Forget the Del Biaggio drama, is NHL expansion on the horizon?
So now we can add words like "brazen" to help describe the fallen financial entrepreneur "Boots" Del Biaggio, whose precipitous plummet into bankruptcy has launched multiple lawsuits and investigations, and caused many outsiders to question the stability of the Nashville Predators ownership group. Today's Tennessean includes a report on how Del Biaggio was making his pitch to bring other investors into his Forecheck Holdings Investments firm (obviously no relation to this blog, or I wouldn't be running ads!), which actually holds the ownership interest in the Predators.
It's a rare glimpse into the machinations that go on behind the scenes among the owners, and included with the online version of the Tennessean's report are a number of PDF files that outline Del Biaggio's pitch, and a draft version of the Predators ownership's internal operating agreement. Needless to say, this is juicy stuff.
The biggest whammy is on Page 10 of the "Discussion" document, which outlines Del Biaggio's description of the "Portability Value" of the franchise as he sold the idea to potential investors. In the event that the team, after the 2009-10 NHL season, had lost at least $20 million and didn't average 14,000 per game in attendance, the amended Sommet Center lease could be broken (for a fee), and the team moved. Several cities (Hamilton, Kansas City, Las Vegas, Oklahoma City, Seattle, Winnipeg, etc.) are mentioned as relocation possibilities, and that "these cities will offer exceptional arena deals for an NHL team and potentially superior corporate support and fan base than Nashville."
On the next page, there's a REALLY fascinating bit that isn't related directly to the main story here, but should be shouted from the rooftops anyway. Included in the Nashville Group's projection of the team financials going out to 2011-2012 is a footnote alongside the team revenue estimate for the 2010-2011 season which says, "Assumes a $15.0 million expansion fee received." Gentlemen, start your speculation! If 30 teams each received $15 million in expansion money, that represents $450 million paid to the league in full. That would seem to indicate that multiple teams are potentially coming over the NHL horizon, given the figures involved. Larry Brooks of the NY Post had a column last summer that estimated $450-500 million in expansion money if Kansas City and Las Vegas were to join the NHL club, so indeed, might we be looking at a 32-team NHL in 2011?
Anyways, the next page presents Del Biaggio's projection of the financials, based instead on 13,000 average attendance, which paints a much gloomier picture. Interestingly, his projection also includes the $15 million expansion fee coming in 2010-2011. His case to potential investors was basically that it represented the chance to really cash in a few years down the road should the Preds flop and go on the relocation auction block. Hardly shocking news, but the details we've been made privy to by the Tennessean today are truly remarkable.
It's a rare glimpse into the machinations that go on behind the scenes among the owners, and included with the online version of the Tennessean's report are a number of PDF files that outline Del Biaggio's pitch, and a draft version of the Predators ownership's internal operating agreement. Needless to say, this is juicy stuff.
The biggest whammy is on Page 10 of the "Discussion" document, which outlines Del Biaggio's description of the "Portability Value" of the franchise as he sold the idea to potential investors. In the event that the team, after the 2009-10 NHL season, had lost at least $20 million and didn't average 14,000 per game in attendance, the amended Sommet Center lease could be broken (for a fee), and the team moved. Several cities (Hamilton, Kansas City, Las Vegas, Oklahoma City, Seattle, Winnipeg, etc.) are mentioned as relocation possibilities, and that "these cities will offer exceptional arena deals for an NHL team and potentially superior corporate support and fan base than Nashville."
On the next page, there's a REALLY fascinating bit that isn't related directly to the main story here, but should be shouted from the rooftops anyway. Included in the Nashville Group's projection of the team financials going out to 2011-2012 is a footnote alongside the team revenue estimate for the 2010-2011 season which says, "Assumes a $15.0 million expansion fee received." Gentlemen, start your speculation! If 30 teams each received $15 million in expansion money, that represents $450 million paid to the league in full. That would seem to indicate that multiple teams are potentially coming over the NHL horizon, given the figures involved. Larry Brooks of the NY Post had a column last summer that estimated $450-500 million in expansion money if Kansas City and Las Vegas were to join the NHL club, so indeed, might we be looking at a 32-team NHL in 2011?
Anyways, the next page presents Del Biaggio's projection of the financials, based instead on 13,000 average attendance, which paints a much gloomier picture. Interestingly, his projection also includes the $15 million expansion fee coming in 2010-2011. His case to potential investors was basically that it represented the chance to really cash in a few years down the road should the Preds flop and go on the relocation auction block. Hardly shocking news, but the details we've been made privy to by the Tennessean today are truly remarkable.
Labels: economics, nashville predators
6 Comments:
Interesting and thanks for ferreting out that information. The problem is that we don't know if the "Nashville Group Case" is a concoction of the Forecheck fraudsters or an actual projection made by the majority owners. The 'revised operating agreement" published by the Tennessean is missing Exhibits C and D. Could that be where the "Nashville Group Case" comes from? What the Tennessean published looks very much like documents (usually called a "prospectus") that public companies are required to publish when they issue preferred shares. Those documents usually contain financials and financial projections for the issuing company.
The Forecheck speculation on expansion cities makes me laugh: Oklahoma City?? Seattle,btw, has no arena suitable for the NHL, no public interest in funding one (exit Supersonics), and no local investors who have shown serious interest in acquiring a team.
(obviously no relation to this blog, or I wouldn't be running ads!)
That's what I was wondering... :)
FYI, OKC has one of the best minor-league fanbases in all of pro sports, not just hockey. There is a natural rivalry with Dallas, St. Louis and any possible KC team. OKC just got an NBA franchise (from Seattle) and will have an NBA/NHL ready arena within a year or two.
Will OKC (my hometown) get an NHL franchise? I wouldn't bet on it.
Now that i think about it, why is no one questioning the honesty of the deck itself? The guy's a crook, right?
As to trusting Boots' numbers, Paul, I don't place too much stock in them, but I would guess that they're probably in the ballpark in terms of the overall picture. Average 13,000 fans, and it's a disaster. Get over 14,000, and they can probably make it work, particularly with some decent playoff runs. I think that with the continued good work that they're doing, combined with the growth of Nashville relative to other American cities, they've got a decent chance of making it.
With Nissan opening their new North American headquarters this week in Franklin and Verizon Wireless opening a new administrative complex this fall, I wonder if they'll jump on as corporate sponsors.
Excellent post! I definitely think that the NHL will expand to 32 teams within 3 years---I am predicting teams in Hamilton and Las Vegas coming, and think that Kansas City will likely buy a team and move them to KC within 5 years as well.....
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