A dustup between parties with legal claims to proceeds from the sales of horses in the Stonewall Farm bankruptcy has been settled.
On Thursday, the Lexington Herald-Leader‘s Janet Patton had a business story about a motion in the case that could have had very serious implications for equine business.
In particular, an adversarial motion filed Aug. 11 in US Bankruptcy Court for the Eastern District of Kentucky (Lexington Division) by Stonewall Farm’s various stallion entities essentially pitted differing banks against one another.
The major points were that the Stonewall entities (and their bank) wanted the stud fees paid before issuing the stallion service certificates on mares and foals that are collateral for loans from other banks.
Not surprisingly, those banks didn’t want to fork over any money when they were owed quite a lot already.
This, however, was not a typical situation. The various Stonewall entities own all the horses involved, and they are all in bankruptcy.
The hot-button question was whether the Stonewall/bank entity on the stallion side could force the Stonewall/bank entity on the mare side to pony up cash to allow a sale.
An agreement, however, has been worked out between the parties to allow the bankruptcy dispersal to proceed.
Although the confrontation between the Stonewall entities has some of the qualities of a tempest in a tea pot, this was a serious point because, typically, sales companies will not allow horses through the ring without both the Jockey Club registration papers and the stallion service certificate being available to buyers, as noted in the conditions of sale.
By requiring the papers and stallion service certificate, Keeneland is able to guarantee clear title to the horses going through the ring, although there can be as many liens as required on the proceeds from the sale.
Keeneland and other sales houses are serving the interests of a clear marketplace by insisting on unencumbered title to the horses. Every buyer wants a clear title, with no loose ends, and the sales companies don’t sell parts, pieces, or loose ends.
Typically, when a bank has a lien against a horse, it provides the stallion service certificate and takes the proceeds from the sale up to the lien amount.