DBRS Comments on Announced Settlement in Magna Entertainment Corp. Chapter 11 Proceeding

DBRS notes that MI Developments Inc. (MID or the Company), its subsidiary MID Islandi sf (MID lender) and Magna Entertainment Corp. (MEC) have announced that they have agreed in principle to a settlement and release with the Official Committee of Unsecured Creditors (the Committee) in connection with an action commenced by the Committee with respect to the Chapter 11 filings of MEC (Action). The settlement agreement is conditional upon the negotiation of definite documents and the confirmation of the Plan of Reorganization in the MEC Chapter 11 Proceeding. DBRS deems the settlement as a positive development removing an overhanging legal proceeding and a distraction to the senior management at MID.

However, the proposed settlement does not fully resolve the rating status of MID which remains Under Review with Negative Implications. As articulated in our last press release (for details see press release dated March 5, 2009), to resolve the Under Review with Negative Implications status DBRS will assess several key rating factors, including the deteriorating conditions in the automotive industry and their impact on MID’s major tenant, Magna International Inc. and, more importantly, MID’s real estate business strategy going forward. The resolution of this lawsuit and the agreement to support MEC’s Plan of Reorganization would help to clear some uncertainties. DBRS is in the process of assessing the recent developments and plans to resolve the Under Review situation in the near future.

Under the terms of the settlement, in exchange for the dismissal of the Action with prejudice and a full release of MID, all current and former officers and directors of MID, MID lender and MEC and their respective affiliates, the unsecured creditors of MEC will receive $75 million in cash plus $1.5 million as a reimbursement for certain expenses in connection with the Action. Additionally, the parties have agreed to the distribution of certain proceeds on the disposal of three assets, namely, Thistledown, Maryland Jockey Club and Lone Star Park, as well as MID’s right to receive the assets or proceeds from the sale of Portland Meadows. Furthermore, the parties have agreed to support a Plan of Reorganization in connection with the MEC Chapter 11 Proceeding, which will provide for the remaining assets of MEC to be transferred to MID, including, among other assets, Santa Anita Park, Golden Gate Fields, Gulfstream Park (including MEC’s interest in the Village at Gulfstream Park), AmTote International, Inc. and XpressBet, Inc.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Real Estate, which can be found on our website under Methodologies.

This is a Corporate rating.