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The New Jersey Devils are in some hot financial water, with majority owner Jeff Vanderbeek reportedly missing a Tuesday deadline to repay an $80 million loan. The Tuesday date was actually an extension deadline; the original loan payback was due in September 2011. It appears there will be no more extensions for Vanderbeek to delay repaying the full amount of the loan, but it does seem that Vanderbeek will be given some time to gather whatever amount he can to pay down the debt.
Recent reports have stated that Vanderbeek has managed to reduce the debt significantly, but remains somewhere around $18 million in the hole. He may have a way out, though -- according to The Fourth Period, Calgary billionaire Bill Gallacher is trying to buy most, if not all, of the Devils.
According to the report, Gallacher "seems close to purchasing" the team, though it remains unclear whether he'd be buying part of the franchise or the whole thing. He has a history of trying to buy into the NHL, as he was in on the sweepstakes to own the Dallas Stars a few years back, but lost out to Tom Gagliardi. Vanderbeek might get an extension to refinance the Devils' debt and raise what money he can, but Gallacher might present an easier, more direct exit strategy.
The reigning Eastern Conference Champions likely won't face bankruptcy, despite the passing of an August 14 deadline to settle over $77 million in debt, according to New Jersey Devils blog Fire & Ice. What's with the sudden patience from lenders who now have the legal right to force managing partner Jeff Vanderbeek and the franchise into bankruptcy? A quiet restructuring of that $77 million figure, according to Fire & Ice:
A source said Vanderbeek has already worked the debt down to less than $35 million and raised roughly half of that remaining figure, leaving him needing about $18 million more to fully cover what the team owes the banks. If the lenders were to push the team into bankruptcy, they would likely recover much less than that. That gives them every reason to give Vanderbeek the time he needs to raise the rest of the money the team owes.
Fire And Ice (via Sports Business Journal) also note that the benefit - and perhaps the only one for anyone in hockey - to the looming uncertainty of CBA negotiations with the NHL and the NHLPA is that the banks are reportedly willing to wait until the CBA is settled before making a move on the Devils. The chief reason for the CBA to be settled first is that ownership of the franchise would land with the NHL itself if the Devils were declared officially bankrupt.
The window of the CBA and the reported lessening of the total debt presumably gives Vanderbeek time to find new investors to cope with the loss created when Brick City, LLC backed out of its 47 percent stake in the franchise, a move that created the debt uncertainty.
As the NHL prepares to give up ownership of the Phoenix Coyotes, a report indicates that they could find themselves in ownership of another club. According to the New York Post, the league plans to take control over the New Jersey Devils should owner Jeff Vanderbeek fail to refinance the team's debt by August.
Vanderbeek is near a deal to sell a majority stake to a mystery investor, which would allow him to keep control of the Eastern Conference champions, one source said. The proceeds from a sale would be used to repay lenders much of the $77 million in past due debt.
But while Bettman has said publicly that he expects the Devils' financial situation to be resolved soon, his behind-the-scenes moves suggest he's far from confident that a deal will get done.
The Post has always been provocative when it comes to the Devils' financial situation, and Commissioner Gary Bettman has been vocal against the Post's coverage in the past -- most recently at his State of the League prior to Game 1 of the Stanley Cup Finals.
But should this report hold true, it's obviously major news. It may seem like par for the course that the NHL owns a team after three-years of that same scenario in Phoenix, but that doesn't mean it's ever a positive for the league to own control of a team. This may simply be a worst-case contingency for the league, and should Bettman & Co. take ownership, it's not as if there are a limited amount of potential buyers to take over the team.
This isn't necessarily Coyotes 2.0, but it's not great news for the Devils or the NHL either.
The Devils may be in the Stanley Cup Finals, but there's still doubt about the club off the ice. It's not overshadowing the team like the situation in Phoenix has done to the Coyotes, but there are still uncertainties when it comes to owner Jeff Vanderbeek's hold on the club. Commissioner Gary Bettman talked about the process Wednesday.
"The New Jersey situation," Bettman said, "as we understand it at its most up-to-date point, is that the club, Jeff Vanderbeek, is working on both refinancing the debt on the club and an equity raise. He appears to be fairly confident that he can pull this off in due course in the next few weeks. Since I've been in touch with the banks on a regular basis, we seem to be on track."
The club's debt is reported to be around $80 million.
