What the heck... I made a public records request on "Arena Agreements"

Fireplug

Fireplug

Bench
I made a public records request on "Arena Agreements" (updated Apr. 5)

Figured it couldn't hurt to try it so I made an official public request for those ethereal "Arena Agreements" that are referenced in the bond documents, but can't be found online. Since we have no idea what the actual titles or dates of these documents are, I requested:

Any and all records collectively referred to as "Arena Agreements" which are made reference to on page 26 of OS_List_2007 1997 Lease Rev Bonds.pdf which can be found on the City Treasurer's website. Specifically, the "Arena Agreements" were executed at or about the same time as the Arco Refinancing Agreement 02/05/97 and the Arena Facility Sublease dated 07/01/1997 and contain legal ramifications of Sacramento Kings relocation.

If I get anything back I will share it here, though I am not holding my breath.
 
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Fireplug said:
Figured it couldn't hurt to try it so I made an official public request for those ethereal "Arena Agreements" that are referenced in the bond documents, but can't be found online. Since we have no idea what the actual titles or dates of these documents are, I requested:

Any and all records collectively referred to as "Arena Agreements" which are made reference to on page 26 of OS_List_2007 1997 Lease Rev Bonds.pdf which can be found on the City Treasurer's website. Specifically, the "Arena Agreements" were executed at or about the same time as the Arco Refinancing Agreement 02/05/97 and the Arena Facility Sublease dated 07/01/1997 and contain legal ramifications of Sacramento Kings relocation.

If I get anything back I will share it here, though I am not holding my breath.
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Nicely played.
 
This is the latest letter sent to the league and the Kings from the city requesting assurances of the payback of the loan before relocation.

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It does clarify some of the agreements that were made, but nowhere does it talk about part ownership of the team. I have yet to hear anything back yet on my request from the city.
 
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Here are documents that state the amount that must be payed each year to the owners of the bonds. (they also give a glance into other bond indebtedness of the city)

I am not sure, but am looking for, any documents that show how much net income the Arena generates each year. I'm assuming that one scenario if the Maloofs don't pay off the bond is for the city to try and pay the bond monies each year themselves with net income from the arena that we would then "own" ourselves.

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You can right click and view image on that last one to make it bigger as the forum shrinks it.
 
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I guess one "good" thing, if you can call it that, is that it appears that the city itself doesn't have to pay the base payment bond money back itself if it can't. I don't know who actually bought the municipal bonds (like Samueli seems to be doing for Anaheim) but those investors may end up being the actual ones who ultimately get screwed.


From the 2007 documents:

Base Rental Payments Not City Debt

NEITHER THE AUTHORITY. NOR THE CITY. NOR ANY MEMBER OF THE
AUTHORITY HAS PLEDGED ITS FULL FAITH AND CREDIT FOR THE PAYMENT OF THE
INTEREST ON, OR PRINCIPAL OF, THE 1997 BONDS OR FOR THE PAYMENT OF BASE
RENTAL PAYMENTS UNDER THE FACILITY LEASE. NEITHER THE PAYMENT OF THE
PRINCIPAL OF, OR INTEREST ON, THE 1997 BONDS NOR THE OBLIGATION TO MAKE BASE
RENTAL PAYMENTS UNDER THE FACILITY LEASE CONSTITUTES A DEBT, LIABILITY OR
OBLIGATION OF THE AUTHORITY, THE CITY, OR ANY MEMBER OF THE AUTHORITY FOR
WHICH ANY SUCH ENTITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION
OR FOR WHICH ANY SUCH ENTITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

THE AUTHORITY HAS NO TAXING POWER. If available Arena revenues paid to the City as Sublease Rent under the Arena Facility Sublease and assigned to the Authority are less than required to offset Base Rental Payments,nd if the City's other revenue sources are less than its total obligations, then the City could choose to fund other municipal services before making Base Rental Payments and other payments due under the Fac ility Lease. The same result could occur if. because of State Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS" herein.


Furthermore, in a passage I am not quoting here, in the event of a default by the Maloofs, even though there is language saying that the Maloofs are supposed to pay us back the full remained of the bonds, the documents say specifically that the city does NOT have to accelerate repayment of the bonds themselves. So theoretically the city could just go on making base payments each year till 2027 according to the schedule above, and I guess those base payments could be reimbursed by whatever net profit the city could make in running the arena ourselves plus whatever we could get for selling off what is now $25 million of the team. (I'm sure the city could find someone named Samueli or someone else who would be interested in buying that $25 million portion, maybe even for more than $25 mil.)
 
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This document describes how the $25 million team ownership security, basically collateral that the team owes us if they move and default on the agreement, is subordinate (or would be paid to us AFTER) the Kings first pay off the loan they owe the NBA league. The Maloofs borrowed money from the league and it appears there is a $75 million security that the team would owe the league first before they would owe us our $25 mil, if the team went into default on their loans. This is probably why the league would like to move the Kings to an area that would keep the team more solvent.

http://lawzilla.com/content/kings/sacto-2010-09-07.pdf

So it looks like the Maloofs not only owe us the $77 million in bond paybacks which they would owe over time whether they stay here or not, but they owe the league $75 million as well. !?

