This may be of little comfort to those of us too depressed to look at our RRSPs, but this week’s turmoil in the stock markets is also causing much heartburn for those trying to sell NHL franchises.
When the stock market craters, it plays havoc with the net worth of prospective buyers. This makes it hard for them to line up financing, since bankers need little reason to slam the cash drawer shut these days.
This is not without precedent in the NHL. Ten years ago, George Gillett’s purchase of the Montreal Canadiens was put on hold for months because the shares in a meat-packing company he planned to use to help finance the deal went into a free-fall. Gillett persevered and wound up making a huge profit on the Habs but the latest stock market uproar goes well beyond the health of a single stock.
Such is the situation Robert Caporale finds himself in this week. He is the chairman of Game Plan LLC, the investment bank in charge of selling the St. Louis Blues. He sent out letters to prospective buyers recently, asking for “non-binding” bids for the hockey team by Aug. 22, only to see the Dow Jones industrial average start its roller-coaster ride.
One of Caporale’s peers in the investment banking field says the NHL franchise market is “a mess.” He saluted Caporale’s efforts but said the Game Plan boss is just trying to goose a slow market.
Caporale agreed, sort of, and then asked wryly, “tell me when there’s a good time to do it?” He said he can’t do anything about the stock market: “I have to deal with reality.”
Reality, according to the anonymous investment banker, is that there are two serious bidders for the Blues at best and neither is willing to put up enough cash to even cover the $120-million (all currency U.S.) bank debt the current owners have on the team. Caporale declined to say who received requests for bids but multiple sources say the main suitors are two groups led by Blues minority owner Tom Stillman and Chicago businessman Matthew Hulsizer, who turned his attention to St. Louis when the political shenanigans around the Phoenix Coyotes grew tiresome.
Caporale’s fellow banker thinks another problem is that Blues chairman Dave Checketts is considered a smart operator by people in the sports business. But he was unable to turn the Blues into a steady source of profit since he took over the team in 2006. When buyers see that not even Checketts can make the Blues a going concern, their enthusiasm wanes.
“I think when people look at the financials over the last few years, they will see a positive performance and the team is on an upward trend,” Caporale said in response.
Checketts and the Blues have been dogged by bad luck on the ice. While there have been some management hiccups, the Blues can argue injuries are the single biggest reason why the team missed the playoffs for five of the last six seasons.
Caporale hopes his pitch will lead to a sale by late September and there is some pressure to get a deal done. Citibank extended the Blues’ $120-million loan but does not have unlimited patience.
There are hopes one or two of the alleged bidders on the Dallas Stars may take a look at the Blues if Vancouver businessman Tom Gaglardi winds up as the Stars’ new owner. But Caporale’s colleague, who is familiar with the Stars sale, is dubious.
At this point, Gaglardi has an exclusive negotiating window and hopes to have a bid before the bankruptcy court within two weeks. It will also serve as a stalking-horse bid, one used by the court to see if anyone else wants to top it.
But our banking source thinks the other groups who have looked at the Stars are not willing to pay as much as Gaglardi. Local oil men Billy Quinn, who seems to have Dallas Mavericks owner Mark Cuban in his group, and Doug Miller, plus businessman Chuck Greenberg, who parted company with the Texas Rangers baseball team, have all looked at the Stars. They will have the right to bid against Gaglardi when his bid gets to the bankruptcy court but insiders are not expecting any surprises.
This sale, too, is taking much longer than expected. It will also wind up netting far, far less than the many creditors of current Stars owner Tom Hicks expected. That group of bankers, whose unhappiness is behind many of the delays, once hoped for as much as $450-million since the deal includes half of American Airlines Center but they will be fortunate to see even half of that.