Newark Mayor Cory Booker did not mince words Wednesday, calling New Jersey Devils owner Jeff Vanderbeek a "hustler" who "came into this city with a mouthful of promises and a pocketful of lies." It all came in the aftermath of an arbitrator's ruling in favor of the Devils in a dispute between the team and the city over the revenue-sharing agreement at Prudential Center, the five-year old home of the team in downtown Newark.
"He is a high-class, high-falutin huckster and hustler," the mayor said in a diatribe more in the style of Chris Christie than Cory Booker. "A Wall Street millionaire that played into every stereotype that's out there."
On Tuesday, a panel of independent arbitrators upheld a lease agreement and "parking letter" that leaves Newark owing roughly $600,000 to the Devils after waiting in vain for $13 million in unpaid rent.
The ruling awarded the city $14.7 million in unpaid rent and other expenses from the Devils, but it also awarded Vanderbeek's club $15.3 million in parking revenues and excess taxes.
The Devils pay the city rent and a share of revenues each year as part of the Prudential Center lease agreement, and the city is obligated to pay a share of the parking revenues as part of a separate agreement. Both deals were signed before Mayor Booker was inaugurated in 2006.
For more on the New Jersey Devils, including actual on-ice matters, check with In Lou We Trust.
Citing sources, the Post reports that a new investor will pay down the company’s $80 million debt and give Vanderbeek until the start of the 2012-2013 season to raise new capital. If he can't make that happen, however, he would be forced to sell the team.
While the reported move would give the franchise some breathing room, some think it might just be an extension preceding an imminent sale.
For the last several months, the National Hockey League has funded the Devils. The move reportedly comes just in time, as Devils creditors only have another few weeks to put the franchise in default if they plan to force the team into bankruptcy during the offseason, according to sources.
Zach Parise has a new contract coming between now and the summer, but it's still up in the air which team signs him to that deal. He could hit the unrestricted free agency market on July 1, or the New Jersey Devils could sign him to a new deal before then.
The big problem there is that the Devils are in financial limbo, and for a player thinking about signing a piece of paper that will anchor him down in one spot for potentially the rest of his career, these sorts of things matter. That's concerning for fans of the Devils and great news for fans of the other 29 teams in the NHL ... or perhaps not.
Parise told the Star-Ledger on Thursday that the financial woes of the Devils organization do not necessarily matter.
"I don't know too much about it," Parise said this morning. "I don't know what's going on behind the scenes. The only thing I've been told is it's not going to make a difference. That's what I'm going on. As far as what's going to happen, I really don't know really anything about what's happening."
Parise has reiterated all year that he wants to sign with the Devils -- he signed a one-year deal with them last offseason -- but contract negotiations have yet to begin. That's obviously fueling the trade deadline rumor mill, but trading Parise at the Feb. 27 deadline seems silly considering the Devils are right in the thick of the Eastern Conference playoff race.
Then again, is securing a No. 7 or 8 seed worth losing a guy of Parise's caliber for nothing in the summer? Devils blog In Lou We Trust says they shouldn't let him go, but the real question is if Lou Lamoriello feels the same way.
The New Jersey Devils are not under the threat of bankruptcy, according to... well, the New Jersey Devils. That, of course, flies in the face of a New York Post report Monday morning, which claimed that the Devils had missed a September 1 loan payment and that the banks were getting ready to "push the team into bankruptcy."
Here's the full statement issued today by the team:
Today's New York Post story is inaccurate. The notions that the Devils are facing bankruptcy or that "the Devils have told their banks to get lost" are patently untrue. The Devils value their relationship with their banks and are confident a refinancing will be completed shortly. As stated previously, ownership is close to finalizing an agreement that would lead to a buyout of Brick City's share of the company.
The organization is also pleased to report that new season ticket sales are up 130% over last year and last week's on-sale for single game tickets were 260% above last year's similar period. Finally, the start of training camp was incorrectly reported in the article as tomorrow. In fact, training camp starts on Friday for the rookies and Saturday for the veterans.
The last line is an obvious shot at the Post's reporting, which you have to admit is pretty funny even if you love the Post like Rupert Murdoch and hate the Devils with a burning passion. It's not surprising that the team is denying the report, and while we certainly don't know the full truth at this point, it'll be interesting to see what happens as this situation drags on.
The real news in the statement, perhaps, is that the Devils are "close" to buying out the shares owned by minority owners Ray Chambers and Mike Gilfillan, who combine to make up the group called Brick City. Until now, the only information we had on the state of Brick City's attempt to sell their shares was that the process wasn't going too well. This statement seems to counter that notion.
