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

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Ahmed ZayatSusie Raisher

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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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