Maryland Business

I spoke to Joseph De Francis last night regarding today’s story about his loss of gaming rights to Laurel Park, and the former owner of Maryland’s thoroughbred race tracks said while he was disappointed in the judge’s decision, he was not surprised.

He also added that what he thought was more significant was Magna Entertainment Corp.’s request for the delay of the auction of Maryland’s tracks by nearly two weeks.

“That’s what we’ve all been waiting for,” he said. Now it’s that much longer that the tracks “will be under the cloud of bankruptcy.”

When Magna’s attorney Brian Rosen told the judge on Tuesday they’d like to move the auction back to Jan. 21, I was disappointed (after all, we’ve been waiting for this thing for more than nine months) but not at all surprised. After all Magna has requested to move back just about every date related to the Maryland race tracks, it was only a matter of time before the auction got moved.

On a side note, the auction is closed to the press — which means we’ll get to tell you who the winning bidder is but won’t get to see and relay to you the auction day’s antics firsthand.

The reason for privacy given to me by the New York firm running the auction was that it was for the protection of the bidders — the auction had been advertised as a private affair. Also, the proceedings will be taking place on private grounds, so it’s sound reasoning.

Still, I think Marylanders who are following this story would be curious about how the new owner pulled it off and who came just a hair shy of beating him — a story we won’t get to really know if the auction is closed. Does that disappoint anyone?

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With the Anne Arundel County Council scheduled to vote Monday on whether to allow zoning for slots at the Arundel Mills Mall, the Maryland Horse Council has issued an alert calling upon the industry to make its presence known that night.

The e-mail sent out by the council is pretty over-the-top — it implores people to “help save Laurel Park,” warning that the future of thoroughbred racing is in danger if the council votes to approve the zoning for Arundel Mills:

The Anne Arundel County Council will vote Monday on whether to allow the slots that we all expected to be put at Laurel Park Racecourse to instead go to a new non-racing facility next to Arundel Mills Mall. The Maryland Jockey Club predicts that if slots go to Arundel Mills, Laurel Park’s value will immediately plummet, the impending bankruptcy auction will be a disaster, and the land there will be used for a housing development. If zoning is denied for Arundel Mills slots on Monday, the Jockey Club will submit a proposal for slots at Laurel, it’s value will increase, and the track will be given a new future with new ownership.

Wow, talk about glossing over the details — first of all, it’s not even certain the county council will vote because they are hearing arguments before the vote. They have to vote before Midnight so if the hearings go over, the vote gets rescheduled.

Second, if the zoning gets voted down, while the MJC may WANT to submit a new application, there’s no guarantee that could be done. AND if the MJC (which is owned by Magna Entertainment Corp.) did apply for a license, Magna would most certainly take its Maryland tracks off the auction block and we wouldn’t have a new owner after all.

Does anyone else find this a bit too much?

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With all the buzz this week about Magna Entertainment Corp.’s stalking horse bid (being delayed, then pulled altogether), we in the newsroom started wondering where in the heck the term “stalking horse” came from.

In this case with Magna, the term is used to characterize a bid that basically serves at the benchmark bid — it’s one that the company in bankruptcy feels is as a good price for its assets. The stalking horse bid was to be the measuring stick competing bidders should use to form their own offers.

But we wondered why “stalking horse”? Why not something more literal like “starting bid”? So I did a little Internet sleuthing.

According to word-detective.com, the term comes from horses used in hunting. “‘Stalking horses’ were trained to allow a hunter to dismount and then use the horse as a blind to conceal his presence as he ’stalked’ the game (which apparently did not notice that it was being approached by a six-legged horse),” the author writes. “The term was expanded fairly quickly to cover any sort of portable blind.”

The explanation makes sense for the use of “stalking horse” in the context of being a decoy, such as a stalking horse candidate entered into an election to conceal the candidacy of another or to divide the opposition, as thefreedictionary.com defines the term.

But how did the term get linked with auction proceedings? That connection is provided by Ken Naglewski in his 2006 article in Financier Worldwide:

“It appears that the tactical leverage…dissuades other qualified bidders who might have bid more from even entering the fray,” he said. “There have been cases where other potential bidders choose not to participate rather than spend more time and effort trying to overcome the bidding advantages offered to the stalking horse.”

Although the stalking horse bid has been an increasingly common process in bankruptcy auctions over the last few years, Naglewski says a stalking horse bid is not required. He also says it’s typical for the stalking horse bid to wind up as the winning bidder, which also backs up that “chilling effect” theory.

So now that we know the history, do you think it matters that Magna is going ahead without a stalking horse bid? Without a leading bid, is anyone at a disadvantage?

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