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Gawd, I *LOVE* Tom Hicks.
Just wait a bit; I think there will be. The reduced income from the reduced ticket sales and corresponding concession sales; and the reduced big ticket corporate sponsors, should start showing up this spring in baseball. Anyone who went out hard with a big payroll in baseball may have trouble.
In basketball, the NBA went and arranged a big line of credit that a bunch of unnamed teams drew upon. Their "nothing to see here; move along" was an attempt to hide the fact that at least 1/3 of the NBA teams have cash-flow problems.
Hockey may be in bigger toruble than anyone else.
I think only NFL football is fine, because they just are a great form of entertainment that still draws big TV ratings, with only 10 home-dates a year to have to sell.
They're in trouble, but I think the NBA is in far more trouble.
A lot of companies are going Ch. 11 b/c their owners over-leveraged them when credit was cheap.
The businesses (like baseball) remain sound, they just will probably be owned by the bondholders now.
In other words, default does not mean "in danger of going out of business".
Yeah. It could be that they'll just have to renegotiate the terms or covenants of the loan. There may have been provisions for what kind of cash flow, etc. Hicks' group needed maintain. It's not necessarily as dire as it sounds.
Yeah, Hicks may lose the team is all, which, if I can read the mood of Rangers fans accurately, might be reason to rejoice.
But why do they have cash flow problems? Even the least valuable NBA franchises take in over $100 million a year in revenue. The reason a lot of teams have problems with cash is that their owners have tied the teams to various stock market machinations, often in the forms of using them as collateral for loans. When all the idiot owners started losing money on their other businesses/investments that were funded by those loans, they lost the ability to pay the loans back. The same things are surely happening in the other 3 sports, and it says nothing about the general viability of a sport or league, just about the stupidity of various rich guys.
Also, the line of credit story was way overplayed, in my opinion. Sports leagues always have enormous lines of credit available for their franchises to take advantage of.
Hockey almost certainly is in more trouble than anyone else. Even before the recent financial troubles, there were a ton of highly unstable franchises just bleeding cash. It wouldn't be surprising if hockey actually underwent some form of contraction over the next year, or just had a decent number of owners declare the bankruptcy of their teams and walk away completely.
It also doesn't help that a lot of NHL owners didn't have deep pockets to begin with.
Most businesses operate on lines of credit--small and large--which is what made the recent credit crunch so hard on the economy. It hammered the biggest corporations and also people like lobster fishermen and independent restaurant owners.
Or like the former Islanders owner, any pockets at all.
Hicks had already put his stake in the Rangers up for sale.
<edit: remembered that it wasn't his entire stake>
Because they borrowed heavily against them. Sports teams are generally appreciating assets, but don't necessarily have huge cash flow.
Simplified example. Say you have a team worth $500M, that generates $40M a year in profits (EBITDA) on $250M in revenue, which has been growing at 10%, and you borrow $400M at 7%, so you debt payment is $28M. Looks like no problem. But, you probably have a loan covenant saying EBITDA must be 1.1 X debt service, so if now revenue goes down just a little bit, say 4% ($10M), instead of up, and you can't cut costs, your profit is now $30M and you're in technical default, even though you are still profitable and still making your payments.
Now, the bank will probably waive the covenant (for a fee) but if your revenue goes down more, and it takes a long time to cut costs, you may actually miss debt payments and get the lender taking over the business before you have a chance to stabilize the finances.
I completely missed this.
Sorry, my mistake, it isn't the entire stake, he was trying to go from 95% to around 51-60%. Pretty widely reported in the English press, since he's the joint owner of Liverpool.
I forgot about Liverpool. They must be dancing in the streets with this news.
Also, because so many LBOs and other debt issued in the 2004-2007 era was "covenant light", companies are waiting a lot longer than they used to before they file (before, they'd be forced in when busting a minimum cash or minimum EBITDA covenant that their lender refused to waive or otherwise accomodate). When they finally do hit bk, they're in much worse shape than they would have been with more realistic covenants. In addition, recent bankruptcy law changes are very unfavorable to companies. These include the extended period for reclamation claims and changes in the timelines for rejecting leases. Finally, the credit markets seizing up have made DIP financing incredibly expensive, which can make operating in chapter 11 essentially a gradual liquidation/wind-down.
