October 26, 2011
When Tyler Dellow digs, interesting things about the inner workings of the NHL come to light.
In March 2009, the Hicks Sports Group defaulted on $525 million in loans. The Dallas Stars were up for sale, and were being financed by a group of lenders.
One year later, reports began to surface that the Stars were receiving advance payments from the NHL in order to continue to operate. Dave Shoalts of the Globe & Mail listed them as one of "six NHL teams [that] needed advances on television and/or revenue-sharing money to pay the bills" in an April 2010 report. Stars owner Tom Hicks denied the report to the Dallas Morning News, and NHL VP Bill Daly replied via email:
"Tom is right. The Stars aren't entitled to revenue sharing so there is no revenue sharing to "advance." There is no money owing from the Stars to the League."
In June 2010, NHL commissioner Gary Bettman appeared on "Hockey Night in Canada" and was asked about the Stars, in light of the fact that NHL was still owning and operating the Phoenix Coyotes (as they are still doing today). From Andrew's Stars Page:
MacLean: "How about Dallas? Tom Hicks. Have you been funding the Dallas Stars?"
MacLean: "What's he going to do? I hear Bill Gallacher of Calgary wants to buy them. How come he hasn't?"
Bettman: "It's a process. You don't buy multi-million dollar assets like you buy a lottery ticket. It requires due diligence. It requires a lot of homework. Ultimately it requires negotiating a purchase and sale agreement. Tom Hicks has had some issues. Obviously the Texas Rangers are being sold in baseball and are in bankruptcy. The Stars are not going into bankruptcy. We anticipate they'll be sold over the summer."
MacLean: "That's fair, but Tom's obviously turning back the keys, right?"
Bettman: "He's selling the club. He's not turning back the keys."
(An aside: They totally did go into bankruptcy, to necessitate the probable sale in 2011 to Tom Gaglardi.)
In October 2010, Ken Campbell of The Hockey News claimed that the NHL "had to front the Stars about $8 million in revenue sharing and league television money to help them pay the bills" while still searching for an owner. Sources denied this to the Dallas Morning News, saying that the team had not received an advance on future revenue, but was "in the first stages of studying how it can receive the money."
Which brings us to Dellow's post on Wednesday, on his blog mc79hockey.com, and some interesting news about the NHL's financial involvement — or potential financial involvement — with the team.
Quoting the Bettman passage above for context, Dellow then printed a "Declaration of Robert L. Hutson, Chief Financial Officer of Dallas Stars, Dallas Arena and StarCenter, and Treasurer of U.S. Holdings, dated September 15, 2011"; something (we assume) was submitted as part of the team's bankruptcy proceedings.
One passage in particular struck Dellow:
In January 2010, Dallas Stars again faced cash flow deficiencies once the Interest Reserve Account had been fully depleted. HSG and Dallas Stars began discussions with the NHL and the Prepetition HSG Lenders with respect to securing additional funds to meet its cash flow needs for the remainder of the 2009-2010 NHL season. On February 1, 2010, after weeks of discussions, Dallas Stars executed a Promissory Note with the Prepetition CFV Lender (together with the other agreements and instruments related thereto, the "Original CFV Debt Agreement"), pursuant to which the Prepetition CFV Lender agreed to make available to Dallas Stars advances in an aggregate principal amount of up to $19,000,000 (the "Original CFV Debt Amount").
That's a lot of legal mumbo and jumbo, so Dellow provides a courtesy to the reader:
So, to translate the legalese, according to Mr. Hutson on January 14, 2010, the commissioner of the NHL obtained the exclusive right to control the operations of the Dallas Stars and the Dallas Arena, including the authority to cause a sale. Hicks Sports Group had no ability to control the Stars or the Arena, or their operations, from that date forward. On February 1, 2010, Dallas executed a Promissory Note pursuant to which it obtained access to money from CFV I LLC, an affiliate of the NHL.
How much involvement did the NHL have with the Dallas Stars? If nothing else, the previously denied leaks about advances on money are given a validity given this legal maneuvering.
The NHL was already operating one of its franchises in Phoenix. It was so desirous to not operate a second one — or have the impression that it was — that it shipped the Atlanta Thrashers up to Winnipeg last spring.
There were, and are, obviously mitigating circumstances in Dallas with regard to its financial stability, but that's nuance. The league couldn't be seen as an active funder of another of its franchises — despite what might have actually been happening behind the scenes. Which, apparently, was much more than was made public.
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