Financial trouble bubbling for Devils?
By Stu Hackel
In a blunt statement directed at a report in today's New York Post, the New Jersey Devils have denied that the franchise is either in or near bankruptcy and that the team's relationship with its bankers is fractured, calling the allegations "patently untrue."
The statement also addressed other inaccuracies that the team found in the story, but did not respond to the story's main allegation: that the team missed its Sept. 1 loan payment. A knowledgable source, however, said no payment was made because the deadline was moved.
The statement in full reads: "Today’s NY Post story is inaccurate. The notions that the Devils are facing bankruptcy or that “the Devils have told their banks to get lost” are patently untrue. The Devils value their relationship with their banks and are confident a refinancing will be completed shortly. As stated previously, ownership is close to finalizing an agreement that would lead to a buyout of Brick City’s share of the company.
"The organization is also pleased to report that new season ticket sales are up 130% over last year and last week’s on-sale for single game tickets was 260% above last year’s similar period.
"Finally, the start of training camp was incorrectly reported in the article as tomorrow, in fact, training camp starts on Friday for the rookies and Saturday for the veterans."
The Post story, written by Josh Kosman, said the Devils are facing two obstacles, one being an apparent feud between owners Jeff Vanderbeek and Ray Chambers, which was compounded by Chambers' inability to sell his 47 percent share of the team. The second obstacle Kosman identified was that the Devils' relationship with their bankers had grown highly contentious. CIT Group, Inc. is the lead lender.
But, as the Devils' statement counters, Chambers' stake is now being bought by Vanderbeek and that transaction could be near completion, as is a refinancing of the team. (Tom Gulitti of The Bergen Record blogs that the refinancing is contingent on the buyout.) If that is the case, it would seem the team-banker relationship is not as poisonous as Kosman implied when he wrote a source told him, "The Devils have told their bankers to get lost," and quoted the source saying the bankers want nothing to do with Vanderbeek.
Kosman also quoted a source that said the team may not only be near bankruptcy, but already be bankrupt, a dubious claim considering filing for bankruptcy is a matter of public record and no filing by the club has been reported.
However, there are still reasons to believe that the Devils could face some serious financial challenges. The team owns its Prudential Center arena and could be victimized by the NBA lockout if that league's season does not go forward. The problem that could arise is that the company that operates the arena, Devils Arena Entertainment, also guarantees the NHL team's loans.
The NBA's New Jersey Nets are a tenant at "The Rock" and will take up at least 44 of the building's dates. Richard Krezwick, President of Devils Arena Entertainment and general manager of the Prudential Center, told Bloomberg News last month that the Devils have no safeguards built into their deal with the Nets should any or all of those dates not be filled. The Nets do not face any penalties that would compensate the Devils should the NBA not play, and it's too late and too risky to try to fill those dates with other attractions.
"We unfortunately have 44 dates in our calendar that are at significant risk right now, but we can’t touch them,” Krezwick told Bloomberg. “You try to play out every scenario, but there really is no solution....So the facility is at risk.” Krezwick declined to provide Bloomberg with an estimated figure of the losses the Devils might incur.
The Devils are not the only NHL team that will face problems if the NBA lockout extends into the basketball and hockey seasons, but they may be the only team that will lose that revenue permanently. If the NBA locks out its players all season, the Nets won't play in Newark again as they are scheduled to move to Brooklyn for the 2012-13 campaign. Some observers, like Forbes Magazine's Mike Ozanian, have stated they don't believe the Devils can be successful financially in Newark without an NBA tenant in their building. Vanderbeek believes the team can succeed without an NBA tenant by thriving on concert bookings that previously went to the Meadowlands Arena.
(Newark Mayor Cory Booker has said he'd like his city to get an NBA team full-time after the Nets move, even though it had an $83 million budget shortfall last year, but relocating or expanding are hardly high priorities for the NBA at the moment.)
The figures on ticket sales are heartening because the Devils fans seem to have responded to the club's strong second half showing last season. The team has had ongoing issues with their attendance, which unofficially ranked 25th in per-game average (14,775) and 23rd in percentage of seats filled (83.8 of capacity) for their home dates. These were the worst attendance figures the Devils had seen since "The Rock" opened in 2007, and certainly their poor start last season didn't help their gate receipts. Still, in the four years of the arena's history, the team has not yet averaged more than 15,800 or over 90 percent capacity.
NHL Deputy Commissioner Bill Daly would not comment about the Devils' finances when contacted by Rich Chere of The Newark Star-Ledger, other than to characterize The Post story as inaccurate. Daly said all comments should come from the Devils.
Devils President and GM Lou Lamoriello also declined to provide any insight into the team's financial situation. "No. I'm not going to comment," he told Chere. He did say, however, that he was not given any financial restrictions by ownership when assembling his team for this season.
The possibility of red ink in New Jersey can't be pleasing to any of these gentlemen. The only red they want to see is on the Devils' jerseys