Ottawa Senators owner Rod Bryden has worked out a tentative financial restructuring of the National Hockey League team and its arena that will see the franchise eliminate more than 80 per cent of its debt while making it a "virtual certainty" that the club will not relocate.
The proposed deal will see a new company, owned by Bryden and an unnamed new U.S. investor, buy both the team and its arena from existing owners and creditors for an undisclosed sum. The new owners would be able to retire most of the approximately $375-million debt owned largely by the creditors of Covanta Energy Corp., the New Jersey-based company that ranks as the hockey team's primary debt holder. Those creditors, mostly large international banks, are expected to accept a massive writedown on the debt.
Covanta, formerly Ogden Corp., filed for bankruptcy protection this year because many of its business interests were suffering and because it was unable to finance its $105-million (U.S.) loan to the NHL team.
The proposed deal, which will be accepted within 60 days by creditors unless a stronger proposal emerges, would transform the debt-laden Senators into one of the NNL's most financially stable franchises, Bryden said yesterday during a press conference. Despite a relatively strong fan base and a better-than-average team in recent years, the Senators required a late-season loan from the NHL this year to make it through the season.
"If accepted, this proposal will result in a financially strong enterprise supporting our Senators here in Ottawa," Bryden said. "The change is very dramatic."
Bryden said his new company, to be called Senators Sports and Entertainment Inc., would have a top-notch playing facility and about $75-million in debt, which he described as a reasonable burden for a business of that size.
The key to the proposed deal is that troubled Covanta's creditors need to raise money from the energy company's non-core assets so that they can try to make the core operation profitable and, therefore, salvage as much of their investments as possible.
The new ownership structure would also allow the new owners to still gain the tax benefits sought from an earlier proposal to create a limited partnership, which offered tax advantages, but was cancelled because of Covanta's bankruptcy filing.
Bryden said Covanta's surprise filing triggered a series of events that have so far worked out well for the Senators, the team's fans -- and its owner.
A remaining stumbling block to his proposal and the franchise's future in Ottawa, Bryden said, is that the combined market value of the arena and the team operating in Ottawa must be worth at least as much as the team alone in another city. If that wasn't the case, the team would likely be sold to a buyer that would move the team.
Bryden also said the Senators and Palladium Corp., which now owns the Corel Centre where the team plays, have hired Boston-based Game Plan LLC to solicit offers to buy either, or both of, the team and the arena.
Randel Vataha, Game Plan's president, said the process to seek offers is just getting off the ground, but the market for NHL franchises is solid. Vataha wouldn't provide estimates on the values of the team or the facility but said Bryden's offer is strong. "We think he's made an excellent bid."
Vataha said Game Plan would pursue other bidders for about 60 days.
The Senators, one of the NHL's small-market teams, have become famous in recent years for pursuing a wide range of bids to improve the franchise's finances, including a variety of possible equity sales and swaps, tax-cutting plans, and a failed bid to get the federal governmant to fund financially weaker Canadian-based teams.
Bryden said the team's long-term future rests on its ability to sell tickets, particularly season tickets to the corporate market. The club has sold only about 8,000 season tickets for the coming season, team officials said, about 2,500 less than what had been expected.