Confirmed with Link: Senators are for sale - and it’s a Gong Show

[Tuna99]

So the new ownership group assumes all the debt incurred from the Melnyk years? I was assuming the Melnyk daughters would have to pay off the debts with the money brought in from the sale of the team.

Anyone have insight on that?

The daughters would be responsible to paying off the debt unless the purchase structure is they pay $500 million for the team to the daughters and assume the debt of $450 million.

 

[Sens of Anarchy]

So the new ownership group assumes all the debt incurred from the Melnyk years? I was assuming the Melnyk daughters would have to pay off the debts with the money brought in from the sale of the team.

Anyone have insight on that?

I heard they were buying the debt and that figure was over 400 mil... Definitely not sure on that.

The daughters would be responsible to paying off the debt unless the purchase structure is they pay $500 million for the team to the daughters and assume the debt of $450 million.

do you have a link for this?

 

[Tuna99]

I heard they were buying the debt and that figure was over 400 mil... Definitely not sure on that.


do you have a link for this?

No, but daughters apparently are interested in a legacy piece (say 10%) so how the ownership structure emerges with the debt and legacy piece could be interesting

 

[Loach]

I thought it was included.

Price 950. 450 to debt, 500 to the ladies.

Not sure where I heard it, but was happy the team would be debt free.

 

[IpsoPostFacto]

Part of the problem here is that we only have rumours about the sale price - like $900 million.

I'm going on the theory that the value of the business is not %1.3B ($900 + $400 millions). Further to this, I think the Sparks group was basically trying a bully bid very early before access to the books and indicated they could go to $950m and presumable they hadn't seen the $400m debt.

so either the current owners get a check for 900M and still own the debt, or they get $500m and new owners assume the debt.

As a side note, I recall an anonymous comment from one of the bidders that "...the books looked better than I though". This tells me that the large debt was understood to have something to do with mismanagement or Eugene borrowing money to prop other activities as opposed to the basic underlying hockey business being a terrible investment.

For the big $ we have heard in the rumours, I wonder if bidders look at that debt and figure "why should we be paying that $400million - you guys took that money to fund a lifestyle or prop up other business. You've already had the benefit of that". I have no idea and at the end of the day, none of that may matter and bidders look at the business, assign a value, and don't worry about the actual debt number as long as they understand what caused that debt. After all, NHL teams don't come up for sale every day.

I reserve the right to be completely incorrect.

Still on team Reynolds.

 

[thinkwild]

When Melnyk bought the team, even though many creditors and small businesses lost money in the bankruptcy, it still seemed much of the debt being reported for the team was still being reported. It seems highly unlikely to me that a billionaire would ever pay off the debt. They likely use that debt servicing.

It sure makes me wonder how the team accumulated that much debt though. I am going to assume it was all team debt and not illegal business practices. But still, how does it get that high.

 

[Comely]

When Melnyk bought the team he wasn't allowed to sell shares at that time (CEOs only have certain windows they can) so he bought it with debt and assigned that debt to the team. When he could sell shares they weren't worth as much so he didn't. So my understanding is the sens have carried the debt for their own purchase the entire time.

 

[coladin]

Part of the problem here is that we only have rumours about the sale price - like $900 million.

I'm going on the theory that the value of the business is not %1.3B ($900 + $400 millions). Further to this, I think the Sparks group was basically trying a bully bid very early before access to the books and indicated they could go to $950m and presumable they hadn't seen the $400m debt.

so either the current owners get a check for 900M and still own the debt, or they get $500m and new owners assume the debt.

As a side note, I recall an anonymous comment from one of the bidders that "...the books looked better than I though". This tells me that the large debt was understood to have something to do with mismanagement or Eugene borrowing money to prop other activities as opposed to the basic underlying hockey business being a terrible investment.

For the big $ we have heard in the rumours, I wonder if bidders look at that debt and figure "why should we be paying that $400million - you guys took that money to fund a lifestyle or prop up other business. You've already had the benefit of that". I have no idea and at the end of the day, none of that may matter and bidders look at the business, assign a value, and don't worry about the actual debt number as long as they understand what caused that debt. After all, NHL teams don't come up for sale every day.

