Maryland “auction”

[takeout]

[snip]
But Bayne, who said he has lost roughly $2 million after investing with Magna three years ago, countered Leone’s testimony.

“I don’t think it was a real auction setup,” said Bayne, who said he spoke with Cordish Thursday morning. “Cordish said he tried to put in four stalking horse bids, but you all wouldn’t allow him,” he said, motioning to executives.

During cross examinations of the shareholder witnesses, both sides were short-tempered, with Judge Mary F. Walrath telling both sides many times to stop interrupting each other. Magna and other parties behind the plan tried to emphasize the shareholders’ inexperience in real estate and gaming.
[snip]
http://mddailyrecord.com/2010/04/22/penn-national-gaming-could-run-laurel-slots/

Comment: Read the underlined part again and try to keep a straight face. I dare you. :)

[takeout]

[snip]
If the lawsuit is dropped, MI Developments would pay $89 million to holders of most general unsecured claims against Magna while acquiring several of its assets, including the Maryland Jockey Club's Pimlico track in Baltimore, home to the Preakness Triple Crown race.
[snip]
"You all bait-and-switched us," Bayne said in a testy exchange with Kenneth Eckstein, a lawyer for the creditors committee. "We were told that this was a complete liquidation; that they were going to auction off all assets."

Fellow shareholder Glenn Mattson, a former banking executive, said his analysis shows that Magna's assets are worth about $2.3 billion, far more than what Magna and its advisers claim.
[snip]
http://www.google.com/hostednews/ap/article/ALeqM5gg1LoFP5xsW9YmIT9jrq0JhoweEAD9F8EI100

Comment: 89 million versus 2.3 billion? Not much disagreement there. :rolleyes: Looks like Magna is trying to pull off an “okey doke” of Wall Street proportions. Hope they are unsuccessful.

[takeout]

No surprises here. Bankruptcy judge says it's fine for Magna to keep screwing its creditors. I wonder who invented Chapter 11 “restructuring”? It sure wasn't anyone with a soul.

Judge approves Magna reorganization plan
http://www.mercurynews.com/business/ci_14962288?nclick_check=1

[snip]
But the judge rejected asset valuations provided by the shareholders, saying they were unfounded and speculative.

Walrath determined that MID was forgiving or satisfying more than $700 million in claims under the reorganization plan, but that the assets it was gaining, even at valuations higher than those Magna asserted, are worth far less.

"It's clear from all of these that they do not even approach the $700 million," the judge said. "...
[snip]

Comment: I know a quick way to find out what they are really worth. Have a REAL auction and SELL THEM.

[Irish Boy]

You might be new to bankruptcy. If so, welcome to the wonderful world of corporate reorganizations! Anyway, the shareholders are off base here, and their only chance of having any say in the proceedings is to show that the company is actually solvent, which it isn't. Bankruptcy judges do this all the time -- in fact, it's all they do -- and they have a better idea of valuations than a dude on a horse racing message board.

[takeout]

I don’t know anything about bankruptcy but it certainly appears to be a rigged game. All of those auction postponements and the like. And aren’t these judges always very much on the side of the debtor? These shareholders are so screwed and Frank gets to keep some of his “most valuable” assets. Yeah, that’s fair.

[Irish Boy]

"Frank" isn't in bankruptcy. Magna Entertainment is in bankruptcy. The reason you structure your business into multiple entities is to keep insolvency isolated should it occur to one of the operations. This is standard procedure.

Furthermore, the shareholders all knew the rules of the game when they entered it. As a shareholder, you are a residual claimant, meaning that you earn on each dollar made after the debt is paid off. If the debt cannot be repaid, then you get nothing. This is the absolute priority rule that drives all bankruptcies, and it is simply the background norm against which all investors operate. The shareholders knew this when they decided to be shareholders.

Besides, the people currently holding the shares now are people who bought their stake in the company for pennies hoping to get something out of the bankruptcy proceedings. This is standard operating practice. If the company is insolvent, the shareholders are entitled to nothing, but proving that the company is insolvent is difficult and requires costly cramdown hearings that the debtor corporation would like to avoid. If the shareholders raise a stink, they can try to extract something, rather than the nothing they are actually owed under bankruptcy. They're playing the game, just like Magna is playing the game. And they all knew the rules before the game started.

At this point in bankruptcy proceedings, all claimants have likely traded out of their positions and given their claims to vulture investors who specialize in bankruptcy proceedings. This is just the way that all Chapter 11 reorganizations of any size go through on the ground. Nothing unusual whatsoever is occurring here. And since every party understood exactly the norms in bankruptcy when they entered into their agreement with Magna (or, more likely, their agreements with the previous claimants and shareholders -- shareholders are not claimants).

[kenwoodallpromos]

So, who are those that Stronach will listen to as to how to improve the assets he will have left? The horseplayers, the track execs, the states, or the same voices inside his head?

[Irish Boy]

Bankruptcy has nothing to do with improving the assets, however. The only thing chapter 11 does is recapitalize the capital structure of the company, or provide a mechanism for the asset to be sold unencumbered by the previous debt. When you loan money to a company, or purchase stock of a company, your return price factors into account the possibility that the company will become insolvent. This is no different. If Stronach is still willing to use outside (non-Magna) assets to retain ownership, there is no justification for the court to switch ownership just for the sake of doing so because it thinks someone might run the assets better.