A Fayette County, Kentucky judge granted a motion at an emergency hearing Wednesday to put Zayat Stables and its horses into receivership, reports the Lexington Herald-Leader. The ruling follows a lawsuit filed by New York-based MGG Investment Group alleging that owner Ahmed Zayat had sold shares in Triple Crown-winning stallion American Pharoah that were being used as collateral against loans made by MGG to Zayat. MGG’s lawsuit alleges that Zayat defaulted on his loans in September, and seeks at least $23 million from Zayat.
According to the Herald-Leader, Zayat sent an email to an investor in the lawsuit filing, saying, “I have pushed myself to the brinks of bankruptcy personally by using every dollar I have in America to fund the company until I find an investor to pay you in full.” He indicated he planned to meet with Fasig-Tipton about a potential dispersal sale.
The Herald-Leader story reports that the suit says, “On the basis of Mr. Zayat’s communications with MGG it is clear that Zayat Stables and Mr. Zayat no longer have the resources necessary to continue to pay for the upkeep of their valuable equine assets that are MGG’s Collateral. In fact, according to Mr. Zayat’s January 12, 2019 email to MGG, in order to keep Zayat Stables in operation he has exhausted all of his savings and his business and personal bank accounts, and has resorted to seeking loans from friends, family, and even payday lenders. Because Zayat Stables and Mr. Zayat lack the cash flow necessary to fund basic services, the Equine Collateral will at best diminish in value and at worst be permanently lost. If Zayat Stables or Mr. Zayat are unable to feed and care for the Equine Collateral, or make additional efforts to dispose of assets, the foreclosure process will simply take too long and the Equine Collateral will be lost.”
The paper also reports that the suit says that Zayat sold off nine seasons to American Pharoah without telling the firm and hid $3.3 million in proceeds rather than using the money to pay back part of the loan as required.
This story will be updated. .