Anaheim come up with an 11th hour deal "sweetener"?!?!?!

[ParniValjak]

http://www.sacbee.com/2011/04/28/3587545/anaheim-sweetening-the-pot-by.html

In a last-minute move to land the Kings, Anaheim billionaire Henry Samueli today offered to increase his personal loan to the team from $50 million to as much as $75 million, and has offered to buy a minority stake in the team......

...Originally, Honda Center officials had planned to spend $25 million on upgrades. That figure has jumped to $70 million, center officials said Thursday afternoon.

I knew they would also have something up their sleeve but luckily for us, it doesn't appear to be too much of an 11th hour Joker card.

 

[Bricklayer]

Well, the Samueli stuff might be an enticement to the Maloofs, but its hardly going to make the NBA feel any better about things -- quite the opposite perhaps.

The upgrades however are directly in response to Stern's concerns.

Still think this is back to Sacramento's team to lose again though after Sac had lost that position only a month ago. One interesting possiblity that I don't think anybody would like, but nonetheless -- if the Maloofs file to relocate, as I understand it the BOG doesn't have to vote for months. So they could delay voting until they see what the Sac arena plan looks like. In that scenario Sacramento still needs to finally close the arena deal to shut the door on this nonsense.

 

[Fear the Putin]

good news...in a sense

Samueli is shooting last minute offers because he knows or at least has been informed that they aren't moving to Anaheim.


Now, I'm confused. Originally, it was supposed to be $75 million in bonds with $25 mil going towards renovation and $50 mil going towards the Maloofs. So, apparently now it's simply Samueli giving the Maloofs massive loans in addition to the bonds.

Unless of course Samueli would simply divert all the bonds towards the renovation and give a boatload of personal loans to the Maloofs.

 

[Section 101]

good news...in a sense

Samueli is shooting last minute offers because he knows or at least has been informed that they aren't moving to Anaheim.


Now, I'm confused. Originally, it was supposed to be $75 million in bonds with $25 mil going towards renovation and $50 mil going towards the Maloofs. So, apparently now it's simply Samueli giving the Maloofs massive loans in addition to the bonds.

Unless of course Samueli would simply divert all the bonds towards the renovation and give a boatload of personal loans to the Maloofs.

No more bonds from the city. It's all Samueli now.

 

[The Hammer]

One interesting possiblity that I don't think anybody would like, but nonetheless -- if the Maloofs file to relocate, as I understand it the BOG doesn't have to vote for months. So they could delay voting until they see what the Sac arena plan looks like. In that scenario Sacramento still needs to finally close the arena deal to shut the door on this nonsense.

I have a feeling it's going to come to that. The main signs being the Maloofs suddenly strong intent to move no matter what, and seeming desperation to do so. Might have burned the bridge with the fans completely though if that happens... just sitting for months in the offseason knowing the owners of the team officially don't even want to try to be here.

If then an arena deal comes together and I STRONGLY suspect it would in such a scenario... what then do the Maloofs do? Maybe that's the point at which they sell.

The fear in the above scenario is that they intentionally sabotage the arena deal process somehow... some creative way.

 

[JB_kings]

It's interesting now because all the parties are starting to show their cards. Samueli keeps upping his bid to own the team. So if you are the Maloofs, you gotta be a little miffed and very wary that Samueli is suddenly offering up more than he did under their supposed negotiations in prior months. And why is he now pulling out all the stops to help them move their team? This guy is not a not being just a nice dude. If they ever had suspicions of him grabbing the team, there should be fire alarms going off in their minds now. They really should be getting the memo that there is very little hope of staying as owners if they move to Anaheim.

And they burned so many bridges in Sacramento going all in on Anaheim, the NBA might just force them to sell out. They have played this so poorly, that they could lose the team no matter which way they go. They've done nothing but help prove they are financially distressed. And also blind to the point where everyone but them recognize Samueli as a loanshark.

 

[Bricklayer]

As an aside the Maloofs only own 53% of the team I think. If they sell off ANY amount of the team to drop below 50% ownership, they will automatically be at risk of being knocked back to minority owners if Samueli goes to the other minority owners and makes them deals they cannot refuse. At 51% they are safe, until they default on his loans. Anything less and they are just idiots. You don't give the shark keys to the franchise and not expect him to eat you.

 

[The Hammer]

As an aside the Maloofs only own 53% of the team I think. If they sell off ANY amount of the team to drop below 50% ownership, they will automatically be at risk of being knocked back to minority owners if Samueli goes to the other minority owners and makes them deals they cannot refuse. At 51% they are safe, until they default on his loans. Anything less and they are just idiots. You don't give the shark keys to the franchise and not expect him to eat you.

Which brings up a question I've been having and maybe someone can answer.

