The decision by new Rangers owner Chuck Greenberg to separate the Rangers from the Stars in future television negotiations could be one reason buyers are not upping their offers for the Star. And the fact the lenders might be willing to finance this team for this season could be one reason the banks do not appear ready to lower the price.
The combined events could mean that fans could be waiting for a while for the team to be sold, according to several sources I talked to in the past few days.
Calgary oilman Bill Gallacher has officially withdrawn his name from the negotiations, according to two sources, and they do not know if he will be back or not. Gallacher has not responded to several requests for interviews, and some insiders said even they have not talked to him since his wishes were made clear to exit the process. Some people believe this is about his business dealings and how he chooses to spend his money, and some people believe this is about the price of the Stars and the fact information about Greenberg and the Rangers started to leak out.
Greenberg has committed to a 20-year deal with FSSW, according to several reports, and that means the Stars will have to negotiate future deals on their own (the two were tied together because of Hicks Sports Group and buyers hoped they would stay together and use combined negotiating power to get a new deal). The Stars' current television deal does not expire until after the 2013-14 season, so we're talking way down the road, but people who do due diligence say this kind of stuff does matter in franchise value.
The most interesting thing I discovered in trying to find about the sale is when I asked about the economic pressures of the sale and when those potential pressures will start pushing on the process of the sale. I was told that the Stars right now have the money they collected in the summer from ticket sales, ad revenue, television revenue, and all manner of ways they collect income _ and that should hold them for a while (possibly three to four months). I thought that when that money was gone, the economic pressure of paying bills would help force a sale (just as it did when Norman Green ran out of money back in 1994), but I was told that the lenders who basically own the team might simply extend a line of credit to the team and pay their bills that way.
Because the lenders (led by Monarch Investment Group and Galatioto Sports Partners) are really the owners of the team right now and are in charge of the sale, they have the ability to use their finances to manipulate the process. If they feel the offers are too low, they could fund the team with the hope that a short-term investment would actually make more money down the line. The financial planners of the lenders have to ponder whether an upturn in the economy will help create a higher price, whether the extra time would allow the broker to beat the bushes for new bidders, or whether they can find some way to start a bidding war.
I have also been told that the lenders are very open to structuring a deal for the new owner in which the current lenders would finance the team. It would almost be like assuming a mortgage on a house, but that will be a tricky deal as any future debt (as in debt the lender might incur this season) will definitely be structured into the amount the new owner would have to take on.
I don't know how much say Tom Hicks has in this process, but I don't think it's much. I'm sure he wants this over as quickly as possible, but I believe the lenders are in control and he simply has to wait and abide by their wishes.
The great thing about this scenario is that it appears there is no fear of the Stars' bills not being paid. The bad thing about this scenario is the banks pretty much set the budget for the team, and there is very little wiggle room for the Stars right now on their $45 million payroll budget. I was told if this pressed on and the Stars really wanted to start negotiating a contract extension for Brad Richards, it would probably take a meeting between people from the Stars, the lenders, Hicks Sports Group and the NHL to decide exactly what kind of offer could be made and how it might be structured.
That's looking a long way down the road, and I was told the lenders would prefer to get this done sooner than later. But when I asked what would happen if the team hadn't been sold by February and the front office needed to make a decision on Richards, that was the scenario that was suggested. One can't imagine that it would be easy to get a complicated deal done when there are that many people involved.
As for potential buyers, I have been told Vancouver businessman Tom Gaglardi still is very interested and willing to be patient. In addition to Gaglardi, I have been told there are at least two other buyers, but they are not interested in buying at the current price that is being sought. They have expressed their interest to the NHL, they have expressed their concerns about the price, and they are waiting patiently to be told what the next step is.
It appears the next step is to wait, possibly until the economy changes or the lenders get restless.
Bankruptcy is an option still, but it seems that would only happen if the group of lenders became fractious. Right now, they appear to be on the same page and would not want to take any control out of their own hands, since they are the ones who hold all of the cards. They found out in the Rangers sale that bankruptcy is expensive and unpredictable, and that's a lesson that is pretty fresh. However, these same people took the Rangers into organized bankruptcy, so I don't think that should be ruled out completely.
So what happens next? It appears they wait. The lenders obviously want to sell the team as quickly as possible, but they do not appear ready to sell at the prices that are being offered. And, I'm not sure when any of this will change.
One of the problems in trying to find the proper sale price for the Stars is that Forbes valued the team at $246 million last November. However, since then the Tampa Bay Lighting and Atlanta Thrashers sold for significant losses and the Phoenix Coyotes went into bankruptcy and are now owned by the NHL _ and that's the market in which the team is being sold.
With fan interest at an all-time low in North Texas, prospective buyers believe that if they want to up payroll, then they will have to be prepared to fund losses for this team for possibly two or three seasons. If they simply try to win on a $45 million budget, they feel they will be spinning their wheels. As such, they are factoring future losses into the value of the team _ sort of like pondering how much it will cost to fix up a house once you buy it.
The lender, obviously disagree with that philosophy.
Everybody involved says there is open dialogue and that nobody is mad, but it appears clear that they are a long way away from getting a deal done unless somebody really steps forward with a big offer.