Originally the team owed the league $30 mil and us $20 mil in security if they defaulted on the two loans, but in $2003 they got more in a loan with the NBA apparently which upped the NBA owed amount to $75 mil and the security for us to $25 mil. I am assuming the other portion of security for our loan to them was considered to be the arena itself which back then was appraised at least $50 mil I'm sure.

By the way, if I am reading any of this wrong, or anyone has any comments, please feel free to jump in here. I'm using this area to post docs that I find but I feel like I'm talking to myself. :)
 
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Fireplug said:
This document describes how the $25 million team ownership security, basically collateral that the team owes us if they move and default on the agreement, is subordinate (or would be paid to us AFTER) the Kings first pay off the loan they owe the NBA league. The Maloofs borrowed money from the league and it appears there is a $75 million security that the team would owe the league first before they would owe us our $25 mil, if the team went into default on their loans. This is probably why the league would like to move the Kings to an area that would keep the team more solvent.

http://lawzilla.com/content/kings/sacto-2010-09-07.pdf

So it looks like the Maloofs not only owe us the $77 million in bond paybacks which they would owe over time whether they stay here or not, but they owe the league $75 million as well. !?

By the way, if I am reading any of this wrong, or anyone has any comments, please feel free to jump in here. I'm using this area to post docs that I find but I feel like I'm talking to myself. :)
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The fact that the bonds is second is irrelevant if they move. That would only be if they filed bankruptcy.
 
Ok, anyone up for a little light reading. :)

Here is the link to pretty much all of the original documents in PDF format, including the Team and Arena Owner relocation agreements. Over 1100 pages worth.

http://www.cityofsacramento.org/kings/documents/1997_Lease_Rev_Bonds/97_Lease_Revenue_Bond.pdf

And here is the link to a clickable pdf table of contents from which you can get to the hundreds of documents related to the 2007 re-marketing of the Bonds.

http://www.cityofsacramento.org/kings/documents/2007_Reissue/Table_of_Contents.pdf


So I read through all the parts about relocation penalties, and put options, and amended security agreements, and I actually feel better about the whole thing.

In my opinion, there are plenty of places where it is plain that the intention of the documents are in securing the Kings in Sacramento, with clear penalties stated if the Kings didn't stay. I don't think anyone reading the agreements could say that the team and arena owners didn't clearly know their obligations, so a breach of contract (or bad faith agreement) would be easy to prove against the Kings if they walk away from their debt.

An important protection is that we have a "Put Option" on the agreement which means if the Kings relocate we have the legal right to force them to buy back the arena from us at a price which will cover the remaining bond debt. If the Kings default and refuse to buy it back, I am pretty certain that the city could go after them for actual money, not just a portion of team value, and be completely legal in doing so. When they signed the agreements, the team basically signed an agreement to buy back the arena as well under certain circumstances one of which is relocation.

The city has a specific collateral of $25,000,000 of the team and all that goes with being owner of the team including intellectual property rights and everything. But nowhere does it say that by taking that specific collateral the debt would be fulfilled. In fact, in one place it specifically states how much the city can go after the team for (the difference between the appraised current value of the arena and the outstanding loan amount.) And in this paragraph it appears to state that the city trustee's retain all rights to sue or get back the money through any legal means possible: )

Cumulative Rights Etc The rights powers and remedies of the Trustee under this Security Agreement shall be in addition to all rights powers and remedies given to the Trustee by virtue of any applicable law the Team Owner Relocation Assurance Agreement or any ether agreement all of which rights powers and remedies shall be cumulative and may be exercised successively or concurrently without impairing the Trustee's rights hereunder The Team Owner waives any right to require the Trustee to proceed against any person or to exhaust the Collateral or to pursue any remedy in the Trustee's power.

In fact the agreements specifically state the reasons the Kings could move without penalty.

1) If the arena has been condemned (which it hasn't)
2) if there is a new arena (which there isnt)

So legally, I think the city seems on pretty solid ground.

Now, any lawyer want to read through this all?
 
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Actually, the reason I really wanted to get to the bottom of this is because I think a strong city position helps us to keep the team. Anything that financially makes it more difficult for the Kings to leave can only help to perhaps sway them in our direction when they do the tally sheet with "Stay" or "Go" on the top of the columns. Anything to keep them here.
 
Mike0476 said:
Brick?
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Yes, if he wishes. I am willing to take Fireplug's interpretation of this as I doubt there is much better Cliff's notes version than he has given. Brick could do it but the general sense is that the City is in a decent position and it clears up a lot of speculation. I would rather that the speculators read this than Brick.