Does not the NBA need to approve of all owners? Also, if that is the case, I have trouble thinking that by law, if you default on a loan, that the creditor cannot go after your ownership stake, and thus in this case at least knock current majority owners below 50 percent, opening the door to a takeover of sorts. There's got to be something like this written into the NBA constitution or franchise agreement.

And a related question I've been asking, if the above scenario is possible, is it not possible to simply outright use your stake in an NBA team as collateral? If the latter is not possible, perhaps the Maloofs are counting on an informal version of the former, with a backroom deal in place with Samueli, should default occur.

If you're the Maloofs I'm still just baffled at why you do this... unless you PLAN on Samueli sharking your team... and you do it anyway because you are so desparate for cash (his personal loans)... and the quick cash outweighs any profit you would net after selling and paying off current debts!!! But if that were the case, almost sure bankruptcy would result. Are they using bankruptcy as a strategy? Am I overthinking what they might be thinking?

 

[Glenn]

Does not the NBA need to approve of all owners? Also, if that is the case, I have trouble thinking that by law, if you default on a loan, that the creditor cannot go after your ownership stake, and thus in this case at least knock current majority owners below 50 percent, opening the door to a takeover of sorts. There's got to be something like this written into the NBA constitution or franchise agreement.

Yes, the NBA has to approve all owners. In 1994 Top Rank tried to buy the Timberwolves with the stated intention of moving them to New Orleans. The BOG did not approve the sale.

I still don't think the managing partner has to own more than 50% of the team. It depends on the partnership agreement. As it is and unless the partnership agreement is rewritten, the Maloofs are the managing partners no matter what the percentage they own. That's my understanding of partnerships. It's not the same as owning shares.

And a related question I've been asking, if the above scenario is possible, is it not possible to simply outright use your stake in an NBA team as collateral? If the latter is not possible, perhaps the Maloofs are counting on an informal version of the former, with a backroom deal in place with Samueli, should default occur.

Don't know. It is up to the league if Samueli would be able to take control in any fashion. I think this would be investigated closely. It certainly seems to me trying to be as unbiased as possible that the league would not allow a new owner to appear because of a default. That stinks. My opinion but perhaps would be the opinion of the BOG.

If you're the Maloofs I'm still just baffled at why you do this... unless you PLAN on Samueli sharking your team... and you do it anyway because you are so desparate for cash (his personal loans)... and the quick cash outweighs any profit you would net after selling and paying off current debts!!! But if that were the case, almost sure bankruptcy would result. Are they using bankruptcy as a strategy? Am I overthinking what they might be thinking?

As to the last sentence: probably. Too convoluted for me and I think I am smarter than the Maloofs. (cough)

I think the first answer that the BOG has to approve an ownership covers most of this. The BOG might very well see that Samueli has induced a team to move with the full intention of taking over. That's close enough to the Top Rank attempt to buy the Timberselves except it is far more devious and conniving as Top Rank signed some document promising to move the T'Wolves. That's upfront and still wasn't acceptable.

 

[The Hammer]

Thank you Glenn, for that very thoughtful response.

 

[Spike]

If you're the Maloofs I'm still just baffled at why you do this... unless you PLAN on Samueli sharking your team...

Seems like the easiest way to do this. Get your money, move the team, and snub your nose at the NBA all at once.

 

[Section 101]

Yes, the NBA has to approve all owners. In 1994 Top Rank tried to buy the Timberwolves with the stated intention of moving them to New Orleans. The BOG did not approve the sale.

I still don't think the managing partner has to own more than 50% of the team. It depends on the partnership agreement. As it is and unless the partnership agreement is rewritten, the Maloofs are the managing partners no matter what the percentage they own. That's my understanding of partnerships. It's not the same as owning shares.



Don't know. It is up to the league if Samueli would be able to take control in any fashion. I think this would be investigated closely. It certainly seems to me trying to be as unbiased as possible that the league would not allow a new owner to appear because of a default. That stinks. My opinion but perhaps would be the opinion of the BOG.



As to the last sentence: probably. Too convoluted for me and I think I am smarter than the Maloofs. (cough)

I think the first answer that the BOG has to approve an ownership covers most of this. The BOG might very well see that Samueli has induced a team to move with the full intention of taking over. That's close enough to the Top Rank attempt to buy the Timberselves except it is far more devious and conniving as Top Rank signed some document promising to move the T'Wolves. That's upfront and still wasn't acceptable.

Correct the managing partner doesn't have to have majority share. However, they wont have a majority vote to rubber stamp anything.

 

[kennadog]

Not all partnerships have a "managing general partner." The Maloofs came in as minority owners and then became majority owners about a year later, when Thomas sold out. The current minority owners don't want the team to move, but they can't outvote the Maloofs, because the Maloofs own over 50% (something like 51-53% range).

I would not think the NBA (owners) want someone to circumvent the approval process by becoming owner on the basis of a loan default. That's trying to slide into ownership without league approval.

 

[Larry David]

Yup. There are two ways to own a pro sports team.

