The fate of the Buffalo Sabres likely will be determined tomorrow by the National Hockey League's board of governors at their annual meeting in Toronto.
While league officials say the only thing on the schedule involving the financially crippled Sabres is an "update" for the governors, it is expected that steps will be taken to prevent the club from declaring bankruptcy or seeking bankruptcy protection. Those steps could include the NHL taking over the franchise in order to sell it to a group of Buffalo-area business people.
The only way the Sabres can break their lease at HSBC Arena and move to another city is if the club takes either of those bankruptcy steps. Otherwise, the Sabres are committed to stay in Buffalo until their lease expires in 20 years.
"On the agenda, there is an item that the board of governors will be updated as to the situation concerning the league and the Buffalo Sabres," Bernadette Mansur, the NHL's vice-president of communications told The Associated Press yesterday. "But there's no motion for action."
The Sabres were caught in the financial meltdown of their owners, John Rigas and his family, after financial irregularities were discovered at Adelphia Communications Corp., the cable-television company controlled by the family.
Two months ago, Adelphia began a downward spiral after it was revealed the company had made more than $3.1-billion (all figures U.S.) in loans and loan guarantees to family partnerships that were not recorded on Adelphia's books. This included loans totalling $150-million to the Sabres, which included the purchase price when John Rigas bought control of the team in 1999.
In two months starting in March, Adelphia's stock fell to less than $1 from $22. It was delisted from the Nasdaq Stock Market earlier this month. Indications of the company's financial woes continued this week when another interest payment on its debt was missed.
The biggest concern for the NHL is that if Adelphia declares bankruptcy, the team could wind up in the hands of a receiver or creditors.
However, like the other three major professional sports leagues, the NHL is protected from the financial problems of its owners. Under its constitution, the league retains ultimate control of its 30 franchises by controlling how owners can finance their teams.
The league has to approve the sale of each team and it has to approve any financing plan of the prospective owner. If the owner wants to borrow money to buy a team and use the franchise itself as collateral, he can do so only with the approval of the league.
This allows the league to step in and take over a franchise if it is concerned about the future of the club. A source in the banking industry said the only way the NHL would step in is if commissioner Gary Bettman feels the Sabres can no longer pay their debts or finance their operations.
So far, Sabres officials have said it is business as usual and they are selling season's tickets and luxury-box leases for 2002-03. The team said renewals are running at about 70 per cent.
If the NHL takes over the Sabres, its goal would be to sell the team quickly. There have been reports a local group led by Mark Hamister, who owns the Buffalo Destroyers of the Arena Football League, is close to making an offer for the Sabres.
A takeover would not be a precedent for the NHL, which has done it on at least three previous occasions. The most recent in June, 1997, when John Spano, who eventually went to jail for fraud, could not make his first payment after buying the New York Islanders. In November, 1995, the NHL briefly took control of the Dallas Stars when former owner Norm Green ran into financial trouble. Staff