Would the filing of an intent to leave expose their poor financial situation? The Maloofs are a lot about image and a full exposure would ruin their image as the Trump wanna bes. I note they made a donation on Trump's Celebruty Apprentice so my analysis of them is not far off. Joe and Gavin.
 
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Fireplug said:
The city has a specific collateral of $25,000,000 of the team and all that goes with being owner of the team including intellectual property rights and everything. But nowhere does it say that by taking that specific collateral the debt would be fulfilled.
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Now, I'm no legal expert, but this seems interesting. I have a mortgage on a condo. The collateral on that mortgage is the title to the condo, and that title is not in my hands, it's in the mortgage company's. If collateral works the same for this sort of transaction, then the city would be currently a $25M owner - that stake would be in hand and coming along with the "intellectual property rights and everything" would be...a voting stake? Does this collateral actually mean that the city has a current voting stake in the Kings? If so, does it come out of the Maloofs' holding or the overall holding? Could this $25M stake reduce the Maloofs to non-majority owners, and allow the city to form a bloc with the other minority owners to override Maloof votes to move?
 
Capt. Factorial said:
Now, I'm no legal expert, but this seems interesting. I have a mortgage on a condo. The collateral on that mortgage is the title to the condo, and that title is not in my hands, it's in the mortgage company's. If collateral works the same for this sort of transaction, then the city would be currently a $25M owner - that stake would be in hand and coming along with the "intellectual property rights and everything" would be...a voting stake? Does this collateral actually mean that the city has a current voting stake in the Kings? If so, does it come out of the Maloofs' holding or the overall holding? Could this $25M stake reduce the Maloofs to non-majority owners, and allow the city to form a bloc with the other minority owners to override Maloof votes to move?
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I believe a person or persons can be labeled general partner or managing partner. I don't think that will change if the Maloof's percentage of ownership is lessened.
 
Capt. Factorial said:
Now, I'm no legal expert, but this seems interesting. I have a mortgage on a condo. The collateral on that mortgage is the title to the condo, and that title is not in my hands, it's in the mortgage company's. If collateral works the same for this sort of transaction, then the city would be currently a $25M owner - that stake would be in hand and coming along with the "intellectual property rights and everything" would be...a voting stake? Does this collateral actually mean that the city has a current voting stake in the Kings? If so, does it come out of the Maloofs' holding or the overall holding? Could this $25M stake reduce the Maloofs to non-majority owners, and allow the city to form a bloc with the other minority owners to override Maloof votes to move?
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I originally wondered that as well. I don't think it is really worded that way though, or at least I can't really find what it means as far as it just says that $25 mill will be the maximum portion of the team that will be used as collateral on a default of the loan. I don't think we really get it until the default and then who knows how long it would take to really go through all the legal process of the default. To me the more interesting part is the "Put Order" which I don't see anything as far as collateral that goes toward that part. That seems like they have a legal obligation to buy it back with cash, and that is probably our best bet legally to get actual money. The whole reason that was even included was because the city at least had the foresight to realize that the arena could go down in value enough so that it no longer was worth the outstanding value of the loan. The original debt was the team and owners, and it should go back to the team and owners if they don't want to stay in our city.

It is all pretty confusing though since their are actually agreements between the city and team, city and arena ownership, city and bond authority, etc. Lots of agreements, and I am not sure if the bond authority itself can go after the team as well.

We need a corporate property lawyer. :)
 
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Bump.

This is some pretty interesting stuff. I'm no lawyer but if you are one, feel free to let us know your interpretation of all the documents.
 
Capt. Factorial said:
Now, I'm no legal expert, but this seems interesting. I have a mortgage on a condo. The collateral on that mortgage is the title to the condo, and that title is not in my hands, it's in the mortgage company's. If collateral works the same for this sort of transaction, then the city would be currently a $25M owner - that stake would be in hand and coming along with the "intellectual property rights and everything" would be...a voting stake? Does this collateral actually mean that the city has a current voting stake in the Kings? If so, does it come out of the Maloofs' holding or the overall holding? Could this $25M stake reduce the Maloofs to non-majority owners, and allow the city to form a bloc with the other minority owners to override Maloof votes to move?
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Ahem, you do have somewhere to go for the Cliff Notes version Capt. ;)

The City does not own any percentage of the Kings, Unless the Maloofs default on the loan conditions. Also, its the city finance authority that actually has a line on the arena and property, as that is the legal entity that can sell bonds for the city.. The city leases it from the financing authority and, in turn, leases it to the Arena ownership. Again, the financing authority has no ownership stake in the arena or land, currently. They would only claim that, if the arena ownership defaulted on the lease terms they have with the city.

Note; their are two ownership entities involved. The arena ownership and the team ownership, even though the percentages and people mirror each other.

Edit: I have copies of almost all the documents. They fill a truly gigantic binder. I made myself an extensive cliff notes version.
 
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