All this is to say that Chapter 11 today isn't the Chapter 11 of yore, and that lots of businesses in or near an 11 are in very dire straits.
Makes sense. He's raising equity to reduce his leverage.
It was more of a rhetorical question.
Well, unless they stole or inherited their way to riches, I am not ready to call them stupid.
"Sports leagues always have enormous lines of credit available for their franchises to take advantage of."
But wait; a line of credit is usually used to draw debt down to cover times of lower income/cash flow, to be paid back when your business cycle has more income/cash flow. How does that apply to an NBA team which is drawing down money in January and February, which should be their time of greater income/cash flow? I think they drew on their lines because they didn't have the revenues, and the NBA hopes to have more revenue to pay back the lines drawn down next year, in a better economic climate. That might work, but then again, it might not.
I wouldn't necessarily mind that from a general standpoint -- less teams would raise the 'talent level bar' for getting into the league and would result in better hockey -- but then again, the 'Hawks aren't in any danger of being one of those contracted teams.
I wonder how a potential contraction would affect the salary cap. I'm already fearing the day when Chicago is going to be forced to say goodbye to one of Keith, Seabrook or Kane because of Campbell's ridiculous contract - a falling cap would only make that worse.
Are you sure that it would improve the talent level bar? I'd guess the combination of a dropping salary cap, less teams to choose from, and the general league instability would actually cause a lot more of the talent to take a serious look at the Russian superleague. A lot of the high skill guys (especially European players) would strongly consider heading overseas, rather than staying here.
He got the owners a cap. Of course, he also screwed it up by not properly setting revenue sharing (and considering the impact of the CAN/US exchange rate), so that the salary floor was so high that about a third of the teams in the league couldn't meet it without losing money.
No, but the holding team going out of Biz would certainly yield a change in ownership (but the new owner may be the same as the old). Depending on the team, many fans would find that reason to rejoice.
That's a seemingly valid point that I hadn't really considered. I thought I remember reading that the cap is already scheduled to go down a bit next season, so contraction likely wouldn't do anything to stave that off...
Is relocation a possibility? I'm admittedly speaking a bit out of ignorance here, but there's gotta be a Canadian market (or two) that could do better than some of the bottom-tier NHL franchises, right? Or is the NHL's 'wonderful' commissioner also standing in the way* of that?
*I remember last summer Nashville was close to a move, but didn't pay enough attention to understand why that stalled.
You're correct, in that there are viable markets which the commissioner is standing in the way of. At this point, these markets probably include Hamilton (or Waterloo), Winnipeg, and Quebec City, as well as another team placed directly inside the GTA (which would likely require a payoff to the Leafs). Of these, there's no guarantee that Winnipeg or QC would be profitable, but they'd probably be losing a lot less money than teams like Nashville, Florida, and Phoenix currently are.
American expansion is Bettmen's goal, and he's basically refused to admit that there's a single market in the US which hasn't worked out wonderfully.
I'm surprised there isn't more of this going on in sports.
If attendance is way down in some cities early, I expect we could see fire sales and teams looking to unload payroll earlier than we've ever seen before in order to avoid more of this.
It just seems like Houston and Seattle are obvious markets for an NHL team, too...it's all so baffling.
There has been speculation that Rogers could do almost exactly this, if the Jays don't get off to a good start - the Ontario economy in general, and Toronto in specific, is in the crapper, and the exchange rate is down about 20% from last year. Between the two, Rogers could probably save a whole ton of cash by trading a bunch of players for whatever they could get which doesn't involve eating salary (Rolen, BJ Ryan, Overbay being the leading contenders, given their salaries relative to perceived performance).
I guess the question is, who is willing to take on payroll right now? The Mets? The Red Sox?The Cubs, once that sale finally goes through? Can the Yankees take on any more?
Of course, given the performance, nobody is taking any of those guys w/o the Jays eating a lot of salary.
I guess Seattle I could see (close to Canada), but the problem with hot weather cities like Houston is the culture is so non-ice. Kids there, unless relocated from another city, don't get exposed to hockey growing up, and just don't have the interest and appreciation of the game.
I think that is part of the problem in Atlanta. People rebut that by telling me about the youth ice hockey leagues in Atlanta. Yeah-5,000,000 people and 2 rinks.
I wonder how Houston's minor league team does.
