Several stories are out today about the potential sale of the Stars. Now that Tom Hicks is back in the States he was able to answer a few questions regarding the events that led us to this point. Apparently phones and the internet haven't made it to England yet.
I think I now know way too much about the cash flow of the Hicks Sports Group. There are several enjoyable quotes out there today which sum up the situation entirely. I think I've read this story before though. Several of these are the same tired nonsense we've heard for 6 years now.
"Whoever the new owner is, he is not going to go to the cap," Hicks said. "If he does, it's all going to come out of his pocket. We're losing money where we are now. These are organizations, and nobody in their right mind is going to write checks to cover big, big losses every year."
…but you say the Stars weren’t losing money when they were winning and spending money? Ignoring the fact that Tom is speaking for a new owner that he has presumably never met, how can he make comments like this? I know I'm making a statement that has been made for several years at this point, but sometimes I wish he just wouldn't talk.
Check this out. I don’t think this situation could be described any better.
My favorite line though, is this
one from Mike Heika:
He said that HSG, which owns the Stars and is in the process of selling the Rangers, took on too much debt because teams spent more than the budget allowed. He now has to monetize the sports assets to pay down the debt, he said.
The Rangers and Stars both spent more than their budget’s allowed? I obviously don’t have a free hand to read through the books of the Hicks Sports Group, but what in the world were they spending money on? The Rangers have had a relatively low payroll since 2003. The Stars play in a capped league. I fail to see how payroll was the budget crusher. The Stars and Rangers combined payrolls over the last 2 seasons were at roughly 240 million dollars. If the payroll is what is going to suffer, are we to assume that they over shot their payroll budget by almost double the Stars payroll? I know they have expenses outside of payroll, but aside from severe debt from poor business decisions how could any of the expenses lead to such a huge cash infusion from Hicks? Something doesn't add up.
This also begs the question of who is in charge of Hicks Sports Group. How can an owner allow his franchises to be run so poorly that he has to reinvest 85 million dollars to keep them afloat? At some point wouldn't he have seen the numbers and ordered a change? Is part of this being laid at the feet of Nolan Ryan, a successful businessman himself?
Our friends on the other side of the pond are feeling the sting too. Liverpool FC isn’t under the umbrella of HSG, but they are a Tom Hicks asset nonetheless. Enjoy
this quote from December 12th:
In a frank admission ahead of tomorrow's game at home to Arsenal, the Liverpool manager also suggested the club are burdened by unrealistic expectations given a transfer budget that is unlikely to improve without new investment.
So Hicks Sports Group franchises overshot their budgets enough to go into serious debt, and Liverpool is paying down enormous debts simultenaously while their player budget has shrunk? What a coincidence.
On the bright side the chances of the Stars staying in the hands of Tom Hicks are relatively slim at this point. According to Tom Hicks himself the window to meet the demands of HSG's creditors via a sale of the Stars is 6 months. We know relatively little about the Stars sale process so far, but we do know a few things:
* Mark Cuban has told Mike Heika that he isn't interested in a majority stake of the Stars.
* There are reportedly 4 groups involved thus far. The Globe and Mail speculated that one is Bill Gallacher of Calgary. Two others are Canadians, and the final one is a local Dallasite.
* The Stars have hired Galatioto Sports Partners to broker a sale.
* The Stars WILL NOT be moving. Period.
The process is still in it's infancy so details are scarce. The search for details took me to Maury Brown, President and Editor-in-Chief of
The Business of Sports Network. The overall theme of our discussion is that this process could play out in a similar fashion to the Rangers.
According to Maury the main difference between the two transactions is real estate. With the Rangers Tom Hicks negotiated a sale of a decent-sized chunk of land around Rangers Ballpark in Arlington. Said issue will not be present with the Stars. Some of the same barriers will still exist though. Creditors will still have to approve a sale of the Stars, but ideally the number of creditors will be smaller. The Stars are being sold to satisfy debts, but ultimately, like the Rangers, the Stars will be sold to owners the NHL approves of. If that deal is for less cash than the creditors are seeking then the sale will still go through. According to Maury "unless HSG is in bankruptcy, the creditors have no solid legal footing through the courts to extract more out of the deal".
The deciding factor about how long the sale will take is the sale of the Rangers. Maury initially estimated that the sale process could take at least a year depending on how much of the debt is paid down from the sale of the Stars. Tom Hicks now says 6 months which seems to indicate that the creditors will not be getting very much cash in the deal. Six months would put us in August, and cripple any off season plans.
One issue that has come up is creditors giving money to the Stars due to cash flow issues. Tom Hicks said " the Stars have seasonal cash flow needs that are being advanced from time to time by our lenders," via email to Mike Heika a few days ago. According to Maury the key word in this exchange is seasonal. The Stars cash needs would be "in the off-season before revenues starts coming in. Since HSG is distressed, their cash flow issues would prevent signings, etc". The proverbial fork was stuck in the Stars offseason before it even began.
While none of the rumored parties have been identified for certain, one man should be brought up again. David McDavid is always around it seems. McDavid led a failed attempt to buy the Atlanta Thrashers and the Atlanta Hawks several years ago, and according to Maury the man to negotiate the deal was none other than Chuck Greenberg, soon to be of the Texas Rangers.
Make sure to check out
The Business of Sports Network for updates about the sales process as they become available. They were spot on about the Texas Rangers sale, and they will no doubt take care of the Stars.
R.I.P. Steve Ott's appendix. You had a good run.
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