I reserve the right to be completely incorrect.

Still on team Reynolds.

I wonder what the rates of the old debt that Melnyk has. It must be way cheaper than what is out there right now.

 

[GCK]

I wonder what the rates of the old debt that Melnyk has. It must be way cheaper than what is out there right now.

Melnyk needed to go outside of the main lenders to get financing over the last few years, I imagine his rates were padded quite a bit.

 

[Sun God Nika]

not a corporate finance expert but wouldn't all the debt be against the entity "Senators Sports and Entertainment"? Which is what is being sold. So the new owners are buying the team with the debt against it? Unless there is a special condition that the daughters have to pay off the debit with their proceeds.

 

[Golden_Jet]

not a corporate finance expert but wouldn't all the debt be against the entity "Senators Sports and Entertainment"? Which is what is being sold. So the new owners are buying the team with the debt against it? Unless there is a special condition that the daughters have to pay off the debit with their proceeds.

I don’t think any of us knows that answer, likely after sale, I would guess.
I assume it would be in the offer either way, after seeing books.
Maybe a bit of both in bids?

If NHL is owed any money from lending, as I thought they leant to some teams during Covid.
I wonder if that would be paid, if they borrowed.

 

[Senator Stanley]

We don't have enough information on the structure of the transaction or even the ownership structure of the organization to know how the debt is being handled.

If it's a share deal (i.e. the buyers are buying 100% of the shares in the corporation, or 90% if the Melnyk's retain a piece), the debt would ordinarily remain with the corporation. The buyers are essentially buying the corporation and everything that comes with it - assets and liabilities. If it's an asset deal (i.e. the buyers are buying assets owned by the corporation but not the shares of the corporation), the debt stays with the corporation.

It's almost certainly a share deal, and either the new owners assume the debt or it's paid off at the time of the sale (with the amount built into the $900M+ price we've been hearing), but we'll have to wait and see. Ultimately the lenders have a big say in this.

 

[SpezNc2]

not a corporate finance expert but wouldn't all the debt be against the entity "Senators Sports and Entertainment"? Which is what is being sold. So the new owners are buying the team with the debt against it? Unless there is a special condition that the daughters have to pay off the debit with their proceeds.

i could be way off base as well but i am assuming that the future owners aren’t buying the company itself but the assets (arena , franchise right etc) and they will rollover the asset in a new entity.

in that case it’s a bit like when you purchase/sell real estate. You purchase the house but when selling, the seller repay his debt.

again i am speculating here but that would be my assumption.

i am ready to be proven wrong here.

that is said on the opposite, maybe the news owners want the cumulate tax loss…

oh my, i am not sure anymore

 

[coladin]

not a corporate finance expert but wouldn't all the debt be against the entity "Senators Sports and Entertainment"? Which is what is being sold. So the new owners are buying the team with the debt against it? Unless there is a special condition that the daughters have to pay off the debit with their proceeds.

The bank always gets their cut first, so I would imagine from the disbursements the Melnyk’s will be left with whatever is left after borrowing, legal, liens, etc…

 

[PlayItAgain]

From a little bit of googling, it seems all 3 scenarios are possible:
1) The seller could pay off the debt with cash prior to the closing.
2) The buyer can assume the debt
3) The debt could be paid at closing through escrow out of the seller’s proceeds before they are released to the seller

So I’m not sure we’ll ever know the answer

 

[coladin]

From a little bit of googling, it seems all 3 scenarios are possible:
1) The seller could pay off the debt with cash prior to the closing.
2) The buyer can assume the debt
3) The debt could be paid at closing through escrow out of the seller’s proceeds before they are released to the seller

So I’m not sure we’ll ever know the answer

I don’t see why the new owners would assume debt when they have an arena to build.

 

[Micklebot]

I don’t see why the new owners would assume debt when they have an arena to build.

I suppose it would depend on the interest rates on the current loans vs what they can get on a new loan?