Which is the Catch 22 - the only way that they can trade those guys is if they get off to a hot start. If those guys get off to a hot start, then the team will also probably get off to a hot start. If the team gets off to a hot start, then they won't want to trade those players, and the only time that someone will want to trade for those guys at (possibly) full salary will be when they get off to that hot start.
I think the Jays would probably be happy if they could even get away with eating only half of the remaining contracts.
Houston's minor league team does well. They really, really like hockey there.
Really, as to how the "Big Three" sports will fare, I guess that depends on how long this economic downturn lasts. I suspect that, even if it lasts a decade, all three sports will be fine (although they may operate a lot differently) in the long run.
Fighting with Colt 45's instead of sticks has really helped the fan interest.
Houston and Seattle would both probably be better choices than many of the current sites. I'd also guess that Hartford would be a decent end destination, as there is hockey tradition in the area.
The senior tour always struck me as funny. I understand it is golf and thus different, but can you imagine a baseball league of teams with players 50 and older? Just doesn't seem to be the best thing to go watch.
I know Jays fans don't want to hear it, but they're probably better off trading him earlier when they can demand (and get back) more in return for him.
38 is a good question as to who can take on more payroll. The Yankees just might if they flounder and it looks like it's possible that they could miss the playoffs again.
Halladay is signed to a well below market deal, and trading him will result in a sudden, massive decrease in attendance/ratings. There still aren't a lot of Jays who the casual fan can identify in Toronto, but Halladay is easily at the top of the list. It's questionable as to whether or not trading him would actually save the team money, as it would probably undo a lot of their efforts to rebuild the Toronto market.
I know Jays fans don't want to hear it, but they're probably better off trading him earlier when they can demand (and get back) more in return for him.
From a talent return basis, it would almost certainly make more sense to trade him now, since teams aren't paying nearly as much as they used to for rentals. Financially, it's not clear whether or not sooner is better.
But what has helped prop up the "later" market is the team seeking the rental knows they are in contention, they know what has worked that season and what has not, and what it will take to get into the play-offs from their position in the standings after 100 games (or whenever the trading deadline is).
Relcoation to Seattle, Houston or Kansas City seems the most likely possibility at this point. After flat out contracting the number of teams, of course.
We don't have to imagine! This was attempted, with a lower minimum age, of course, given the disparity in length of career.
Senior Professional Baseball Assn
Whether or not they are is not the same as whether or not they should - as noted, while Winnipeg and QC aren't ideal markets, they're better than what the NHL has now. Also, with respect to Hamilton being within the market range claimed by Toronto, that's why people have also suggested Waterloo, which conveniently falls just outside the 50 km circle.
The league wouldn't lack for sponsors. Viagra; cialis; depends.
It makes sense that they think this. 2010 should be when they get Marcum back, and (ideally) Janssen and McGowan have both shaken off their post-surgery rust. At that point, it gives them a potentially high-quality rotation (and bullpen) again. Combine that with the experience from both Lind and Snider, and they'll also have a likely capable offense.
Of course, having to deal with the Yankees/Red Sox/Tampa three headed monster, and a likely to be improved Baltimore, is going to be an incredibly unpleasant experience.
Edit: AL East, not NL East.
I'd like to see a return to 2 divisions with 2 wildcards. Or, 3 divisions, 2 wildcards, and the wildcards have a 1 game play-in.
It's only fair. This year, they were probably the most competitive 4th place team ever - 93 pythagorean wins!
If it were my club, and I figured that the club could handle the revenue hit, I would tear down. But, it's not an obvious decision.
EDIT: Pepsi to Ryan. We do things differently here.
I've seen people 'in the know' comment that the arena in Winnipeg is much too small (~15,000) for an NHL team, but it seems to me that if you've got a market that's wild about hockey in which tickets were scarce, you could make up for the lower attendance with higher ticket prices. You'd still have issues with the small local media market, but as Ryan said, it'd be almost impossible to lose less money than the Coyotes are losing in Phoenix.
I haven't been there in 15+ years, but Kitchener-Waterloo seems way too small to me. You'd draw from Hamilton, I guess, but Hamilton is already smack dab in between the Sabres and Leafs as it is.
I've wondered about the logistics of moving teams to places like Prague, Stockholm, and Helsinki. They'd probably need an entire division to make it work, you'd have some serious scheduling issues, and there are already successful teams in those markets, so it might not work. But it's something I've thought about.
