zayat stables | Horse Racing Free Tips

Bankruptcy Judge Grants Extra Time to Probe Zayat’s Finances

The federal judge overseeing Ahmed Zayat's Chapter 7 bankruptcy petition has ordered that the trustee in the case will now have through Apr. 30 to pore over financial documentation to make sure the allegedly insolvent owner and breeder of Triple Crown champ American Pharoah isn't hiding assets.

In a court order dated Mar. 31 that was filed Apr. 2 in United States Bankruptcy Court (District of New Jersey), Judge Vincent Papalia wrote that “the Trustee's time to file a complaint objecting to the Debtor's discharge is further extended…”

In the same order, the judge also denied a cross-motion that Zayat had filed Mar. 16 asking the court to put a stop to the discovery process, which is now nearing the seven-month mark since Zayat filed for bankruptcy protection.

According to documentation that Zayat filed back in September, he allegedly has $19 million in debt but only $314.22 in assets.

MGG Investment Group, LP, the lender who is separately suing Zayat and his family members for allegedly obtaining a $24-million loan by fraud and then not repaying it, told the court Mar. 23 that the trustee's probe must be allowed to go forward with the extra time granted because Zayat's attempt to put an end to the discovery process “does nothing more than establish that Ahmed Zayat is a perpetual liar determined to hinder and obstruct the Trustee, the Court and creditors at every turn.”

MGG has previously asserted that loans it made in 2016 to Zayat's racing and bloodstock business were the product of years of systematic fraud that Zayat allegedly orchestrated, including Zayat Stables' desperate selling-off of equine assets that had been pledged to MGG as collateral.

Because MGG is seeking to recover that money, it does not want Zayat's debts to be declared legally forgiven under the Chapter 7 bankruptcy protection he is seeking.

MGG has specifically alleged that the trustee needs to examine bank accounts in the names of Zayat's wife (Joanne Zayat) and son (Justin Zayat) because “they appear to have been used as conduits through which Sherif El Zayat, the Debtor's brother, loaned money to Ahmed Zayat.”

Ahmed Zayat's Mar. 16 cross-motion included a letter from his attorney, Jay Lubetkin, who wrote that the trustee's request for the banking documents of family members didn't “have any apparent relevance to the Trustee's decision whether to file an objection to discharge complaint.”

Lubetkin also wrote that “The Debtor has been extremely cooperative with the Trustee [and has] provided to the Trustee significant documentation respecting his financial affairs….”

The primary role of a trustee in bankruptcy cases is to ensure that a debtor who files for federal bankruptcy protection is not hiding assets that could instead be used to pay creditors. An objection can be filed to the proceedings if a trustee believes aspects of the filing are not on the up-and-up. A judge can either dismiss a case on his own or by acting on a trustee's objection. A judge can also deny the discharge of a particular debt.

If alleged fraud is uncovered in a bankruptcy filing, the Federal Bureau of Investigation can investigate, and the U.S. Department of Justice can prosecute if it believes a crime has been committed.

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The Friday Show Presented By Diamond B Farm’s Rowayton: Ponying Up

Trainers Mike Maker and Wesley Ward aren't the only horsemen who have encountered Thoroughbred owners who have been slow to pay their bills. In their cases, the two trainers filed suit against owners Kenneth and Sarah Ramsey alleging nearly $1 million was owned to each of them for past due training bills and purse earnings. Ken Ramsey has said he'll make good on both cases and that the lawsuits will be dropped.

In the case of Ahmed Zayat and his family's Zayat Stables – now going through bankruptcy – a host of trainers and other businesses are owed a significant amount of money.

It begs the question of how many other trainers have had to “carry” owners for extended periods of time, negotiate fees after the fact or put liens on bloodstock in order to get paid.

Watch this week's Friday Show for a discussion on this subject with Ray Paulick and Paulick Report editor in chief Natalie Voss. Bloodstock editor Joe Nevills joins the show for a retrospective on the late Sheikh Hamdan of Shadwell Stables, a Toast to Vino Rosso and some news about a new product coming next week that covers the auction front.

The post The Friday Show Presented By Diamond B Farm’s Rowayton: Ponying Up appeared first on Horse Racing News | Paulick Report.

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Even As Fraud Suit Was Imminent, Zayat Now Claims Global Firms Wanted to Invest Hundreds of Millions

Ahmed Zayat, the financially embattled Thoroughbred breeder and owner whose insolvent business dealings are currently being scrutinized in three intertwined legal cases, revealed in an otherwise routine bankruptcy court filing Tuesday that prior to being sued for alleged fraud and loan defaults last year, he had lined up at least two global investment partners purportedly willing to pump hundreds of millions of dollars into his failing racing and bloodstock operation.

Most notably, Zayat claimed he had been tantalizingly close–just days away–from securing a $100 million “equity infusion” from an undisclosed entity in China that would have kept New York-based MGG Investment Group, LP, from suing him and other Zayat family members after their cash-strapped racing stable failed to repay loans and allegedly hid and falsified assets.

Zayat then stated that the “extremely aggressive and highly expensive” nature of defending himself from that lawsuit is what forced him to seek Chapter 7 bankruptcy protection last September.

Within that Mar. 16 document that is intended to speed up Zayat's personal bankruptcy case (now past the six-month mark in a federal court in his home state of New Jersey), the breeder who raced 2015 Triple Crown champ American Pharoah detailed a new timeline that suggests even as his financial world was imploding in January 2020, Zayat traveled the globe in a desperate effort to obtain fresh funding to get out from under MGG's $35 million loan.

But that hastily arranged deal never came through in time to prevent MGG from filing the suit that forced his Thoroughbred stable into court-mandated liquidation, according to the version of events Zayat attested to in his cross-motion.

