Email
Print
Email
Print

Devils again at a crossroads?

Decrease fontDecrease font
Enlarge fontEnlarge font
Devils owner Jeff Vanderbeek is in danger of defaulting on a $40 million loan.

Devils owner Jeff Vanderbeek, here with Patrik Elias, has been on thin financial ice for some time. (AP Photos)

By Stu Hackel

Is time running out for Jeff Vanderbeek’s ownership of the New Jersey Devils? He owes his chief creditor something approaching $80 million, he’s facing a deadline a week from now to fork over a big chunk of it — about $40 million — and, according to one report, he’s only raised half of what he’s promised to pay. Just like Greg Jamison, who is $20 million short of being able to afford to purchase the Phoenix Coyotes, Vanderbeek too may come up shy of what he needs to maintain control of his club. If that’s true, the Eastern Conference Champions could be in for some troubled times.

According to a source who spoke with Josh Kosman in The New York Post, Vanderbeek doesn’t have the money. He “had worked out a deal to raise a certain amount and has not been able to do that.” Another source told Kosman that the Devils chairman and managing partner “has not given up,” and expressed confidence that Vanderbeek would come up with the $20 million and work out a solution to maintain control of the club.

Kosman’s reporting on the Devils’ finances in the past has been questionable; he wrote last September the team was either in or near bankruptcy after a source told him “The Devils are blowing up.” Kosman was forced to backpedal after he overstated the team’s plight at that time.

But that doesn’t mean the Devils were — or are — financially robust. It can’t be denied that they have walked a very thin financial tightrope during the last year.

Let’s not minimize Vanderbeek’s fiscal plight when it comes to having an impact on the ice. Had he raised the funds he’s needed for quite a while, New Jersey’s best player — Zach Parise — wouldn’t have fled to Minnesota in July as a free agent. Parise would have been locked up long ago. The Devils were fortunate to hold on to Martin Brodeur and Bryce Salvador in free agency, but neither was a certainty as dark clouds began gathering over Vanderbeek’s ownership.

A former member of the executive committee at Lehman Brothers Holdings Inc., Vanderbeek has lacked the resources to buy out the 47 percent share of the club that is owned by his estranged partners Ray Chambers and Michael Gilfillan of Brick City Hockey. He doesn’t seem to have been able to find a new partner who has the money that would allow him to keep control of the Devils. And if Kosman is right, Vanderbeek has been unable thus far to raise enough to pay CIT Group Inc., the team’s lead lender, what he’s promised by August 14.

What would happen if he can’t pay? Well, CIT could declare Vanderbeek in default and he could be forced into bankruptcy, but that is a very complicated process. As David Shoalts of The Globe and Mail discovered last September, every NHL franchise that borrows money has in its loan agreement a “stand-still” clause that says lenders must wait a minimum of 180 days after declaring that a team is in default before moving to take over and place it in bankruptcy. Further, if the 180 days expire when the NHL season is underway, the lenders must wait until the season concludes before taking over the club. So unless that provision is not in the current loan agreement between the club and CIT, even if Vanderbeek defaults next week the Devils wouldn’t be compelled to declare bankruptcy until February, which theoretically gives him time to continue searching for funding. If he still comes up short, CIT could not take control of the club until next offseason. Of course, if the 2012-13 season doesn’t start on time, who knows what that means for this timetable?

There have been rumblings in recent months that Vanderbeek had, in fact, completed deals to get some or all of the money he needs. In June, Chris Botta in The Sports Business Daily wrote that a new unnamed investor had been found, but “The identity of the partner has yet to be announced because, according to the source, there has been an agreement to stay silent until the completion of the Devils’ season. A formal announcement of the deal is expected within two weeks of the conclusion of the Stanley Cup Final.”

Kosman then reported that a handshake deal had been reached between Vanderbeek and ”an investor or investors to pump $200 million into Devils Arena Entertainment, which owns the team and operates the (Prudential Center) arena….In return for the cash, the investor would own a majority of the Eastern Conference Champions while Vanderbeek would maintain operating control, the source said.” It would be rather unusual for someone or a group to be majority owner and allow a minority owner to manage the franchise, but it seems to be a moot point now.

And Yahoo’s Puck Daddy editor Greg Wyshynski wrote on his blog, “I’ve heard it’s a group based in Ontario that’s been in conversations with Vanderbeek and the NHL for some time. They would join as minority partners to Vanderbeek.”

Those reports came in the wake of  NHL Commissioner Gary Bettman proclaiming at a press gathering at the Prudential Center on the eve of the Stanley Cup Final that, “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.”

That was over two months ago and neither the refinancing or the equity raise, which were supposedly linked — the new mystery partner providing the money to pay down the debt and refinance — are known to have occurred. There’s been no news ID’ing just who might be throwing in with Vanderbeek either.