The problem is that I don't think that they can handle the revenue hit. A tear down would likely revert attendance levels to that of the 2000 to 2002 seasons, if not lower, as well as cratering TV ratings. Given that Rogers is both the owner of the team and primary broadcaster, it'll hit them twice as hard.
We do things differently here.
Dude... are you hitting on me?!?
Nope. Tampa built the baseball stadium without a tenant then tried to steal the Giants. It happens more than you think.
Things are up to date in Kansas City.
The Kitchener-Waterloo thing is basically a matter of getting outside the area claimed by the Leafs and Sabres. The idea has basically been to build an arena 1 meter over the line, and take advantage of the 1M+ people within an hour drive, as well as the high-tech industry as potential corporate sponsors. I don't know if it'll work, but (as already noted) it's better than keeping guaranteed money losers in markets which can't give away the tickets.
Nope. Tampa built the baseball stadium without a tenant then tried to steal the Giants. It happens more than you think.
Is that the current stadium that the Rays play in? That place is a dump!
Winnipeg had a tenant, but it just wasn't an NHL tenant.
Indianapolis built the Hoosier(RCA)Dome to lure an NFL team. It worked.
What's weird is that they built a tweener-sized arena. 2,000 more seats and you could easily put an NHL team there, 5,000 seats less and it'd be way cheaper and not negatively impact an AHL team's attendance. 15,000 is a really weird capacity.
Unless you are Tampa. They started building the Trop in 1986, with no team in place. They then tried to steal the White Sox and later the Giants.
Oh. I always thought the Trop. was a converted Wal-Mart super-store.
That'd be fun.
Nope, I just figured if I said "joint" or "weed" instead of "Pepsi", the nanny would get it. One never knows, do one?
As they were in Oklahoma City -- at least until the Hornets were temps and the the Sonics were stolen.
I have no idea. I think it's been argued that the 50 km (or mile, I'm not sure) radius is centered on the actual location of the stadium, but I haven't actually seen the official NHL rules on the matter.
Now that I think about it, you're probably right about the 50 mile distance. 50 km from Hamilton is Mississauga.
https://www.sportsbusinessdaily.com/article/119689
It seems that there may not be an actual defined radius, and that the NHL Board of Governors rules on each relocation request and compensation resulting by majority vote on a purely discretionary basis.
I could believe that. The NHL loves to do things by tradition, and doesn't like putting things down on paper. The preference is to govern using the "We've always done it this way" method.
Wouldn't they be pre-empted by whatever written franchise agreements existed in the NHL?
"Article 4.1 of the NHL’s constitution that “each member shall have exclusive territorial rights in the city in it is located and within 50 miles of that city’s corporate limits”."
So, figure out where Toronto's "city corporate limits" end, and go 50 miles [80 kilometers :)] from there. And the CCB basiccally said that a territorial rights restriction was fine with them, pretty much eliminating them as a hurdle for the NHL to impose whatever compensation and decision-making process they want.
My previous statement (#50) was based on the general reluctance of leagues to return to previously vacated cities except for reasons related to expansion or Al Davis. And I'd add Portland to the list of potential relocation spots, now that they got the MLS team.
K/W is also within an hour's drive of London Ontario. It's got a population of about 450,000, and is home to a VERY good (and well supported) junior hockey team. During the hockey lockout season, the London Knights stormed through the rest of the league (setting various records) and won the Canadian junior title (Memorial Cup). Since then, the team is playing sold out home games in a new(ish) facility, around 9,000/game.
It is a hockey-rich environment (being exactly halfway between Toronto and Detroit on the major highway), and would definitely help support another NHL franchise.
In fact, an hour drive from K/W in every direction is pretty much a hockey hotbed.
And London set some records in the 90s, but on the other side of the ledger. 3-60-3? 9 points in 66 games?!?
Kind of like Liberty Media and the Braves (which got its ownership through some stock swap for tax reasons, with Time-Warner).
Are you kidding? It was fantastic for the Jays under the ownership of Interbrew.
I'm with whomever made the first statement. The annals of sports and business lore are filled with reasons why I'd prefer my team have another Mark Cuban than a corporation for an owner. Getting rid of Hicks and his blowhard ######## from a few years back that 2-0-0-0 mentions in the intro and still pisses me off every time I ####### think about it would be icing on the cake.
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