“When MGG filed its Kentucky suit, I was pursuing for [Zayat] Stables a $100 million equity infusion from the Asian markets,” Zayat stated in the filing. “I attended a roadshow in China from Jan. 5, 2020, through Jan. 10, 2020, to pursue that capital infusion. MGG filed suit Jan. 17, 2020. Had MGG not filed its lawsuit in January 2020, the likelihood is that capital raise would have been consummated, resulting in MGG being paid in full.

“MGG encouraged me to pursue that capital infusion while it was secretly preparing the Kentucky suit and intending to exhaust {Zayat] Stables' bank account,” Zayat alleged.

In a different section of the same document, Zayat claimed that MGG “fraudulently induced Stables into a loan which involved a $10 million discretionary portion, never lent the full $35 million to Stables which was required, and admitted it never intended to lend to Stables the full $35 million.”

Zayat stated the money he sought in 2016 from MGG was intended to be a “bridge loan” because Zayat believed he had a bigger deal in the works with CVC Capital Partners, which describes itself as “a world leader in private equity and credit” that seeks to partner with “fundamentally sound, well-managed and cash-generative” businesses.

“At the time of the negotiations with MGG, [Zayat] Stables had a term sheet from CVC, one of the world's largest private equity firms, to inject $250 million equity into Stables for a 49% ownership interest,” Zayat stated in the court document. “Thus, the intent was for Stables to use MGG's $35 million as a bridge loan until an equity infusion transaction could be consummated.”

But that deal also fell through.

The proposed partnership between Zayat and CVC would have unraveled in either late 2016 or early 2017. Based on a different timeline of events laid out by MGG in its lawsuit, that's roughly the same time frame when Zayat and family members allegedly began selling horses and shares in breeding rights while telling the MGG those equine assets remained on the books as security against the loans.

While Zayat's two big-money, near-miss investment disclosures will generate headlines within the Thoroughbred industry, it isn't clear what purpose they serve in relation to the paperwork his legal team filed on Tuesday. The Mar. 16 filing is essentially is a request to get the trustee and creditors to stop grilling him about financial details so the bankruptcy proceedings can be brought to a conclusion.

“The Debtor has been extremely cooperative with the Trustee,” Zayat's attorney, Jay Lubetkin, wrote in an explanatory letter that accompanied the cross-motion. “The Debtor provided to the Trustee significant documentation respecting his financial affairs…. The Debtor has responded with voluminous documents in satisfaction of the Trustee's three very extensive document requests, and temporarily withheld only a small portion of those documents for legitimate, good faith, objectively supportable reasons…

“The Debtor [eventually] provided the Trustee with the temporarily withheld documents, and the Trustee has been in possession of all the requested documents for more than 60 days. The Trustee has personally inspected the Debtor's house with a real estate broker and [an] appraiser for more than two hours, more than three months ago.”

Lubetkin wrote that Zayat and family members are now being asked to turn over another round of detailed financial documents, “none of which have any apparent relevance to the Trustee's decision whether to file an objection to discharge complaint.”

Lubetkin summed up by writing that “In a further display of good faith, the Debtor was willing to consent to a short extension of the Trustee's deadline to file an objection to discharge complaint, if the Trustee agreed to limit the further continued meeting of creditors to one additional hour. Even that reasonable proposal was rejected by the Trustee. For the foregoing reasons, and for those set forth in the supporting Certification, the Debtor respectfully requests that the Court should enter an Order denying the Trustee's further request for an extension of the discharge objection deadline and compelling the Trustee to deem the meeting of creditors concluded.”

According to the cross-motion, among the additional items that the trustee has recently requested are a list of transactions from Zayat's TVG betting account and his credit card statements from 2016.

“Calendar year 2016 was the period immediately after the success of the Triple Crown winning horse American Pharoah, and there is no showing, and can be no showing,

that I was under any personal financial distress during that period of time,” Zayat stated.

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Stakes Winner Gidu, Son Of Frankel, To Enter Stud In Argentina

Gidu, a multiple stakes-winning son of Frankel, will begin his stallion career at Haras Gran Mueñca in Argentina for the 2021 Southern Hemisphere breeding season, the South American publication Turf Diario reports.

The Irish-bred 6-year-old retires with four wins in 21 starts for earnings of $305,457. From the second crop of highly-touted European champion Frankel, he was a $457,683 purchase by Zayat Stables from the 2016 Arqana Deauville August Yearling Sale.

After breaking his maiden as a juvenile, Gidu finished second in the Grade 3 Dania Beach Stakes, then earned a pair of non-graded stakes wins in the Columbia Stakes at Tampa Bay Downs and the Paradise Creek Stakes at Belmont Park. He was sent to the prestigious Royal Ascot meeting after those wins, where he finished sixth in the G1 Commonwealth Cup.

Though he consistently competed in stakes races throughout the rest of his career, Gidu's only remaining earned black type came at the beginning of his 2020 campaign, when he finished second in the G3 Tropical Turf Stakes at Gulfstream Park.

Per documents released as part of the Zayat Stables bankruptcy filings, Gidu was sold privately for $100,000 in the spring of 2020 as part of the operation's liquidation of assets. He raced twice for new owner Santa Escolastica Stable, both out-of-the-money efforts in Saratoga, to end his career.

Bred in Ireland by Ecurie Des Monceaux, Gidu is out of the winning Unbridled's Song mare Manerbe, who is also the dam of Grade 3 winner Marbre Rose and French stakes winner Aviatress.

Gidu hails from the family of Grade 1 winners Zoftig, Zaftig, and Zo Impressive, Grade 2 winner Souper Tapit, Grade 3 winner Verve's Tale, and classic-placed Tale of Verve.

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