WASHINGTON - Maryland Gov. Martin O'Malley yesterday signed into law emergency legislation that authorizes a state authority to issue bonds to purchase the rights to the Preakness Stakes, the second leg of horse racing's Triple Crown series, from its bankrupt owner.
The law gives the Maryland Economic Development Corp. the authority to sell revenue bonds to finance the purchase of horse-racing assets located in Maryland that are owned by Magna Entertainment Corp., a Canadian company, which filed for bankruptcy protection on March 5.
The new law also permits bonds to be sold to cover condemnation expenses if the state can legally take control of the assets in an eminent domain claim. Other Magna assets included under the law are Pimlico Race Course in Baltimore, which hosts the Preakness, Laurel Park, and the Bowie Race Course Training Center.
MEDCO and state officials could not estimate how many bonds would need to be issued, saying only that the law preserves the right to issue the bonds and that no bond sale is imminent.
"The state wants to be prepared to do all that it can do to protect the Preakness and keep it in the state of Maryland," said Robert Brennan, MEDCO's executive director. The necessity for a bond sale might not be decided until July, he said.
The Preakness generates more than 20,000 jobs and has a $1.5 billion economic impact on the state, according to the governor's office. Other states are eager to host the event and Magna might be able to get a better price if it sold the race to one of them, Brennan said.
The state has a right of first refusal clause with Magna, meaning the company must offer to sell the assets to Maryland first before offering them to other buyers. But it is unclear if this clause, which has been in place since 1992 before Magna took control of the assets, is still valid now that Magna is in bankruptcy.
"When a business is in bankruptcy, they are not exempt from state regulation and policy," Brennan said. A bankruptcy hearing, scheduled for April 20, could decide if the right of first refusal clause stands, said a spokesperson for O'Malley. But it also is unclear if the new state law would have significance in the federal bankruptcy court in Delaware, where Magna is incorporated.
Brennan said an eminent domain claim is unlikely and that any buyer probably would keep the Preakness in Maryland. "We want to be positioned so that if we don't have a friendly buyer, we have the abilities to make sure we can do what we need," he said.
A Magna spokesperson could not be reached for comment.