Devils' money woes may torpedo team

Publish date:

By Stu Hackel

In his perfect world, Zach Parise not only would never play for the rival Rangers, he would stay with the New Jersey Devils as the team continues its revival as an NHL power. But the world is far from perfect and the Devils' financial situation is even less so. That's why the team and its captain are on the clock, and that may force Parise to make a hard decision on his future.

The Rangers may be out of Parise's picture, but 28 other teams will take a hard look, if not a hard run, at securing his name on a contract if they can. "I like the people here. I like the staff and my teammates. I like the area," Parise said as the Devs cleaned out their lockers on Wednesday. "There's a lot of good things about this place. I have always liked playing here, that's never changed. We'll see where this takes us right now, but this is a great place to play and I love playing here, I love being here."

It's the "this" in the "We'll see where this takes us" that has to concern the Devils Army. And the "this" is the $77 million due on a loan that Devils ownership must repay this summer to the  CIT Group Inc., the team’s lead lender, as well as the 47 percent share of ownership that one of the Devils partners, Brick City (philanthropist Ray Chambers and his son-in-law, Mike Gilfillan), wants to unload. The problem is that the other partner, Jeff Vanderbeek, a former member of the executive committee at Lehman Brothers Holdings Inc., has yet to find someone to acquire that 47 percent, money that would go to repaying CIT on the debt.

Parise's deadline comes sooner, however. It's July 1, the date his contract with the Devils expires and he becomes an unrestricted free agent. He can't wait around until later this summer to find out if the Devils have raised the money to afford a new pact with him and to continue improving the team.

The Devils have reportedly been losing $20 million annually since moving from the Meadowlands Arena to Newark. That figure was considerably reduced for this season by the team's deep playoff run. In fact, The Newark Star-Ledger figured on Wednesday that the team generated $32.3 million in revenue this spring. "But with close to $200 million in overall debt and $77 million due this summer, experts remain divided about the long-term impacts of the newfound cash," The Star-Ledger's David Giambusso wrote.

After a number of false starts and false reports that go back to last summer, this situation is nearing some sort of resolution. While Parise and the rest of us curiously wait for an answer to Slap Shot goalie Denis Lemieux's age-old hockey question, "Who own da Chiefs?" (Yes, it's "owns. owns."), Commissioner Gary Bettman channeled the Kevin Bacon character in Animal House who urged a rioting mob to "Remain calm. All is well" when he said last month that "Jeff Vanderbeek is working on both refinancing the debt on the club, and an equity raise. He appears to be fairly confident that he can pull this off in due course in the next few weeks. Since I've been in touch with the banks on a regular basis, we seem to be on track."

Bettman's optimism seemed justified when reports came out on June 8 that Vanderbeek had, indeed, enticed someone to pick up Brick City's shares. Chris Botta in Sports Business Journal/Daily, wrote, "The identity of the partner has yet to be announced because, according to the source, there has been an agreement to stay silent until the completion of the Devils’ season. A formal announcement of the deal is expected within two weeks of the conclusion of the Stanley Cup Final." And the sooner the better if they're trying to hold on to Parise.

On Yahoo's Puck Daddy blog, Greg Wyshynski chimed in, "I've heard it's a group based in Ontario that's been in conversations with Vanderbeek and the NHL for some time. They would join as minority partners to Vanderbeek." In The New York Post, Josh Kosman reported a handshake deal had been reached "with an investor or investors to pump $200 million into Devils Arena Entertainment, which owns the team and operates the arena....In return for the cash, the investor would own a majority of the Eastern Conference Champions while Vanderbeek would maintain operating control, the source said."

Why someone would own most of the team and let Vanderbeek, the minority owner, operate it was left unexplained. But others aren't even convinced the deal is real, especially David Shoalts of The Globe and Mail, the paper that has frequently punched holes in the NHL's "All is well" sentiments and claims about struggling franchises.

Citing "several sources connected to the NHL and the banking community," Shoalts reported on June 9 that the naysayers "expressed doubt that anyone would invest in the Devils. They said the team’s financial situation is so dire that the only way to survival is declaring bankruptcy and flushing out the debt through the courts. Then the team could start over with a new owner and a new lease agreement with the city of Newark. There are at least two groups watching the Devils’ situation closely, according to the same sources. They say the groups are only interested in buying the Devils if they go into bankruptcy because they believe their current financial situation is unsalvageable."

Without a new partner for Vanderbeek in place shortly, the Devils almost certainly will lose Parise. He won't be sticking around, signing a new contract with a bankrupt franchise.

Shoalts added, "Just how much the franchise owes its bankers is murky. The $77-million loan payment is for building the arena but there is thought to be at least another $80-million in debt. The total debt could be more than $200-million. (In November, Michael Ozanian of Forbes reported that he believed the Devils' debt was $250 million -- SH)  A group that agreed to invest in the Devils backed away from the deal last year after undisclosed debts started turning up, according to a source. When those debts hit $20-million, the group pulled out."

(Shoalts' story prompted Botta -- the former Islanders PR director whose credential to cover the team was foolishly revoked by GM Garth Snow last season, and who recently joined Sports Business Journal/Daily -- to tweet, "Been @SBJSBD a month, but really feels official now that @dshoalts has countered my Devils story.")

So the raceis on. Will the mystery buyer -- if one actually exists -- be revealed and the Devils' finances be set straight in time to keep Parise in red, white and black? If not, well, no, he won't be ferrying across the Hudson to cash those Madison Square Garden checks like Bobby Holik and Scott Gomez did before him, but there's talk that the Minnesota Wild would love to bring him back to his home state and, according to former North Stars player, coach and exec Lou Nanne, the Wild say they won't be outbid by anyone.

And while we're asking about the captain, let's also ask about the goalie, because Martin Brodeur is also a pending UFA. He, too would like to return for a final season in the NHL. We've always assumed that it would be with New Jersey, but what if some turn of events force changes in the Devils' hierarchy and team president Lou Lamoriello no longer oversees the club, will Marty still want to be a part of it? Could he go elsewhere for his farewell tour?

If the money to keep both Parise and Brodeur is found, will it be enough to pay the debt, keep these two cornerstones of the franchise, and add the other players who are needed to keep the Devils moving forward? If the money is not found, are Shoalts' sources right and the Devils will hurtle toward bankruptcy, something The New York Post said was imminent last year?

We all assume that the complexities inherent in these weighty financial matters mean that delicate negotiations are ongoing to save the day. This is, however, New Jersey, and perhaps delicacy isn't the correct approach. During the Stanley Cup final, the Devils used celebrity cheerleaders on their center ice video screen to pump up the crowd, and one of them was James Gandolfini. "You say you're from Jersey?" he goaded the fans in his best Tony Soprano voice.

This mess could use Tony's brand of New Jersey diplomacy right about now.

COMMENTING GUIDELINES: We encourage engaging, diverse and meaningful commentary and hope you will join the discussion. We also encourage, but do not require, that you use your real name. Please keep comments on-topic and relevant to the original post. To foster healthy discussion, we will review all comments BEFORE they are posted. We expect a basic level of civility toward each other and the subjects of this blog. Disagreements are fine, but mutual respect is a must. Comments will not be approved if they contain profanity (including the use of abbreviations and punctuation marks instead of letters); any abusive language or personal attacks including insults, name-calling, threats, harassment, libel and slander; hateful, racist, sexist, religious or ethnically offensive language; or efforts to promote commercial products or solicitations of any kind, including links that drive traffic to your own website. Flagrant or repeat offenders run the risk of being banned from commenting.