According to the article linked above, you were right…even more of a mess now.
This was the point that I made early on. It doesn’t matter if you thought that you were buying something in good faith, and had the mostest bestest contract evah!. You were buying hot merchandise.
Can you imagine the legal fees that are going to accumulate for everyone involved? Coolmore is going to crush Zayat for this, I am sure. There’s no way you tolerate that kind of behavior–but, what will be left for anyone to get?
Not much!
Blood Horse’s take on all of this…
I am going to be very interested to see if they decide to go after Zayat for criminal fraud, rather than just a civil case. This is not his first rodeo at this, and while he can try and act as though he is simply shocked by these wrongful proceedings, it seems apparent that he is going down, and he is currently taking his family with him.
I don’t have any current inside info, I’m not in KY circles anymore. I remember the 2008 (?) Zayat dispersal, I believe due to the 5th/3rd debacle. He had many horses entered at KeeNov, racing prospects, and mares. Several of the horses were late outs (day of sale outs). I think Zayat had overinflated reserves in mind, and was a bit offended at lower prices, so he pulled the horses (like a spoiled child, IMO) after days of showing and marketing. Some of the horses sold well-- I think Mushka brought 700k from Brushwood, and was a good buy-- but others were homebreds by his own stallions that were not commercially appealing. There was some barn blindness, for sure. It would NOT surprise me if something similar happened in this sale, too.
My impression of Zayat (back in 08) was that he loved his horses and like many owners, believed they ALL were better than they actually were. He had a lot of enthusiasm, and was in over his head. He made his fortune selling a brewery in Egypt for many millions, and named a lot of his horses with brewing names or after his wife and kids (lady Joanne, Point Ashley, J Z Warrior, etc). He would do better having a VERY small stable and enjoying his horses on a more economical scale.
Yes, as the one article https://www.paulickreport.com/news/r…f-ahmed-zayat/ mentioned (when this was first coming out), just because you have been successful in business doesn’t mean you will be successful at the TB racing and breeding business. It’s a whole different beast.
They call it SPIN! And Zayat is working overtime at it…
https://www.bloodhorse.com/horse-rac…acquire-assets
Because, you know, it would be very bad for Zayat to be told that he had no business making these transactions…
Seeing as he didn’t use the proceeds from those sales to pay the bank, and in fact hid the fact that he had sold them, (from the bank) he has a snowball’s chance in hell that anyone will buy it. He’s up a creek
If, in fact, the people that bought the shares and horses knew they were collateral (as the bank contends) and that’s why they were able to buy them for so far under their “appraised value”, they’ve earned what’s coming to them.
If they didn’t, I feel bad for them. They sure won’t be getting their purchases back and are out the money. Either way, a mess of legal bills awaits.
It will be interesting to know whether Coolmore et al really knew of Zayat’s financial woes, as the bank insists.
So, according to the latest round of articles, the lender is now going after purchasers of Zayat horses? Including horses bought at 2020 auctions? Asserting that there was some sort of shady behavior that the horses sold for less than Zayat’s appraised value?
I feel bad for the (seemingly legit) buyers of those horses. It’s not their fault they were the final bidder, less than Zayat’s promised sale price. It’s callwd Market Value, and horses are only worth what someone is willing to pay. If I saw a horse entered at Keeneland or Fasig, I would.expect the horse was clear of liens and available for sale.
Some other things are interesting to me… for the past 2 years, Am Pharoah’s stud fee is “Private.” I do wonder if that is an attempt to make deals, or hide actual values of stud fees, or give gray negotiation area regarding Zayat’s collateral shares. Curious. And the timing of Bodemeister getting sold overseas may also be related?
I feel bad for all those left in the wake of Zayat’s financial disaster.
This is why I am wondering when and if criminal fraud charges will be brought against Zayat. He knew exactly what he was doing, and who he was doing it to including his own family. It’s amazing when someone feels that they are so far above it all that they can try and do these things. While I can’t imagine what they could possibly get, I wonder if there will be some ego driven lawsuits by some of those who purchased horses or seasons That have now been shown to be fraudulent sales.
There were enough private (not auction) sales of breeding rights and horses that the bank for whatever reason, correctly or incorrectly, became suspicious of some buyers. I agree with you. I would think that a horse bought at auction would not be collateral for a bank loan but I don’t know how that works, legally .I mean, the auction can’t be held responsible can they? https://www.paulickreport.com/wp-con…t_Redacted.pdf
American Pharoah stud fee went “private” but that was Coolmore’s call wasn’t it?
The bank says that the buyers “knew or should have known” that the horses/shares were collateral. I guess they’ll have to prove that. Seems like it might be difficult.
ETA After a re-read of the filing apparently it won’t be difficult to prove that Coolmore knew that all of Zayat’s horses and shares were collateral for a loan. Wow.
Oh, I also was surprised about the bank going on about selling below the appraised value. I’ve always seen appraised value as being for insurance purposes. Any bank loaning that amount of money to a horse operation surely would know that a horse is actually worth what someone will pay for it, right?
Am I missing something here? The court filing was a slog of a read for me.
About that “knew or should have known,” is there a title search or equivalent that you can do with horse transactions? I know every loan I’ve ever had involving my farm, three of them to date, the title search was a very big deal as part of it. It would probably be harder to do that with horses, but these are some serious $$ horses, far higher than all my equine transactions of life. Is there some objective, neutral database where banks/other parties file statements that they have some non-real estate thing of value as collateral and other people considering buying it could run a search and see it posted there?
Oh boy, apparently Fasig-Tipton provides a guarantee and Kentucky law is on the buyer’s side as well. So the people that bought at auction may be OK. https://www.bloodhorse.com/horse-rac…dismiss-claims
Coolmore and the others that bought privately can’t get out of it in that manner though.
I don’t want to be FTs insurance carrier.
No Coolmore (and others) are apparently safe because of the Food Security Act.
However, he writes in Equine Law, “the United States Congress decided to get involved in the issues concerning the rights of buyers of farm products free and clear of security interest by including `clear title’ provisions in the Federal Food Security Act of 1985. Essentially, the Food Security Act provides that a purchaser of farm product collateral takes free of a security interest unless the secured party has observed certain conditions.”
The conditions are: if the secured party (MGG in this case) has provided notice to the buyer. This notice comes with specific formal requirements. The second provision is if the lender has filed what is called an “effective financing statement” in a “central filing” system certified by the USDA.
So, if the lender complied with these, filing an effective financing statement in a central filing system certified by the USDA, the horses would be sold with the security attached.
Except, says Becker, this system has only been enacted in 13 states. Kentucky is not one of them.
“So right now,” Becker concludes, “the Food Security Act likely kills this case for horses purchased in Kentucky and most other states.”
The quote is from here: https://www.thoroughbreddailynews.com/zayat-suit-prompts-new-questions-about-horse-sales/
1 Like
Thanks LaurieB.
Well that wasn’t an easy read either but I get it :o, and it looks as if the bank has now incurred the wrath of Coolmore and that Coolmore will now be going after the bank for malicious prosecution.
Jeeze. Why would a bank be so ignorant of the laws surrounding collateral for big loans? Looks like they’re going to have to concentrate on Zayat. Which is fair.
Apparently facts faced about Fasig Tipton auction rules by MGG https://www.bloodhorse.com/horse-rac…ark-bloodstock
Another article with commentary from Clark Bloodstock, the buyer (for a client) at the auction. https://www.thoroughbreddailynews.co…rk-bloodstock/
More for Zayat and MGG to deal with…