 

[Mingus Dew]

FWIW debt assumption is pretty rare in real estate deals of this size. You'd rather bring in your own relationships on the debt side because it means easier documents and a better closing timeline.

Also borrowers almost never have a right to assign the loan without the lender's consent (sole discretion). If the debt is fixed rate (also not common for big real estate deals) then there is a 0% chance the lender is agreeing to an assignment without an index adjustment. They'll want a margin adjustment even if the debt is floating TBH.

You only assume a seller's debt if the deal is contingent on it or the existing loan has brutal lockouts/prepayment penalties and the lender has indicated they'll play ball.

Edit: So to be clear what will happen is a purchase price will be agreed upon and that is what the buyer will pay for the team. The seller will receive the purchase price less the cost of their loan payoff. Lender will be paid out of escrow at closing so the seller will never actually have the "full" purchase price. The sale and the loan payoff happen simultaneously.

The buyer's funds will be a mix of their own equity and debt that they have raised themselves.

 

[Silky Johnson]

A Montreal area DJ in the 1980's and 90's (much of his work was in studio productions, remember Erin Rand... his producer for a while) was a close relative... a Grammy nominated artist ( long since dead of AIDs) is a relative.

bands want the following; in today's world
1) 1-2 Million... in money
2) 1/2 million in set-up or the promoter picks up that tab
3) the craziest demands... stuff like 100 lbs of strawberries...10 bottle of cristal Champaign. and so on
4) downloads of their music. So a large market. They come in, it causes a buzz, that increases sales
5) 20 K screaming fans for ambiance and to create a buzz
6) smoke 2-3 packs an evening, down enough alcohol to numb. Perform...f*** off back to some resting place to repeat the cycle

2 M up front, plus 500 K set up = 2.5 M
1 M to rent the arena = 3.5 M
1/2 M for the promotor = 4 M

20 K fans at $200 a ticket is needed... floor seating, versus far off seats ~ 3:1

so 5000 floor seats at $400
10,000 prime seats at $200
5,000 rest at $100

5,000 fans in the greater Ottawa area have to pay $400 a pop, plus $15 parking (per share, based on 2 people), $20 inside the area, $20 in transport cost (gas, wear and tear on car).. $500 per person... 5,000 people!!!! and a further 15 K paying more reasonable costs.

if you get 15,000 all told and many are lost at the high end, you will have an empty floor.. the one the band stares at all evening long and you are out $500 a head plus a few thousand sprinkled throughout.. so you could be down 1.25 Million. and the band is pissed off.

At 18 K, you could be down 1/2 million...your company's take and the band is lightly pissed off.

so now, you be a promoter...

One Donald Tarlington , also known as Donald K Donald (Production) once spoke in length about the promotion industry!!! Robert Kraft took over the New England Patriots because their previous owner decided to promote the Jackson Five (Michael) on their early 1990's mega tour. Babe Ruth became a Yankee because his Red Socks owner was a theatre promoter...

After a while bands see cities as nameless, faceless... when you play some 50-100 concerts a year or in any 2 years... you don't give a rats ass as to where... you have the pressure of money, of creative output, of maintaining popularity, of band mates not killing each other, of not drinking yourself into an early grave of bad press, bad reviews, image, appearance.

Bands bust their hump trying to get promoters to book them.. they will take a booking in hell as long as fees are paid. The mega bands have 200-300 cities world wide wanting them and a 52 week year. So the mega acts cater to the large population centers (TO versus Ottawa). the smaller acts will never justify the hockey arena.. that leaves that meaty middle, which now puts the ball in the promoters hands and he has to face the real possibly of a 500 k to 1.25 M loss.

So if you are Mike Fisher's wife, 20 K is a real possibility, you come .... If you are Kenny Chesney... Now what, you better be sure of 20 K. If you are U2, you come to talk to Harper or Trudeau and return once every 10 years.

Ottawa's 1-1.1 million and 1.5 Million eastern Ontario is a few hundred K short of what is needed for mass promotions and a large number of concerts or events at an arena.

