Magna Entertainment Inc. said on Tuesday its future is in "substantial doubt" as the horseracing heavyweight tries to work off its huge debt load.

Magna Entertainment, which has $230 million US in borrowings due within the next 12 months, said it would miss its end-of-year deadline to eliminate the company's outstanding debt.

"Although we continue to take steps to implement our debt elimination plan, U.S. real estate and credit markets have continued to demonstrate weakness in 2008 and we do not expect to complete our plan on the originally contemplated time schedule," said Magna Entertainment's chief financial officer Blake Tohana.

Magna Entertainment, a subsidiary of Frank Stronach's MI Developments Inc., owns famous racetracks, such as Santa Anita Park in Arcadia, Calf. and Baltimore's Pimlico Race Track, and also makes money from off-line betting.

A weak U.S. real estate market combined with sagging revenue have slowed Magna Entertainment's plans to sell its assets, the company said. That situation makes the renegotiation of any new credit facility or the extension of existing borrowing arrangements imperative, according to Magna Entertainment.

If Magna Entertainment is unable to generate enough operating cash to pay its interest obligations or get repayment waivers from its lenders, however, Magna's total mountain of debt becomes due at once.

The company made the statements in its second quarter earnings report released this week.

Three month Magna Entertainment stock chart

The company's results showed a slight improvement in the three months ended June 30, 2008, losing $21.3 million, or $3.64 a share. That was compared to Magna Entertainment's loss of $23.4 million, or $4.35 a share, for the second quarter of 2007.

Since 2003, Magna Entertainment has lost more than $500 million.

Revenue slipped marginally to $163 million in the period versus $166.4 million at the same time last year.

Magna Entertainment is also considering a restructuring plan that would see MI Development's 59 per cent stake in the horseracing company sold to Stronach personally. Two of MI Development's biggest shareholders have expressed opposition to the proposal.

Shares in Magna Entertainment ended the trading session down 25 cents, to close at $7.50.

Magna Entertainment, a subsidiary of Frank Stronach's MI Developments Inc., owns famous racetracks, such as Santa Anita Park in Arcadia, Calf. and Baltimore's Pimlico Race Track, and also makes money from off-line betting.