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Fasig-Tipton Photos
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Fasig-Tipton Photos
Fasig-Tipton’s Kentucky Winter Mixed Sale finished with solid numbers after an enthusiastic crescendo of activity on the two-day auction’s second session. A total of 368 horses, including broodmares, yearlings, racehorses and one or two foals, changed hands for a slightly lower average price but a higher total than last year. The buzz around the sale grounds however, was focused more on a group of six horses near the end of the catalogue.
Those six horses were offered for sale on behalf of Zayat Stables, the owner of 2015 Triple Crown winner American Pharoah. In January, the racing and breeding operation was sued in Fayette County Circuit Court by MGG Investments, a New York investment firm which claimed Zayat Stable owner Ahmed Zayat defaulted on $23 million in loans. Zayat had used the stable’s equine holdings as collateral for the loan, which he took out in summer 2016, barely a year after American Pharoah made history at Belmont Park.
At the request of MGG Investments, Judge Kim Bunnell appointed a third-party receiver to run the stable. The receiver is tasked with maximizing the operation’s profits, which will likely require a gradual sell-off of its horses.
Those profits would help pay back the debt Zayat still owes MGG. Zayat made a motion to dissolve the receivership, but that motion was denied. Zayat expressed frustration that the lawsuit was filed, since he said he offered the investment group a plan for dissolving the remaining equine collateral and the two sides were close to working out their differences privately.
An early report from the receiver suggested the stable was not in good financial shape, despite attaining international fame with American Pharoah just five years ago. The receiver said in a few weeks between her appointment and a hearing on Zayat’s motion to dissolve, she had been contacted by numerous trainers, farms, and veterinarians who had Zayat Stables horses in their care. Those horsemen claimed they had not been paid, many of them in months. In a few cases, Zayat admitted he had traded horses to settle unpaid board bills. Average annual training costs for a single horse on the track can range between $35,000 to $50,000. During one court proceeding, attorneys suggested the amount owed by the stable may be in the hundreds of thousands.
It’s not the first time Zayat has been in trouble for loan repayment. In late 2009, Ahmed Zayat was sued by Fifth Third Bank for allegedly defaulting on $34 million in loans. The stable filed for Chapter 11 bankruptcy and worked out an agreement with the bank.
In court documents, MGG alleges that Zayat sold off horses or breeding rights to some Zayat stable horses without notifying the investment company or turning over the proceeds of those sales to go against the debt. In some cases, Zayat disputes those claims.
Among those assets were nine lifetime breeding rights to American Pharoah. A breeding right allows the holder to send one mare per year to a given stallion for the stallion’s lifetime. Breeding rights can prove valuable if a stallion’s commercial popularity increases. Having a standing breeding right operates similar to a stock in that it can increase in value if the stallion performs well. When Zayat sold breeding interest in American Pharoah to Coolmore (in January 2015, before the colt even ran in the Kentucky Derby), his wife and children were given nine lifetime breeding rights as part of the package.
Court files indicate all nine American Pharoah breeding rights held by the Zayats have now been sold. Zayat’s wife and children were among additional defendants named by MGG this week, along with several major owner/breeders who purchased breeding rights and horses sold by Zayat. MGG is requesting the return of horses or breeding rights it alleges were sold without its authorization, as well as damages from some defendants. The new defendants, including Zayat’s family, have not yet had time to file a response.
Of the six Zayat Stables horses that went through the ring at Fasig-Tipton this week, four changed hands. One received no bid, and another did not attain reserve. The four that sold brought a total of $366,000 — a far cry from the $1.9 million Zayat had told MGG he thought they were worth in December.
As the stable still has active racehorses, it’s unlikely it will be completely dissolved before the end of the calendar year.
In the meantime, the public sales market has remained relatively consistent — selectivity is still the name of the game. Buyers are either willing to compete for a horse, or there is sparse interest.
Average price for the auction was $26,568 (a 10 percent decrease from last year), while the median dipped 45 percent to $8,500. Total sales were up 1 percent to $9,777,100. The rate of reserve not attained came to 25 percent.
The Fasig-Tipton Kentucky Winter sale was the final Thoroughbred breeding stock sale in Kentucky for this breeding season. The next sale will be Keeneland’s April Sale of 2-year-olds on April 6 and 7.