August 18, 2009 / 9:51 PM / 10 years ago

Magna Entertainment creditors can pursue claims

NEW YORK, Aug 18 (Reuters) - Creditors of bankrupt racetrack operator Magna Entertainment Corp MECAQ.PK won court approval on Tuesday to pursue claims against the company and its chairman, Canadian billionaire Frank Stronach.

In an order filed in federal bankruptcy court in Delaware, Judge Mary Walrath approved the request to sue Stronach and current and former directors at Magna Entertainment.

The unsecured creditors accused Magna Entertainment, based in Aurora, Ontario, in a recent court filing of fraudulently transferring more than $125 million to companies controlled by Stronach before filing for bankruptcy.

The creditors claimed that horse-racing enthusiast Stronach used his control of MI Developments Inc MIMa.TO, the majority shareholder of Magna Entertainment, to secure prized assets and fraudulently transfer payments to his companies.

The complaint claimed that MI Developments prevented Magna Entertainment from selling assets that might have allowed it to successfully restructure.

MI Developments said last month that the committee’s claims are without merit and that it would contest them vigorously.

A spokesman for Stronach could not be immediately reached for comment.

The creditors seek to subordinate MI Developments’ secured claims in the Magna Entertainment bankruptcy and recover the payments.

Magna Entertainment’s operations include seven thoroughbred racetracks in North America, as well off-track betting facilities.

Stronach founded auto-parts supplier Magna International Inc MGa.TO in 1957 and spun off Magna Entertainment in 2000.

The case is In re Magna Entertainment Corp, U.S. Bankruptcy Court, District of Delaware, No. 09-10720. (Reporting by Phil Wahba. Editing by Robert MacMillan)

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