MI Developments announces project financing for Gulfstream Park and The Meadows and public offering of debentures
December 09 2004 - 7:00AM
PR Newswire (US)
MI Developments announces project financing for Gulfstream Park and
The Meadows and public offering of debentures AURORA, ON, Dec. 9
/PRNewswire-FirstCall/ -- MI Developments Inc. (TSX: MIM.SV.A,
MIM.MV.B; NYSE: MIM) ("MID") today announced that it has agreed to
provide project financing for the reconstruction of facilities at
Gulfstream Park race track in Florida of US$115 million and The
Meadows race track and slot facility in Pennsylvania of US$77
million. MID also announced that it intends to issue long term
senior, unsecured debentures pursuant to its base shelf prospectus
previously filed with Canadian securities regulatory authorities.
Gulfstream Park and The Meadows Project Financing
------------------------------------------------- The project
financing will be made available through two separate facilities
provided by wholly-owned subsidiaries of MID to wholly-owned
subsidiaries of Magna Entertainment Corp. ("MEC") that own and/or
operate Gulfstream and The Meadows. Advances under the facilities
will be made available by way of progress draw advances to fund
reconstruction of the clubhouse/grandstand facility, backstretch
and related site works at Gulfstream, and reconstruction of the
clubhouse/grandstand facility, slot machine facility and related
site works at The Meadows. The project financing facilities have
terms of 10 years from the relevant completion dates for the
construction projects at Gulfstream and The Meadows. The
anticipated completion dates for Gulfstream and The Meadows are the
first and second quarters of 2006, respectively. Prior to the
relevant completion dates, amounts outstanding under each facility
will bear interest at a floating rate equal to 2.55% above MID's
per annum notional cost of borrowing under its floating rate credit
facility, compounded monthly. After the relevant completion date,
amounts outstanding under each facility will bear interest at a
fixed rate of 10.5% per annum, compounded semi-annually, which rate
reflects MID's assessment of the credit associated with the
specific borrowers under the Gulfstream and Meadows project
financings, taking into consideration, among other things, the
anticipated cash flows from The Meadows future slot machine
operations and the significant underlying land value at Gulfstream.
Prior to January 1, 2008, payment of interest will be deferred.
Commencing January 1, 2008, MID will receive monthly blended
payments of principal and interest based on a 25-year amortization
period commencing on the relevant completion date. The project
financing facilities contain cross-guarantee, cross-default and
cross-collateralization provisions. Each facility will be secured
principally by first-ranking security over the lands forming part
of the relevant race track operations at Gulfstream and The Meadows
and certain lands adjacent to the racetrack operations at
Gulfstream and over all other assets of the relevant borrower,
excluding licences and permits. In addition, each borrower will
covenant not to pledge any licences or permits held by it and MEC
will agree not to pledge the shares of the borrowers. The Meadows
project will require additional financing to fund the cost of other
slot related expenditures (slot licence and machines, furnishings
and equipment), which MEC is expected to seek from third party
lenders or investors. MID has agreed, subject to entering into a
satisfactory intercreditor agreement, to subordinate its security
in The Meadows facility to the third party lender up to a maximum
amount of US$110 million. "This project financing represents an
opportunity for MID's real estate business to earn an attractive
return on its investment, coupled with an appropriate security and
covenant package," said John Simonetti, Chief Executive Officer of
MID. "This investment is consistent with MID's core real estate
business strategy and also recognizes benefits which the successful
redevelopment of the Gulfstream and Meadows facilities will have
for MEC's core racing and alternative gaming businesses, which in
turn, will benefit MID shareholders through ownership of a 59%
equity interest in MEC. This investment will not change our primary
focus, nor affect our ability, of pursuing our core real estate
development, construction management and leasing business with the
Magna group of companies (the tenant of virtually all of MID's 107
income-producing properties), or limit our options with respect to
our investment in MEC." The first advance of approximately US$22.2
million under the Gulfstream project financing is expected to occur
on December 9, 2004. A definitive agreement regarding The Meadows
project financing is expected to be entered into by February 28,
2005 and will contain certain conditions for the first advance
including the issuance of a slot machine gaming licence for The
Meadows. The project financing was approved by the MID Board based
on a recommendation from a Special Committee of independent
directors of MID comprised of Messrs. Douglas Young, who acted as
Chairman, Barry Byrd, Philip Fricke and Manfred Jakszus. The
Special Committee engaged CIBC World Markets Inc. as independent
financial advisors and Goodmans LLP as independent legal advisors.
MID expects to file a material change report immediately upon
filing of this press release. The material change report will be
filed less than 21 days before the date of the closing of the
Gulfstream project financing which, in MID's view, is both
reasonable and necessary in the circumstances as the terms of the
project financing were settled, and approved by MID's board of
directors, on December 8, 2004, and MEC requires immediate funding
in order to complete the Gulfstream reconstruction project on
schedule for opening prior to the commencement of the Gulfstream
2006 race meet and to replenish cash previously expended by MEC on
behalf of the Gulfstream borrower on this project. Debenture
Offering ------------------ MID also announced today that it
intends to issue long term debentures that will be senior unsecured
obligations of MID and will rank equally with all of MID's existing
and future senior unsecured indebtedness. The sale of the
debentures is the first offering by MID under a base shelf
prospectus dated March 19, 2004 filed with Canadian securities
regulatory authorities. MID intends to use the net proceeds from
the offering of the debentures to fund on-going construction
projects with Magna International Inc., to fund its obligations
under the project financing for Gulfstream and The Meadows, and for
general corporate purposes. The debentures have not been, and will
not be, registered under the U.S. Securities Act of 1933 and,
accordingly, may not be offered or sold in the United States absent
registration under the Securities Act or an applicable exemption
from the registration requirements. This press release is not an
offer to sell the debentures or a solicitation of an offer to
purchase the debentures in the United States. About MID MID is a
real estate operating company engaged in the ownership,
development, management, leasing and acquisition of industrial and
commercial real estate properties located in North America and
Europe. Virtually all of our income-producing properties are
currently under lease to Magna International Inc. and its
subsidiaries. MID also holds a controlling investment in MEC, North
America's number one owner and operator of horse racetracks, based
on revenues, and one of the world's leading suppliers, via
simulcasting, of live racing content to the growing inter-track,
off-track and account wagering markets. Forward-Looking Statements
The contents of this press release may contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act
and Section 21E of the United States Securities Exchange Act of
1934. Forward-looking statements may include, among others,
statements regarding MID's future plans, costs, objectives or
economic performance, or the assumptions underlying any of the
foregoing. In this press release we use words such as "may",
"would", "could", "will", "likely, "believe", "expect",
"anticipate", "intend", "plan", "forecast", "project", "estimate"
and similar words to identify forward-looking statements.
Forward-looking statements should not be read as guarantees of
future performance or results, and will not necessarily be accurate
indications of whether or the times at or by which such future
performance will be achieved. Forward-looking statements are based
on information available at the time and/or management's good faith
belief with respect to future events and are subject to known and
unknown risks, uncertainties and other unpredictable factors, many
of which are beyond MID's control. MID expressly disclaims any
intention and undertakes no obligation to update or revise any
forward-looking statements to reflect subsequent information,
events or circumstances or otherwise. DATASOURCE: MI Developments
Inc. CONTACT: Doug Tatters at (905) 726-7507.
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