Report: Zayat Stables bankruptcy could be settled for $5 million

The trustee in the Zayat Stables bankruptcy case has proposed a $5 million settlement.

Thoroughbred Daily News reported that under the proposal, Ahmed Zayat and members of his family would pay the $5 million, which would go to lender MCG Investment and the trustee.

The proposal calls for $30,000 to eventually go to unsecured creditors.

Zayat was the breeder and owner of 2015 Triple Crown winner American Pharoah. He filed a Chapter 7 personal bankruptcy case in 2020, which was followed by the involuntary bankruptcy petition led by his former financial advisor.

In the involuntary case, MCG alleged that Zayat and his family members obtained a $24 million loan by fraud and did not repay it. The company also will get a disbursement of about $1 million from the funds in the bankruptcy trustee's account, according to the TDN report.

MCG agreed to return about $452,000 of the settlement money to the trustee, which will provide for the $30,000 for unsecured creditors and about $186,000 for the trustee's administrative obligations.

One of those unsecured creditors is Rudy Rodriguez. His attorney, Drew Mollica, told TDN that the trainer has an unsecured claim of $397,000 against Zayat Stables. Mollica said he does not know yet whether he would object to the proposed settlement.

The next step is for the U.S. Bankruptcy Court for the District of New Jersey to approve the settlement, according to TDN. If any party files an objection by Aug. 16, a hearing would be held on Aug. 23 to hear the objections. If no one objects, the proposed settlement would be approved.