Magna Entertainment files for bankruptcy protection

Horse racetrack operator Magna Entertainment Corp. has filed for bankruptcy protection and plans to sell assets under a major reorganization.

Magna Entertainment, or MEC, a spinoff of auto parts giant Magna International
said Thursday it has filed under Chapter 11 in the U.S. and will also file to have that creditor protection extended in Canada.

"Simply put, MEC has far too much debt and interest expense," said MEC chairman and CEO Frank Stronach, founder of the Magna auto parts empire.

"MEC has previously pursued numerous out-of-court restructuring alternatives but has been unable to complete a comprehensive restructuring to date due, in part, to the current economic recession, severe downturn in the U.S. real estate market and global credit crisis."

The racetrack company said it has secured a US$62.5-million financing from MI Developments, the real estate company that owns a majority stake in MEC and is itself another Magna International spinoff.

The company said the financing will allow it to run its day-to-day operations and pay employees.

MEC said MI Developments has agreed to pay US$195 million for its interests in the Golden Gate Fields, Gulfstream Park, Palm Meadows Training Center and Lone Star Park tracks as well as betting technology businesses XpressBet and AmTote International.

GM considering filing Chapter 11 bankruptcy

General Motors Corp, nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition.

"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."

Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.

GM declined to comment, the story said.

General Motors and Chrysler LLC face a Tuesday deadline to file restructuring plans to the government in exchange for receiving $17.4 billion in federal loans.

Automakers have struggled as U.S. auto sales have tumbled amid a recessionary economy. U.S. auto sales in January tumbled to a 27-year low.

GM has been in talks with bondholders and the United Auto Workers union to get an agreement on a restructuring that would wipe out about $28 billion in debt for the auto maker, sources have told Reuters. However, it appears unlikely a deal could be reached by the Tuesday deadline, they said.

GM has already announced plans to cut 10,000 salaried workers worldwide, or 14 percent of its staff, impose pay cuts for most remaining white-collar U.S. workers and has offered buyouts to its 62,000 U.S. workers represented by the UAW.

In addition, it is trying to sell its Hummer SUV and Swedish Saab brands and is reviewing the status of its Saturn brand.

Nortel files for Chapter 11 bankruptcy

Nortel Networks Corp. filed for Chapter 11 bankruptcy protection in the United States on Wednesday, one day before it was due to make a $107 million interest payment.

The Toronto-based company and several of its affiliates made the filing in federal bankruptcy court in Delaware.

The move came shortly after the trading of Nortel's shares were halted on the TSX.

According to The Globe and Mail, Nortel is also expected to file for bankruptcy protection in Toronto.

"Bankruptcy protection keeps the creditors at bay while you reorganize or sell parts of the business," BNN's Michael Kane reported Wednesday.

The company's board of directors reportedly met in Toronto Tuesday to discuss Nortel's future.

On Thursday, the telecom firm was due to repay a $107-million interest debt on bonds, which would have amounted to about 10 per cent of the company's North American cash reserves.

"They don't have $107 million dollars just to make an interest payment," Kane said.

Canada's most valuable company at one time, Nortel stocks traded as high as $124.50 a share during the tech boom in 2000, said Kane.

On Tuesday, the stock closed at 38.5 cents a share.

"People who are close to the situation are saying to us that although there is a great deal of equity in the company the possibility of it staying together as the Nortel Networks we knew is fairly slim," Kane said.

"We're likely going to see it sold off in bits and pieces."

After the telecom bubble burst, the company failed to re-establish itself and was plagued by accounting scandals and weakening demand.

"It has been a changing landscape that Nortel has been unable to adjust to," Kane said.