Bee: Kings will borrow from NBA credit line

[VF21]

http://www.sacbee.com/sports/story/1656704.html

Kings will borrow from NBA credit line
By Melody Gutierrez
mgutierrez@sacbee.com
Published: Thursday, Feb. 26, 2009 - 3:39 pm
Last Modified: Thursday, Feb. 26, 2009 - 4:08 pm

The Kings are among 12 teams set to borrow from a credit line of $200 million that will be extended to the NBA today.

The amount each team can borrow ranges from $13 million to $20 million of the newly secured money depending on previous borrowing, NBA officials said. The $200 million supplements an existing $1.7 billion leaguewide credit facility, which was established in 2003 to assist franchises in attaining secure loans using the NBA's media contracts as collateral.

The Kings will be extended at least $13 million at a time when they are struggling with operating losses. Highly placed Kings sources recently projected the franchise would lose between $25 million and $28 million before the team dumped several salaries during last week's trade deadline.

The league and its lenders do not restrict how the money can be used. The Orlando Magic is also among the teams planning to borrow, the SportsBusiness Journal reported. The NBA will not release the names of the 12 teams.

Mitch Germann, the Kings' vice president of business communications, confirmed today the team will participate.

The SportsBusiness Journal, which originally reported 15 teams would borrow, first reported the story Feb. 16. The NBA initially was set to borrow $175 million, but an additional $25 million was secured.

The Kings have been hampered by the bad economy and sagging attendance, which hit a new low Wednesday against the Charlotte Bobcats. The announced attendance of 10,439 at Arco Arena was the smallest ever in the building.

The Kings average an NBA-worst 12,264 fans a game.

League officials said teams did not go to the NBA looking for financial assistance. Nor did the NBA seek an extension of its credit facility. Instead, the NBA was approached by JPMorgan Chase and Bank of America. The league polled its teams and found a need, in part because of limited borrowing opportunities.

 

[Kings Faithful]

This is what I don't understand about the attendance problem...why don't the maloofs freaking drop the price?!?! Lets do some math... I'll just say the average ticket to the arena is $60...Now lets multiply that by 12,000 (the average amount of fans attending per game this year. That eaquals $720,000. Now lets drop the average price by $10 and add 3000 fans to the game...$750,000. Now i realize its not that easy but I garauntee more people will come with ticket price reductions. And if the Maloofs are making the same or close to the same money while still filling up the arena isn't everyone happy? Just increase the price along with demand. As long the demand isn't their why overprice?

o yeah and more people also means more food,souvenir, and parking money which would for sure make the difference in financial losses from lowering ticket prices, if any.

 

[VF21]

It's real easy to say drop the prices but if you do, you pretty much have to give a rebate to all the season ticket holders who paid full price IN ADVANCE for their tickets...

It's quite likely there will be a price adjustment for next season, but we'll have to see what happens.

And just for the record? Dropping the price in and of itself doesn't mean 3,000 more people will attend the games. If your product sucks, you aren't going to get more people willing to put their butts in the seats regardless of the price.

 

[Kings Faithful]

It's real easy to say drop the prices but if you do, you pretty much have to give a rebate to all the season ticket holders who paid full price IN ADVANCE for their tickets...

It's quite likely there will be a price adjustment for next season, but we'll have to see what happens.

And just for the record? Dropping the price in and of itself doesn't mean 3,000 more people will attend the games. If your product sucks, you aren't going to get more people willing to put their butts in the seats regardless of the price.

Like i said, its not that easy. I was just doing a very rough estimation to show how you wouldn't lose any money if you reduced the tickets enough to meet demand. I agree with your season ticket argument thoe. It would be best just to wait til next year. Hopefully we see a drop.

 

[rhythmless]

If the lower levels dropped to 40 bucks I'd go to at least a few more games.

The product should reflect the price. When we were tops in the league, our ticket prices reflected that. Now were at the bottom of the pole, we have an old arena that, by the Maloof's own admissions, lacks amenities, and the tickets should reflect that as well.

 

[Kingfanpaul]

Does anyone else find it odd that the banks approached the NBA about lending $200 million? I mean I keep seeing how bad the banks are doing, BofA stock is down to like $5. The banks are not wanting to lend money to the few people that are still trying to buy houses, yet they come approach the NBA about lending them $200 Million?? Seems weird to me... Maybe I am missing something.

 

[Bricklayer]

Does anyone else find it odd that the banks approached the NBA about lending $200 million? I mean I keep seeing how bad the banks are doing, BofA stock is down to like $5. The banks are not wanting to lend money to the few people that are still trying to buy houses, yet they come approach the NBA about lending them $200 Million?? Seems weird to me... Maybe I am missing something.

The NBA is solvent, simple as that. Those guaranteed media contracts give it a huge guaranteed revenue stream. the biggest thing about the banks right now..well, there are several biggest things...but one of them at least is that they are completely petrified of lending money to anyone. Its the flipside overreaction to all the funny credit that created the financial crisis. Now, having got burned, they don't want to lend money to ANYONE who has any chance whatsoever of defaulting. The NBA is probably a ht commodity amongst banks as one of the few entities that looks safe, that has a huge guaranteed revenue stream. You notice that even the owners, multimultimutli millionaires themselves were having problems securing loans on their own -- an individual owner,e a single team, could default from thebanks perspectives. But the NBA as an entity, with the huge media contracts, will not.

Of course those contracts end in a few years, there is a big CBA negotiation comig up etc., but if you are a bank scared to loan money to anybody, you find one that looks remotely safe to you, you jump all over it.

 

[chanel]

Interesting.... the Kings have to borrow from the NBA? I mean I get that they are having a bad day with the economic issues. Its not like many of their players are making what Kobe and Shaq are making.

 

[kennadog]

Interesting.... the Kings have to borrow from the NBA? I mean I get that they are having a bad day with the economic issues. Its not like many of their players are making what Kobe and Shaq are making.

The Kings and the league has offered a loan to up to 15 teams altogether. The Kings are expected to lose about $25-$28 million this season.

Can't even begin to compare the Lakers and Kings, The Lakers have more and greater revenue sources than the Kings outside of ticket sales. Like huge guaranteed TV contract(s) and corporate sponserships.