Zayat Files Bankruptcy

[Hold Your Peace]

The other thing boarding farms will tell you is that the super wealthy have been known to use their clout to be slow and no pays. One farm owner told me once how frustrating it was to watch a major TB owner--not Zayat--buy several million dollars worth of horses at an auction all the while he was months behind on a $25,000 board bill. He eventually got paid but it took a lot of effort. And I understand that situation is not uncommon.

You are correct. Trainers will tell you that some of the worst at paying their bils on time are the richest.

One thing with regard to a lot of "rich" people is that they're usually not liquid.

If Charlotte Weber (whose net worth exceeds $500 million) of Live Oak wanted to spend $100 million at Keeneland September later this year she would likely need to get a loan from a bank to pay Keeneland because something like $515 million of her wealth is in Campbell's Soup stock and if she were to suddenly sell $100 million worth of her Campbell's Soup stock it would set off a market panic (an insider selling almost 20% of their holdings) and the value of her remaining shares would plummet. In addition to a huge part of her wealth being tied up in Campbell's Soup stock I'm sure she's got additional wealth invested in other stocks and her land holdings (i.e. farms) and bloodstock holdings aren't chump change either.

So while Charlotte is considered extremely wealthy, to actually spend a large amount of her wealth the only realistic option is to get a $100 million credit line from a bank with let's say 4 million shares of Campbell's Soup stock as collateral (right now that would be worth about $132 million).

Sometimes these type of arrangements blow up though. Suppose a bunch of people were suddenly sickened by eating Campbell's Soup (see Johnson & Johnson's cyanide Tylenol episode from years ago or Toyota's current problems with sticky accelerator pedals) and Campbell's stock plummeted from $33 a share to $3 a share. That means the collateral on that $100 million credit line is now going to be worth only $12 million and the bank is going to freak and want new collateral or the credit line paid off. Something similar went on with Michael Paulson and Azeri. Paulson had convinced his bank that Azeri and her foal were worth more than they were, and that's why he couldn't let them sell for fair value for a long time. Because as soon as the bank realized their "collateral" wasn't worth what they'd been led to believe, they would have demanded new collateral or cash from Paulson.

[Mom]

@Mom, his racing stable(Zayat Stables) is bankrupt...Zayat is not personally broke.

He is playing with the banks money and if he loses he will just walk away from his debt.

I just think it was dumb of the bank not to get a personal guarantee. I have nothing against using corporate structure for a variety of reasons, but for a bank to issue that loan in such a speculative industry without Zayat signing a personal guarantee of a corporate loan is googfy IMHO.

[Worksoplad]

Jeez this is getting weirder, heres the latest (link below)


That sounds like insurance fraud to me. I'd like to hear the Ins Co. take on all this.

http://www.bloodhorse.com/horse-racing/articles/55285/zayat-not-required-to-report-insurance-check?utm_source=BreakingNews&utm_medium=email

There was no insurance fraud involved:

http://www.bloodhorse.com/horse-racing/ ... ce-at-life

[bdw0617]

@Mom, his racing stable(Zayat Stables) is bankrupt...Zayat is not personally broke.

He is playing with the banks money and if he loses he will just walk away from his debt.

I just think it was dumb of the bank not to get a personal guarantee. I have nothing against using corporate structure for a variety of reasons, but for a bank to issue that loan in such a speculative industry without Zayat signing a personal guarantee of a corporate loan is googfy IMHO.

depends on your D&B score or your personal credit score

if he had good enough credit someone else would have given him the money without signing a personal guarantee.

Banks make a living giving guys like this money, you take chances. if they wouldn't' there are 5-6 others that would have assuming his credit was in order.

the only thing the bank really could have done is given him a super sweet rate if he did give personal collateral, but that would not really be worth it.

[horsenuts]

Although it sounds radical, MOST people shouldn't expect to make money breeding or racing horses. It is a sport, a game, and like boating, golf, skiing, -- it costs money to do it, you don't make money by doing it, at least, not enough money to pay for everything.

Most organizations or individuals who make money in horses offer a service to owners -- such as, trainers, sales consignors, stallion owners, transporters, etc.

If fewer than 5% of horses make back their costs, what does that say about owners and making money.

It just isn't going to happen most of the time.

Exactly! We all remember Seattle Slew and Spectacular Bid making their owners very wealthy........ but those were two lottery ticket horses that people having been trying to buy ever since.......... and it hasn't happened yet................... and it's not going to because horses have dropped in value a great deal since the days of SB being syndicated for $36 million as I recall. But those two horses kept the dream alive for many owners at the sales.

[Tiz]

"One of the reasons I posted was to point out; here's a guy who led in stable earnings and is now filing Chapter 11. You can't argue his success- he was leading owner in earnings yet his racing operation is bankrupt. I think that speaks volumes about this game.."

I think it speaks volumes about Zayat and his spending habits, and because his earnings experience is so rare, virtually nothing about this game.

[Tappiano]

I'm sure there's a stud deal in the works for Eskendereya .. so that will help.

[zinn21]

I think it speaks volumes about Zayat and his spending habits, and because his earnings experience is so rare, virtually nothing about this game.

Perhaps his earnings are the exception but his losses are the rule for virtually every owner in the game. It matters not if you are cost conscious or a big spender-you lose money and that speaks volumes about this game.

[NorthStar]

I have never understood the speculative nature of the business at that level. No shots at anyone, but if you have the good fortune in business to have this type of disposable income, why would you leverage yourself so big?

I believe its called $ego$. Isn't that really what drives the industry? How else can one justify breeding 200 horses to maybe get a couple of good ones, or spending as much as 1/2 mil to breed to a stallion?

It does seem that Jackson has done his homework, even though some of those purchases are hard to justify if the reported prices are correct.

Don't know a better example of $ego$ driven purchases, except maybe the Green Monkey.