The financial woes of the New Jersey Devils are such that the NHL team’s lenders are trying sell their shares of the team’s debt at a hefty discount, according to a source in the bond market.
Devils co-owner Jeff Vanderbeek already missed an interest payment on the $80-million (all currency U.S.) loan Sept. 1. He was given an extension by the lenders in order to try and raise enough money to buy out co-owners Ray Chambers and Mike Gilfillan.
However, Vanderbeek’s efforts have not paid off yet so he still has not been able to make the interest payment. The Devils are not an attractive property to buyers because of their attendance troubles at the Prudential Center in Newark, N.J. They are 25th among the NHL’s 30 teams in attendance with an average announced crowd of 14,074.
As is the case with most loans that size, the original banker, CIT Investment Banking Services, parcelled off chunks of the deal with other lenders. Some of those lenders decided they have little chance of recovering their money and put their shares of the loan up for sale.
The asking price is 75 cents on the dollar, according to a person familiar with the pricing. It’s not clear just how much of the Devils’ outstanding debt is for sale, or who is selling. The bid price stands at 65 cents, meaning the buyers and sellers are far apart.
At that price, the distressed loan is in what the person referred to as “loan-to-own territory.” That means that buyers wouldn’t be purchasing the loan with any serious hope of being repaid, and instead would be trying to get first in line to own the team in a restructuring that handed over the team to creditors.
Neither Vanderbeek nor NHL deputy commissioner Bill Daly would comment on the matter.
But those close to Vanderbeek, who declined to speak on the record because he is negotiating with his bankers, insist any part of the loan that may be up for sale is not offered at a discount. It is also disputed that any buyer could wind up in control of the franchise.
While it would appear someone who wanted to buy and move an NHL franchise could do so by buying the Devils’ bank loan, it is not that easy. The NHL proved in its court battle with Jim Balsillie, who unsuccessfully tried to buy the Phoenix Coyotes out of bankruptcy and move them to Hamilton, that it ultimately has control over any franchise moves.
Even if the loan is sold quickly, the Devils will not be pushed into bankruptcy during the coming NHL season because of a so-called stand-still clause in their lending agreement.
The NHL puts the stand-still clause in every loan made to one of its teams. This forces the banks to wait a minimum of 180 days after they declare a team in default on its loan before moving to take over the team and place it into bankruptcy. If the 180 days end during the NHL season, as they would in this case, the banks are bound to stand still until the day after the last game of the Stanley Cup playoffs.