Magna Entertainment equity holders want third-party examiner named

By Lisa Kerner

Charlotte, N.C., April 7 - Magna Entertainment Corp.'s non-insider equity holders want the court to direct the Office of the U.S. Trustee to appoint an official committee of equity security holders or an examiner, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

A hearing is scheduled for April 20.

The request for a third-party examiner is "in response to a plan that purports to involve a 'settlement' between the unsecured creditors and clear insiders of the debtor, the terms of which give creditors less than half of what they are owed, and then turns the ownership and management of the debtor over to the very insiders and majority shareholder that put this company into bankruptcy in the first place, leaving the rest of the shareholders with no return and no say in the process."

According to the filing, the settlement came "as a complete surprise" and it is "as if the bankruptcy case has begun anew."

The shareholders, who collectively hold approximately 9.6% of the equity in the debtor, believe the proposed plan "is being pushed through quickly despite the fact that the debtor admitted having failed to perform a going-concern valuation of the company," said the filing.

Magna, an Aurora, Ont.-based owner and operator of horse racetracks, filed for bankruptcy on March 5, 2009 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 09-10720.

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