We continually hear reports about troubled NHL franchises, how some mystery man with a bag of cash is prepared to ride in and save the day, and quite often these deals don’t come to fruition. Now, when it comes to certain teams, it could very well be that potential investors are sincere but something — like a look at the franchise’s books or some arcane market research — scares them off or, putting it more nicely, makes them reconsider. You hope that’s the reason these would-be saviors vanish. You don’t want to think that they don’t really exist and we’re all being misled with tales of big-money dudes who are as real as comic book superheroes. There’s already enough make-believe and delusion in the world of pro sports.

COMMENTING GUIDELINES: We encourage engaging, diverse and meaningful commentary and hope you will join the discussion. We also encourage, but do not require, that you use your real name. Please keep comments on-topic and relevant to the original post. To foster healthy discussion, we will review all comments BEFORE they are posted. We expect a basic level of civility toward each other and the subjects of this blog. Disagreements are fine, but mutual respect is a must. Comments will not be approved if they contain profanity (including the use of abbreviations and punctuation marks instead of letters); any abusive language or personal attacks including insults, name-calling, threats, harassment, libel and slander; hateful, racist, sexist, religious or ethnically offensive language; or efforts to promote commercial products or solicitations of any kind, including links that drive traffic to your own website. Flagrant or repeat offenders run the risk of being banned from commenting.

  • Published On Aug 07, 2012
  • 6 comments
    Bruce
    Bruce

    Hey Stu, in your professional opinion, is this the reason why Bettman let the Thrashers be sold and moved so quickly from Atlanta, because it saw this type of situation in the future with this franchise, where the ownership would have absolutely no problem with filing for bankruptcy for the Thrashers?  I understand that the general opinion is that nobody in Atlanta likes hockey, but it's hard to overlook the fact that many of the hockey rinks in the area always have cars parked, and that ice time can fill up pretty quickly.  Working with an ownership group that specifically wanted a basketball team, but had to buy a hockey team as well and argued and filed lawsuits on each other, makes it seem as though the league saw this coming with the Devils. 

     

    And, just so it is understood, many of us wouldn't have any problems seeing the Devil come down to Georgia...

    TravisMounts
    TravisMounts

    Let's bring that team to the Sprint Center in Kansas City!

    EricMalmborg
    EricMalmborg

    Another negative comment article by Stu Hackel... Stu, do you even enjoy hockey? Can you wrote something positive for a change to get people excited for the 2012/13 season? Or is it continuing doom and gloom articles?

    Stu Hackel
    Stu Hackel moderator

     @Bruce  Hey Bruce - My understanding of the situation in Atlanta is that the ownership group was in a somewhat similar situation in that they needed new investors, But that's where the parallel mostly ends. The Thrashers owners, who (as you noted) spent lots of time suing each other and even their own lawyers when their efforts and resources might have been better applied to the team, couldn't attract any potential owners who wanted to keep the club in town, but they had a willing buyer in the True North Group and a building and team infrastructure ready to go. After extensive losses and zero success on the ice it was the only move the NHL could make in allowing the sale and franchise move. There was really no talk of bankruptcy that I recall.

     

    It's different from the Devils' situation. NJ has had great success on the ice, and some moderate success financially over the years. They have a fan base that is more sizable than the Thrashers and, under the right circumstances, could probably succeed financially in their Newark arena. They also have a myriad of issues with respect to their ownership that differ from Atlanta. There are people who supposedly would like to own the club and keep them there, but they don't want to be minority owners and right now, Mr. Vanderbeek is not selling his share. So they will have to wait around to see if circumstances force him to change his mind or force him into bankruptcy at which point they might be able to pounce on it.

     

    I've always thought the NHL could work in Atlanta but both the Trashers and the Flames before them were beset by poor ownership. The Tharshers poor on-ice performance didn't allow them to build a fan base and the combination of factors doomed them. Too bad. But I somehow doubt the Devils -- or anyone -- will be moving there in the near future. If the Thrashers couldn't attract anyone with deep pockets to keep the club there, no one is going to risk putting another club in town any time soon.

     

    Thanks for your comment.

    JoeCabot
    JoeCabot

     @EricMalmborg Facts is facts eric.  A looming work stoppage.  Franchises living on the financial edge.  As well as being entertainment,  hockey is a business, and if business is not taken care of, the product goes away.

    Stu Hackel
    Stu Hackel moderator

     @EricMalmborg  Hey, Eric - How do you even know there is going to be a 2012-13 season about which to get excited? That alone is worth criticism, don't you think? And while you may believe I only write negative articles, you are incorrect. There was nothing negative in what I wrote about Daniel Alfredsson last week. When there are positive stories to write (and there are more to come) I write them. But I'm not a cheerleader for the product. Others might be and if you'd rather read them instead of what I have to say, please do. I won't be offended.