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US Real Estate Weakness Harms Magna Track Sales
While Magna's ability to continue "has been an issue for some time, the current report documents further, significant problems," noted thoroughbredtimes.com. Last September, MEC chairman Frank Stronach announced a debt elimination plan that "called for the sale of assets"; however in the latest report, MEC notes "the weakness in the US real estate market has hurt the demand for the company's assets, including tracks like Thistledown (in Ohio) & Remington Park (in Oklahoma)". As a result, MEC chief financial officer Blake Tohana commented: "Although we continue to take steps to implement our debt elimination plan, US real estate & credit markets have continued to demonstrate weakness in 2008 & we do not expect to complete our plan on the originally contemplated time schedule. However, we remain firmly committed to reducing debt & interest expense. We closed the sale of Great Lakes Downs (in Michigan) in July 2008 & are continuing to pursue other asset sale opportunities." Because MEC has not been able to sell its properties, the latest report notes the company "will seek extensions from existing lenders & additional short-term funds during a difficult credit market". Most worryingly, on June 30 Magna reported US$229.8 million of debt due to mature in 12 months; during August, Magna "faces an obligation to pay US$100 million owed for rebuilding Gulfstream Park, as well as payments on US$40 million of revolving credit with a Canadian financial institution & a US$110 million bridge loan with a subsidiary". The company confirmed bluntly: "The availability of such extensions & additional funds is not assured."