So, the bank sued in federal court in an effort to seize the stables. Zayat countered with the bankruptcy, forcing Fifth Third back to the negotiating table and giving Zayat time to come up with a plan to fully repay the company’s debts.
Thoroughbreds used for breeding often make better collateral for stable owners than horses that are still racing, Terry Finley, owner of West Point Thoroughbreds, said in an interview.
Quick Sales
When a bank seizes thoroughbreds from an owner, it will quickly put the horses up for auction, rather than try to breed them or develop them, Finley said.
In bankruptcy papers, Zayat accused Fifth Third of trying to break up the thoroughbred collection through a fire sale.
Ultimately, he and the bank settled the dispute by restructuring the loan. Zayat agreed to sell horses over four years, giving the bank 40 percent of the proceeds. He refinanced a final payment of $14.4 million that was due at the end of December.
The deal allowed Zayat to keep his stables, an unusual outcome in bankruptcy, where most owners are forced out.
Two years later American Pharoah was born.
While one of the horses he sold was Littleprincessemma, Zayat still owns Pioneerof the Nile, who brings in about $60,000 each time he’s put out to stud, according to the Blood-Horse stallion register.
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