You have enough money that: (1) you can take small losses in many years and get hammered once when the wheels fall off, and still make a lot of money when you sell after 8-15 years; or (2) you don't plan on selling and its merely a big fancy toy in your overall portfilo.

The Maloofs no longer appear able to own the right way. Looking at their holdings, the Kings are the only business that's going to make a profit anytime soon. Thus, modest profits are a goal, small losses are OK, and huge losses are no longer acceptable. There is another team that's run that way ... its called the Clippers. Donald Sterling figured out that if he spends some money people will come to his games. He won't get the place full, but he can make a profit and doesn't have much risk. However, he knows that if you go for it, spend big, and don't win ... you get hammered. Risk v reward. And that's why he doesn't plan to spend big (Kobe was a logical exception.)

The Maloofs were a logical buy and sell type owner, because they bought just before values exploded. But like many locals, they've taken out too many loans. If they take another loan in Anaheim, its going to suck when they sell because the change from the 1999 value is about what they will have in loans.

 

[macadocious]

OK so if that is actually the case, then why are these franchises worth anything? If a teams is going to lose money more often then not, then they should not have a value. Certain industries have basic valuation formulas, all of them have to be profitable for them to make sense to a buyer, or have a way to become profitable.

If they are not profitable and cannot become so, where do you get a 200-300MM valuation at? It doesn't make sense. There has to be something else here we are missing.

 

[Glenn]

The present NBA business model is flat out wrong. No business should be structured so that some teams will lose money and require an owner to lose money. That's common sense. If 22 teams are losing money, that's wrong.

Yes, I know revenue sharing is on the table and probably in some convoluted manner is involved with the CBA. This HAS to be done. I don't believe it that buyers are lining up, certainly not for 22 teams that lost money.

Franchises can lose money but have a resale value that makes up for the losses. This is totally dependent on the value of the team rising faster than the money you lose in day to day business. That's screwy to this simple minded guy that invests to make money.

I think in the present economy even the filthy rich are in trouble. What were the bailouts for if not to prevent huge multi billion dollar companies from going bankrupt? I wish I qualified.

 

[pdxKingsFan]

There has to be something else here we are missing.

We're missing their accounting books and going by what the owners tell us, for one. Let's say the Kings are losing money but if buy virtue of owning the Kings and hosting their games in said arena, said arena gives you full operational control of the remaining dates of that arena and you get all kinds of other non-Kings revenue for "free" because the lease is hung on the team. Then, even if the team loses money operationally it may create value for the rest of an owner's portfolio. There is no doubt the Kings being the hottest team in the NBA at the time the Palms opened helped take that place a level beyond where it belonged.

Then there's all the perks you get in life just for owning the team. You can swap your best seats (probably at an operational loss) for a vacation, hotel rooms, tickets to other sports, whatever the hell you feel like. That whole bartering thing works when you have a valuable and unique asset.

I don't think being an owner is as raw a deal as it is made out to be.

 

[Trueblood]

OK so if that is actually the case, then why are these franchises worth anything? If a teams is going to lose money more often then not, then they should not have a value. Certain industries have basic valuation formulas, all of them have to be profitable for them to make sense to a buyer, or have a way to become profitable.

If they are not profitable and cannot become so, where do you get a 200-300MM valuation at? It doesn't make sense. There has to be something else here we are missing.

You're getting warm. Yes, the model is somewhat broken but is getting fixed but I've said it and I'll say it again. Never believe a word that NBA owners or ANY business owner tells you. It's the #1 rule of business. Always cry poverty and most people won't do enough research to know if you're full of it or not. That's what they bank on.

I won't go as far as Fisher and Hunter have, saying that the owners just want to increase an already hugely profitable business and make it even more profitable. Some teams do indeed lose money and that's why we may have a lockout but it's not nearly as bad as they make it out to be. The owners know that nobody is going to side with NBA players so they have a leg up in leverage right off the bat. If that wasn't the case and nobody cared about making money then why would they even have the lockout in the first place? If it's just a big toy that they can sell when they want, there's no point in locking out the players.

 

[Trueblood]

We're missing their accounting books and going by what the owners tell us, for one. Let's say the Kings are losing money but if buy virtue of owning the Kings and hosting their games in said arena, said arena gives you full operational control of the remaining dates of that arena and you get all kinds of other non-Kings revenue for "free" because the lease is hung on the team. Then, even if the team loses money operationally it may create value for the rest of an owner's portfolio. There is no doubt the Kings being the hottest team in the NBA at the time the Palms opened helped take that place a level beyond where it belonged.

Then there's all the perks you get in life just for owning the team. You can swap your best seats (probably at an operational loss) for a vacation, hotel rooms, tickets to other sports, whatever the hell you feel like. That whole bartering thing works when you have a valuable and unique asset.

I don't think being an owner is as raw a deal as it is made out to be.

This. Great post.