A federal judge in Lexington has cleared the way to allow Fifth Third Bank to go after Thoroughbred owner Ahmed Zayat and his Pioneerof the Nile subsidiary to cover his stable's debt.
On Monday, U.S. District Judge Karen K. Caldwell partially lifted a stay imposed Feb. 5, when Zayat Stables entered bankruptcy in New Jersey.
Fifth Third Bank has sued Zayat Stables, Zayat and Pioneerof the Nile Ltd., alleging the stables have defaulted on $34 million in loans. Zayat and Pioneer guaranteed those loans.
Zayat Stables went into bankruptcy to block a move by Fifth Third to seize Ahmed Zayat's 200-plus racehorse stable. Zayat is the second-leading Thoroughbred owner in the United States, with on-track earnings of more than $2 million.
Zayat argued that the Lexington court should wait for the bankruptcy to be resolved to avoid complicating matters.
Zayat has counter-sued Fifth Third, alleging fraudulent and deceptive lending practices. And in the bankruptcy case, the stable filed an adversarial claim that could mitigate how much Zayat must pay back and when.
Caldwell said that Zayat can continue to pursue those claims, but the judge said that in the meantime the bankruptcy protection should not prevent the bank from going after the solvent loan guarantors.
Fifth Third typically does not comment on pending litigation.
A hearing on the Zayat Stables' reorganization plan is scheduled July 15 in bankruptcy court in New Jersey.
If the court approves the plan, Zayat spokesman Matthew Hiltzik said in a statement, "there will be a temporary injunction prohibiting Fifth Third from pursuing Mr. Zayat on his guarantees, provided that the stable meets all of its obligations under the plan, which Mr. Zayat intends to do. Mr. Zayat will continue to focus on moving forward and resolving this matter."