20 K at 12-24 times a year is massive. And unlike the Sens who rely on ~ $80 per fan, you need ~ $300 per fan. good luck.

Reasonably accurate post but some problems.

Mega acts typically play stadiums not arena's with the festival circuit when not actively touring. Festivals create efficiencies in production costs and arr easy cash grabs for artists.

The landscape of touring has changed significantly since DKD's prime. Basically Live Nation is a monopoly. They own Ticket Master and are the largest venue manager and promoter in the world.

What they typically do is buy out a artist's tour, giving them a flat amount of money and then they call the shots. It completely derisks it for the artist and LN usually makes more in the end.

LN then crams as many shows that will make money into the tour. At that comes down to logistics.

Ottawa has a good geographical location for touring being an overnight from Boston/Montreal/New York/Toronto. Given a good venue, the math works out better for more touring acts, even with only 10-12k fans.

There may be hundreds of cities with better markets but you can't play Paris in between New York and Toronto.

Also, your numbers are WAY WAY OFF. See the below link to Poll Star and the average attendance (7900) and average gross (850k) for the top 100 us tours.

Concert Industry Roars Back! Pollstar 2022 Mid-Year Report - Pollstar News

During the first half of 2022, one thing was abundantly clear about music fans in North America and throughout much of the world: they couldn’t wait to see

news.pollstar.com

Also see this Wikipedia article on the highest grossing tours of all time. I don't think any of the Arena Tours (under 20k) come close to your numbers.

List of highest-grossing concert tours - Wikipedia

en.m.wikipedia.org

 

[Tuna99]

Reasonably accurate post but some problems.

Mega acts typically play stadiums not arena's with the festival circuit when not actively touring. Festivals create efficiencies in production costs and arr easy cash grabs for artists.

The landscape of touring has changed significantly since DKD's prime. Basically Live Nation is a monopoly. They own Ticket Master and are the largest venue manager and promoter in the world.

What they typically do is buy out a artist's tour, giving them a flat amount of money and then they call the shots. It completely derisks it for the artist and LN usually makes more in the end.

LN then crams as many shows that will make money into the tour. At that comes down to logistics.

Ottawa has a good geographical location for touring being an overnight from Boston/Montreal/New York/Toronto. Given a good venue, the math works out better for more touring acts, even with only 10-12k fans.

There may be hundreds of cities with better markets but you can't play Paris in between New York and Toronto.

Also, your numbers are WAY WAY OFF. See the below link to Poll Star and the average attendance (7900) and average gross (850k) for the top 100 us tours.

Concert Industry Roars Back! Pollstar 2022 Mid-Year Report - Pollstar News

During the first half of 2022, one thing was abundantly clear about music fans in North America and throughout much of the world: they couldn’t wait to see

news.pollstar.com

Also see this Wikipedia article on the highest grossing tours of all time. I don't think any of the Arena Tours (under 20k) come close to your numbers.

List of highest-grossing concert tours - Wikipedia

en.m.wikipedia.org

Nice, also sending a shout out to Sudbury for all these reasons above. Good music scene there because people stop to sleep on their cross Canada tours and concerts break out all over the place

 

[Silky Johnson]

Nice, also sending a shout out to Sudbury for all these reasons above. Good music scene there because people stop to sleep on their cross Canada tours and concerts break out all over the place

100%. Literally have stayed myself in Sudbury for that exact reason.

 

[Senator Stanley]

This would be a disaster. Ottawa fans getting the worst owner in the NBA to replace the worst owner in hockey.

 

[bicboi64]

This would be a disaster. Ottawa fans getting the worst owner in the NBA to replace the worst owner in hockey.

Oh god, the Sacramento Kings are utter shite in terms of being mismanaged, please hockey gods no

 

[NyQuil]

Horn Chen, come on down!

I liked this line:

It’s the first time in 17 years Sacramento has made the post-season.

 

[GCK]

Oh god, the Sacramento Kings are utter shite in terms of being mismanaged, please hockey gods no

Probably looking at partnering with one of the real estate players.