There is a good chance the Nashville Predators - in exchange for not being found in default on their arena lease - will push back a few years their right to move the team.
There are fears the city will accept this and pass up what it really needs: a chance to force the more well-to-do members of the Preds ownership group to take more financial responsibility for the NHL club.
"That is certainly a possibility," Steve North, a member of the Metropolitan Sports Authority, which oversees the Nashville Arena on behalf of the city, said yesterday.
The team's latest problem erupted last month, when it became public that Predators chairman and part-owner David Freeman has a $3.3-million (U.S.) federal tax lien on his house for failure to pay his 2007 taxes. Freeman did not inform the Sports Authority of this, which violated the owners' financial guarantee with the city and potentially placed the Predators in default on their lease.
Under the terms of the financial guarantee, each member of the ownership group must certify his or her net worth is equal only to their stake in the NHL club. If the club goes bankrupt, the owners have to pay their guaranteed amount to the city. The owners also have to declare their taxes are paid.
Freeman's share of the guarantee comes to $29.5-million - an amount now in doubt because of his tax troubles.
The guarantee allows the owners to include their shares in the Predators as part of their net worth. It also does not obligate other owners to cover a fellow owner's portion of the guarantee if they have financial problems.
Critics argue this would leave the city with nothing if the club goes bankrupt.
The current lease allows the Predators to move as early as May under three conditions: The club must not be in default on the lease, it must average less than 14,000 fans per home game, and it must have lost a cumulative total of $20-million since the current ownership group took over in June of 2007.
The Predators would also have to pay a $20-million termination fee.
At present, the Predators average announced crowd this season is 14,077.
North and some of his fellow Sports Authority members would like to see both the escape clause pushed back a few years, and the financial guarantee strengthened in exchange for not finding the Predators in default of their lease. If the Preds are found in default, they are liable for a $50-million penalty - but that would open a new and sticky list of issues, including revoking the lease, so the city is not likely to go that far.
Negotiations between the club and the city are under way. The city's lawyers could present a proposed deal to the Sports Authority's finance committee for approval by Jan. 15.
Any lease amendment must be approved by the full Sports Authority board, which is scheduled to meet Jan. 22.
Some members of the Sports Authority would like to see the guarantee become a joint one, with the remaining owners responsible if another co-owner goes bankrupt. They also want to disallow the use of Predators shares in the guarantee.
However, there is no unanimity on the Sports Authority on the issue.
"There are some members of the Sports Authority who are concerned, are nervous about it," North said. "Others' view is: If the legal and finance departments of the city are not concerned, we're not either."
One source said the sentiment in Nashville is the owners would never agree to strengthen the guarantee because that would leave them on the hook if Freeman's troubles get worse. But, the source said, city officials are too scared the team will move to push the issue.
No one from the Nashville Mayor Karl Dean's office or the city's legal department responded to requests for comment.
Freeman did not respond either, nor did fellow Predators owners Herb Fritch and Tom Cigarran.
The current ownership group was recruited in 2007 to prevent BlackBerry billionaire Jim Balsillie from buying the Predators from former owner Craig Leipold, and trying to move them to Hamilton.Report Typo/Error