One of the overarching storylines throughout this year's detour-laden auction calendar has been the liquidation of the once-mighty Zayat Stables operation to settle debts from a defaulted eight-figure loan and an ensuing bankruptcy.
Beginning with the Fasig-Tipton Kentucky Winter Mixed Sale in February, the equine holdings of Ahmed Zayat have been steadily pieced off through the auction ring, private sales, the claim box, and giveaways. According to a court document filed in early November by Elizabeth Woodward, the receiver responsible for handling the liquidation, there were still 10 horses publicly on the books for the stable. After the recently-completed Keeneland November Breeding Stock Sale, where all 10 were cataloged, only two remain, and they will likely be sold privately by Thanksgiving.
This, of course, is not a clear-cut indicator that all of the liquidation resources have been exhausted. The document implies that Zayat Stables still holds some stallion interests, and other holdings might still be in the process of being determined. Regardless, it is clear that the sun is almost over the horizon on the operation that bred and raced Triple Crown winner American Pharoah, won Eclipse Awards as outstanding owner and breeder, and was recognized by the Turf Publicists of America with the Big Sport of Turfdom Award and by the National Turf Writers and Broadcasters Association with the Mr. Fitz Award for “typifying the spirit of racing.”
The November sale saw nine of the 10 remaining Zayat horses go through the ring, with eight selling for a total of $491,000.
Starting with the two that didn't sell, Amandrea is owned in a 45 percent minority with partner Myracehorse.com, and she was scratched from the sale. The next filing from the receiver will indicate if a private deal was brokered or pending for Zayat's share before the sale. A weanling Kitten's Joy filly finished under her reserve with a final bid of $80,000, but liquidation horses that did not meet their reserve at previous auctions this year have typically been sold privately or re-entered in another auction.
The remaining eight followed the pattern set by their predecessors, hammering well below their lofty assessed values set by Zayat's representatives in mid-December 2019. That assessment came about when the owner submitted a liquidation plan to creditor MGG Investments to pay off a $23-million loan and stave off a lawsuit. MGG ultimately filed suit in late January.
The group cataloged in the November sale (minus the weanling, who wasn't born at the time of the valuation) was valued at a combined $5.9 million in December 2019, meaning they ultimately brought about 8 percent of what they were projected to when they went through the ring nearly a year later.
The six horses sold at this year's Fasig-Tipton July Horses of Racing Age Sale brought 9.62 percent of their December assessed value, while the six horses sold in February brought about 19 percent of their assessed worth.
It's well established that assessing value to a Thoroughbred is not a concrete science, and Thoroughbred value can be so fluid that the 2019 projection is practically obsolete at this point. The receiver's November report also makes sure to note how COVID-19 has affected the marketplace for public and private trade.
What makes it worth pointing out at this juncture is the assessment's use as a milepost – first, to show just how fluid those valuations can be, and second, to display how short of the mark the Zayat dispersal will come to paying off its creditors.
One of the primary methods of assigning valuation is based on income projection – what a horse could potentially earn in his or her lifetime at that point in the road. This would explain the widest discrepancy in the Keeneland November group, Gozilla, who sold for $60,000 after being valued at $2.25 million a year earlier.
In December, Gozilla was a 2-year-old looking down the Triple Crown trail with a third in the Grade 1 Hopeful Stakes and a fourth in the G1 Champagne Stakes. The Flatter colt had a a full buffet of spring graded stakes races to bolster his resume, and a strong performance in the Triple Crown races themselves could have made him a legitimate stallion prospect, easily worth seven or eight figures. The opportunity to reach that level, paired with the past performance to imply he was capable of doing it, justified a higher valuation, even if it was one staring at his ceiling.
To put that valuation in perspective, Max Player was appraised at a “fair market value” of $1.75 million after winning the G3 Withers Stakes in early February. The Kentucky Derby qualifying points the son of Honor Code earned in that race were arguably worth more than the graded stakes win itself. The fact that he was firmly on the path to the Triple Crown, and proved he was capable of defeating other horses with the same intentions, increased his earning potential.
Now, in November, Gozilla's Triple Crown opportunity has been exhausted, along with a potentially lucrative Breeders' Cup try. He has raced just once in 2020, finishing eighth in a Keeneland allowance in July.
Gozilla remains intact, and horses have recovered from greater downturns in form to become high-level runners and stallions, but his window is much smaller to achieve it, and the public auction market is as risk averse as it's ever been. It's highly unlikely he'd have ever commanded a price anywhere close to the Zayat assessment, but his open market value is also a fair assessment of his earnings potential at this point in his career.
A similar trajectory can be seen in Alex Joon, a 3-year-old Flatter colt who shortly before had broken his maiden at Churchill Downs when assigned a $1-million valuation last year. He has since run twice, most recently finishing second in a Churchill allowance, before selling for $120,000 at the November sale.
Alex Joon's allowance runner-up effort came on Oct. 29, shortly before the November sale, and recent form can be appealing for a racing prospect. This was also the case for the most expensive Zayat offering, Bob and Jackie, who sold for $190,000.
The 4-year-old Twirling Candy colt has been one of the highlights among the Zayat runners in 2020. He kicked off his campaign with a victory in the Wickerr Stakes at Del Mar, then he finished fourth in the G2 Del Mar Handicap later in the meet. He entered the November sale off a G2 City of Hope Mile Stakes at Santa Anita on Oct. 3, giving potential buyers recent proof that he can compete at a graded stakes level.
Bob and Jackie was a two-time stakes winner at the time of the December valuation, which placed him at $750,000. Using the same methodology for his higher-priced stablemates, his Triple Crown chances had passed at that point and he'd only run once in 2019 by mid-December. However, his recent stakes success and the fact that he plausibly still had a few prime racing years left in him to make a stallion resume boosted his value above the rank and file. As it turns out, he would become one of the most valuable Zayat horses to change hands at auction during the liquidation.
One last horse to examine from the November group is the Eskendereya mare Fateer, the dam of Bob and Jackie who was offered at this year's Fasig-Tipton Kentucky Winter Mixed Sale in February but finished under her reserve at $95,000. She was offered in-foal to top sire Kitten's Joy during the sale, and the ensuing filly was an $80,000 RNA at the November sale.
Nine months later, Fateer went through the ring again, not pregnant for the 2021 foaling season, and she sold for $57,000 – a steep drop from her $450,000 valuation in December.
Like many bankruptcies, the assets of the Zayat Stables dispersal will likely put only pennies on the dollar toward paying back the outstanding debt.
Thoroughbreds are a volatile commodity, and the fortunes of a public or private sale can swing wildly over one or two big performances by a runner or their foals, as well as the overall health of the marketplace. The valuations placed on the Zayat horses in December were unrealistic – they always were – but an unspectacular year from the stable in the middle of a pandemic also created a wider gap between projection and reality.
One of the most celebrated stables of the past decade went out quietly on the racetrack, which led to it going out quietly in the auction ring.
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