stronach recently told the Ca racing board he spent over $350 million on Ca racing with little return.
Tom, here is your chance to answer as to what ways Stronach has actually improved racing. Thanks.


He didn't say Stronach improved racing, he said he "tried to improve racing."

[boomman]

Im ashamed at both of your posts!!!!...Granted things may not have turned out the way they were invisioned, But at leat Magna has tried to inprove racing.No matter what you do someone isnt going to be happy. :confused:

First of all. when did you become hall monitor?:D And secondly, what in the hell has Magna done to improve racing? I can't wait for your answer!!

Boomer

[Drew]

McShell has to keep sucking up to uncle Frank so he can still run at the track. FL Horseman are not allowed to make waves or join the black list.

[linrom1]

What a gd freak, he wanted to parlay his experience in making bug shields and door handles into a horse racing career; Gulfstream can't even pay the interest on its loans. Stronach destroyed one of the most beautiful racetracks in the world and put up a stucco barn at a cost of almost $190 million where all he had to do is wheel in the slot machines into the existing structure.

[trigger]

The reports of MEC's death may have been greatly exaggerated.
Only one day(8/10/07) but :
Magna Entertainment Corp. 2.69http://us.js2.yimg.com/us.yimg.com/i/us/fi/yfc/images/arrow_green_1.1.png 0.69(34.50%)958,478 4:00pm ET

[Tom]

What a gd freak, he wanted to parlay his experience in making bug shields and door handles into a horse racing career;

Well, he did put tires on his grandstand! :lol:

[andicap]

McShell,

Stronach has not tried to improve racing. he has tried to enrich himself by getting racinos at racetracks. Racing was always just a tool for his ends -- making money on real estate and slots. He sucked money out of MI for his ill-advised ventures too.

Only the gullible would think Frank was out to help "the sport."

[NoCal Boy]

I think the reaction to MEC's stock on Friday was more of a sign that they are selling off assets to reduce debt than any confidence in their operations. Stronach was not even on the conference call with analysts and investors. A former CEO turned consultant was on the call who is heading the strategic review of assets. It smacks of a planned liquidation of some sorts to me.

Gulfstream should be in the hands of someone like PENN or HET that know how to run racinos.

[garyoz]

The reports of MEC's death may have been greatly exaggerated.
Only one day(8/10/07) but :
Magna Entertainment Corp. 2.69http://us.js2.yimg.com/us.yimg.com/i/us/fi/yfc/images/arrow_green_1.1.png 0.69(34.50%)958,478 4:00pm ET

Could be tied to the underlying assets (e.g., the property and racinos). Still have to get by the negative cash flow and the "on-going concern" qualification by the outside auditors. Very few companies make it out of the on-going concern status because no one wants to lend them money because of bankruptcy risk. It is usually a downward spiral.

Maybe they will announce an asset sale...and buy some time. Or, maybe they can do some sale and lease back stuff. Or maybe some shorts are covering, who knows.

But, 2.69 to zero is still a 100% loss of investment. Auditors don't make going concern stuff up.