AURORA, ON, March 5 /CNW/ - Magna Entertainment Corp. ("MEC" or "the Company") (NASDAQ: MECA; TSX: MEC.A), together with certain of its wholly-owned subsidiaries, today announced that it has filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Court") and will seek recognition of the Chapter 11 proceedings from the Ontario Superior Court of Justice under section 18.6 of the Companies' Creditors Arrangement Act in Canada.

MEC's day-to-day operations will continue uninterrupted throughout the Chapter 11 process while it undertakes to sell its assets and implement a reorganization of the Company. As part of the Chapter 11 filing, the Company has sought emergency relief to ensure the continued payment of employee wages and benefits and horsemen winnings and its ability to honor existing customer programs. XpressBet(R), MEC's account wagering company, is not one of the MEC subsidiaries making a Chapter 11 filing.

In connection with the Chapter 11 filing, MEC announced that it has arranged a six-month secured debtor-in-possession financing facility (the "DIP Financing") in the amount of $62.5 million from a subsidiary of MI Developments Inc. ("MID"), the Company's largest secured creditor and controlling shareholder. The Company will use the proceeds from the DIP Financing to fund its operations during the Chapter 11 proceedings. If approved by the Court, the DIP Financing will enable MEC to continue to satisfy its obligations associated with the ongoing operation of its business, including the ordinary course payment of employee wages and benefits and horsemen and customer winnings, and payment of post-petition obligations to vendors. The DIP Financing will be secured by liens on substantially all assets of MEC, as well as a pledge of capital stock of certain guarantors. Advances under the DIP Financing must be made in accordance with an approved budget. The terms of the DIP Financing contemplate that MEC will sell its assets through an auction process and use the proceeds from the asset sales to repay its creditors. Miller Buckfire & Co., LLC, the Company's financial advisor and investment banker, will conduct a marketing and sale process for the Company's assets.

The terms of the DIP Financing were considered by the Special Committee of MEC's board of directors and the Special Committee retained independent legal and financial advisors to assist in its deliberations. The DIP Financing was approved by MEC's board, following a favourable recommendation of the Special Committee.

MEC also announced that it has entered into an agreement with MID to sell its interests associated with the following assets (the "Stalking Horse Bid"): Golden Gate Fields; Gulfstream Park, including MEC's interest in The Village at Gulfstream Park(TM) (a joint venture with Forest City); Palm Meadows Training Center; Lone Star Park; AmTote International, XpressBet(R); and a holdback note associated with the sale of The Meadows. The aggregate offer price for the assets is $195 million and is payable in the form of $44 million cash, MID's assumption of a $15 million capital lease and a $136 million credit bid of MEC's existing indebtedness to MID. Under the agreement, MEC will seek Court approval of a process to market these and other MEC assets and MID's offer may be topped by third parties during the Chapter 11 auction process.