The attendance-challenged, heavily indebted team missed its Sept. 1 loan payment, giving its lenders a breakaway chance to push the team into bankruptcy, a source with direct knowledge of the situation said.
"The Devils are blowing up," the source said.
The team's financial hardships could also affect Newark's four-year-old Prudential Center, the Devils' home arena. Team-owned Devils Arena Entertainment operates the $375 million building and guarantees the Devils' loans and, therefore, is in danger of also going bankrupt.
Minority owner Ray Chambers has attempted to sell his shares of the team for months, but those attempts have been much less than successful. Meanwhile, majority owner Jeff Vanderbeek, who also acts as one of the public faces of the Devils' front office alongside general manager Lou Lamiorello, has reportedly told the banks to "get lost," writes the Post. It appears as though investors are not too happy with Vanderbeek these days, and that certainly doesn't help Chambers' sale effort.
If bankruptcy is declared, the team will have 180 days before lenders can repossess the club and force a sale. The Devils owe about $100 million, further complicated by the $180 million owed by Devils Arena Entertainment.
It's not as if things are getting any easier, either. The NBA lockout has shut the New Jersey Nets out of Prudential Center, and if they are to miss the entire season, the arena would lose 25 percent of its events for the year. That's a lot of money. The location of the building doesn't bring any favors either, as there are plenty of other venues in the area competing with The Rock for events, including Izod Center, the former home of the Devils.
The presence of the Nets is the only thing keeping the arena group in the black. You know, the basketball team that never intended to play a game there in the first place, but only did so when the lagging construction of their new home in Brooklyn and a less-than-ideal setup at Izod necessitated it.
Of course, that begs one large question: Can Prudential Center, and thus the Devils, be profitable once the Nets leave for good? This was set to be their final season in Newark anyway. Those questions are still up in the air, but for now, financial documents in the Devils' offices look quite a bit like those home red jerseys.
For more on the Devils, on the ice and off, check in with SB Nation's In Lou We Trust.
After a few hours of haziness, the current situation surrounding the New Jersey Devils ownership is gradually coming into focus. Majority owner Jeff Vanderbeek has announced that he's not selling, nor is he interested in selling, his majority stake in the team. The same cannot be said for minority owner, Brick City.
From the Devils:
As Managing Member of the New Jersey Devils, it is not my desire to sell the team. My partner, Brick City, and I have different visions for the franchise. While Brick City has a right, under our partnership agreement, to explore a sale and Moag and Co. has been retained to assist in these effort, I anticipate maintaining a controlling interest.
Vanderbeek owns 50 percent of the team and since he's not interested in selling, he'll keep that majority stake no matter what happens with Brick City. Another owner, Peter Simon, is not selling his shares.
Brick City, the group headed by Mike Gilfillan and Ray Chambers, has disagreed with Vanderbeek in the past. According to Tom Gulitti, the NHL helped iron out issues between the two back in 2009.
Tom Gulitti of the Bergen Record is one of the best beat writers in the NHL. He's the authority on the New Jersey Devils, so I'd believe this report from him that says the Devils are not for sale.
Devils owner Jeff Vanderbeek is not looking to sell the team.
The team is expected to release a statement shortly refuting a report that Vandebeek has begun the process of looking for potential buyers.
Bloomberg.com, which originally reported that the Devils were for sale, has not retracted their report. Still, Gulitti isn't the only one reporting that it's inaccurate. Craig Custance of the Sporting News and TSN in Canada are also among the reporters saying that it's not happening.
We'll wait on official word from the team.
He's been in full control of the team since 2004, when the Wall Street executive left Lehman Brothers to run the team full-time. He's had control of some portion of the team since 2000.
Vanderbeek has made long strides towards spreading the Devils brand over the last six years. He was the driving force behind the construction of Prudential Center, the new home of the team that opened in 2007.
He also was a key component of the deal that brought Ilya Kovalchuk to the team, as well as the contract this past offseason that's gone down, at least for the time being, as a complete laughing stock.
It's obviously a curious time for a sale, as for the first time since the 1980s, the Devils are one of the worst teams in hockey. They've perennially been one of the league's most successful teams, and when a businessman makes a decision like Vanderbeek seems to be making here, you have to wonder exactly why he's jumping ship.
In New Jersey, the fans are certainly going to be disappointed about the news. For more on that, check in with our Devils blog, In Lou We Trust.