Early Briefing: Local Wounded Giants
Steven Pearlstein takes a look at last year's Post 200 companies and sees wounded giants, hunkered down and cutting back, their balance sheets under stress and their stock prices hammered. Fannie Mae and Freddie Mac were nationalized, and Allied Capital may no longer be a going concern. Chevy Chase Bank got bought, and FBR changed its name. Joe Robert was diagnosed with brain tumors earlier this year, and this week his JER Investors Trust announced a secondary stock offering that would stiff current shareholders while raising $150 million from a new crop of investors. Hospitality, law firms, consultants - they're all cutting back too, he writes.
Washington may have showed up late for the recession, Pearlstein says, but it has arrived.
Magna Entertainment, the troubled owner of Maryland's thoroughbred tracks, filed for bankruptcy protection and essentially put all its racetracks up for sale, including Laurel Park and Pimlico Race Course, home of the Preakness Stakes.
The Chapter 11 filing was expected. The company defaulted last week on a bank loan tied to Pimlico, Laurel and the Maryland Jockey Club, which operates the tracks, and it had a $40 million loan payment due yesterday. Still, the prospect of an auction for Magna's assets heightens concerns about the future of thoroughbred racing in Maryland and, in particular, about the Preakness, the second jewel of the Triple Crown and the state's biggest one-day sporting event.
American Capital, the publicly traded private-equity firm, said it foreclosed on collateral that Chairman Malon Wilkus put up to secure $5 million in loans that he used to buy the company's common stock. The collateral was in the form of 1 million shares of company stock. Under the terms of the agreements, the foreclosures occurred automatically and the loans are extinguished.
"As the stock price declined in recent months, I used much of my personal resources to repay outstanding loans to the company and others, rather than selling the stock in which I so strongly believe. This included pledging over 850,000 additional shares, which were previously unencumbered, in order to provide additional collateral for my stock loans from American Capital. Unfortunately, with the latest decline in our (net asset value) and stock price, I did not have the resources to protect the loans any further and the foreclosure occurred," Wilkus said in a statement.
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Posted by: denniskimm | March 9, 2009 8:51 AM
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