By T. D. Thornton
After nine months under court-appointed receivership to liquidate and manage its remaining equine assets, the insolvent Zayat Stables, LLC, is down to 12 remaining horses at eight locations, according to an October status report filed Nov. 11 in Kentucky's Fayette Circuit Court.
One formerly valuable colt had to be given away during the most recent month of transactions: Lexington-based receiver Elizabeth Woodward wrote that she released the ownership of a 3-year-old Empire Maker–Duke's Dream colt “to offset boarding, training and veterinary charges which exceeded the estimated fair market value of the horse.”
That colt was the seventh-session KEESEP sales topper in 2018, acquired for $450,000 in a partnership purchase between Zayat Stables and St. Elias Stable. The receiver's report, however, stated Zayat Stables had 100% ownership interest in the colt at the time he was relinquished.
“He looked the part,” Zayat told TDN back in 2018 just after the hammer fell. “He was very well-balanced, he had a great walk and a great pedigree…. Everything was going for him.”
In more general terms concerning the financial state of Zayat Stables, the report stated that “As of Oct. 31, 2020, the Receiver has collected approximately $1,624,277 through the collection of purse proceeds and other funds held for Zayat Stables and from sales of the horses referenced herein. She has expended approximately $1,029,293 on operations, such as board bills, veterinary bills, and administrative fees and commissions necessary to be paid for the sales to date.”
Woodward reported the collection of $135,068 from the September sale of an American Pharoah–La Vita Bella yearling as the largest single transaction since her last report was filed with the court. That filly hammered at FTKSEP for $300,000.
Two of Zayat Stables' horses raced in October: Bob and Jackie (Twirling Candy) ran third in the Oct. 3 GII City of Hope Mile S. at Del Mar, earning $24,000. Alex Joon (Flatter) ran second in an Oct. 29 N1X allowance at Churchill Downs, earning $9,800.
Zayat Stables was ordered into receivership back in January as part of a $24.5 million civil lawsuit by MGG Investment Group, LP, a lender alleging fraud and loan defaults by Ahmed Zayat and his family-owned bloodstock and racing operation.
That lawsuit revolves around accusations that Zayat Stables hid the proceeds from the sale of nine lifetime breeding rights shares to 2015 Triple Crown winner American Pharoah, plus at least 15 other “valuable racing Thoroughbreds” the lender held as collateral.
The MMG suit is one of three intertwined and currently active court cases involving Ahmed Zayat and his racing stable.
In a federal Chapter 7 bankruptcy petition filed by Ahmed Zayat Sept. 8, Thoroughbred trainers, horse farms, bloodstock businesses, veterinarians, and equine transportation companies were among 132 entities listed as creditors. They are due $14,755,1717 in “non-priority unsecured claims,” which means they are at the bottom of the hierarchy to get paid–if they get paid at all. Zayat Stables is listed as a co-debtor to 112 of those 132 non-priority unsecured claims.
Separately, Ahmed Zayat's former financial advisor is among the entities who initiated a Sept. 14 federal “involuntary bankruptcy” petition against Zayat's family-owned racing stable.
Although once prevalent, involuntary bankruptcy proceedings are now relatively uncommon in U.S. courts. They are designed to protect creditors, not debtors, and are often filed against companies (as opposed to individuals) as an attempt to get paid when it is believed that a firm is rapidly burning through assets and/or financial malfeasance is alleged.