The financial woes of some of the NHL’s teams are well known. Phoenix, Dallas, Columbus, even the Islanders can get thrown into that mix on occasion. The problems of the New Jersey Devils, however, aren’t played up quite as much… Until now.
Forbes’ Mike Ozanian reports that the Devils are headed towards bankruptcy themselves and that owner Jeff Vanderbeek is compounding the team’s issues by treating the team the same way Tom Hicks did with the Dallas Stars. The issue at hand for the Devils? Vanderbeek isn’t making interest payments on the team. Quotes from the Globe And Mail on Vanderbeek’s inability to pay follow.
Devils co-owner Jeff Vanderbeek already missed an interest payment on the $80-million (all currency U.S.) loan Sept. 1. He was given an extension by the lenders in order to try and raise enough money to buy out co-owners Ray Chambers and Mike Gilfillan.
However, Vanderbeek’s efforts have not paid off yet so he still has not been able to make the interest payment. The Devils are not an attractive property to buyers because of their attendance troubles at the Prudential Center in Newark, N.J. They are 25th among the NHL’s 30 teams in attendance with an average announced crowd of 14,074.
As you might imagine, this is horrible news. Ozanian concludes his report on the Devils saying that the NHL and commissioner Gary Bettman have to do their part to get Vanderbeek out as the owner before the debt issue makes the possibility of selling the team virtually impossible.
Just when you thought things were turning the corner for the league, they’ve got another financial disaster to juggle and this one is in the heart of league’s biggest market.
Yesterday, the New York Post published an article stating that the New Jersey Devils missed a September 1st deadline to pay $100 million to lenders. Later in the day, the Devils organization announced that the Post’s story was “patently false.” If that’s the case, it sounds like Forbes has the same false information—because they too are reporting that the franchise was unable to pay creditors on September 1st.
Forbes goes deeper to explain that even if the team failed to make promised payments earlier this month, any bankruptcy proceedings would still be in the distant future (read: after the season). Forbes Executive Editor Mike Ozanian explains the details:
“Despite being unable to pay lenders $100 million that was due September 1, the NHL’s New Jersey Devils do not have to worry about being forced into bankruptcy by creditors for at least nine months because a consent letter stipulates lenders cannot take action against the Devils until after the last game of this season’s Stanley Cup playoffs, which should be around mid-June.”
Jeff Vanderbeek and Brick City LLC currently co-own the Devils with each claiming 47% in the NHL franchise. Brick City LLC has been looking to sell off their interest since February—an interest that Vanderbeek now plans on purchasing in order to refinance the team. Where it could get interesting is the value of the team vs. the amount of the debt. Forbes valued the Devils at $218 million last December—a value that includes money made from non-NHL events. Unfortunately for Vanderbeek, those projections for the coming year can be expected to decrease as forty-one New Jersey Nets home games would vanish if a potential NBA lockout wipes out the 2011-12 season. Even if the teams can salvage part of the season, revenue will be lost with each and every game missed. Mix in the fact that the outstanding debts stand at $250 million and refinancing the team might not be as easy as it sounds.
For the moment, we can give both sides the benefit of the doubt. Yes, the New York Post was correct when they said the Devils could face bankruptcy proceedings for failing to pay on September 1. On the other hand, the Devils don’t believe their facing bankruptcy because they have until June to hammer out the Brick City buyout and refinance the team. Either way, we’re splitting hairs.
No matter how you slice it, it would help everyone involved if the Devils could get off to a good start. They’ve already sold more tickets than they had at this time last season—so there’s potential to start bringing fans into the building. In a gate-driven league, there’s no substitute for sellout crowds packing the arena, paying for parking, buying beer, and picking up merchandise at The Rock.
Let’s be honest: nothing brings in fans and revenue quite like winning.
Last season was a tough one on the ice for the New Jersey Devils, but a report in The New York Post indicates that things are much rockier on the accounting spreadsheets. Josh Kosman cited an anonymous source who reports that the team missed a $100 million Sept. 1 loan payment, which is a troubling issue because it could push the franchise toward bankruptcy.
The bankruptcy problems could also reportedly extend to the Prudential Center, the Devils’ four-year-old arena located in Newark. Devils Arena Entertainment is on the hook for $180 million in payments, according to Kosman and other reports.
The source told Kosman that the Devils are “blowing up,” which we will assume isn’t slang for “on a roll” in this instance. The report indicates that the Devils’ issues are multifaceted.
The first problem is that the team’s ownership is in a state of flux, even if majority owner Jeff Vanderbeek stays in the picture. Co-owner Ray Chambers has been trying to sell his share of the team for about a year but hasn’t had any luck so far. Kosman also writes that Vanderbeek doesn’t have a good relationship with lenders, which could exacerbate the issues.
“You have a bank group that wants nothing to do with Vanderbeek,” said a source, who added they have been upset with how late they have been with financial information.
Some lenders are already considering selling their stakes to vulture investors, the source said.
“This is going to be a very difficult situation.”
The third problem is truly outside the Devils’ hands: the NBA’s lockout could ruin the New Jersey Nets’ final season at the Prudential Center. A full lockout would knock out 25 percent of the building’s 161 scheduled events, which is even more problematic considering the fact that the Nets are reportedly the reason why the building earned its first profitable year. Either way, the Nets aren’t going to be a part of a long-term solution for the Devils’ alleged financial problems.
It all seems like a very messy situation for the Devils, who haven’t responded to the report at this time. Like many other ownership/bankruptcy scenarios, this looks to be a fluid situation, so we will keep an eye out for responses from the team and any other updates.