Sept. 16 (Bloomberg) -- The Dallas Stars hockey team, the last professional sports club owned by former billionaire Thomas Hicks, filed for bankruptcy with a plan to sell the franchise through a court-approved auction.
Vancouver-based businessman Tom Gaglardi has agreed to be the lead bidder in the auction, with an offer that includes about $50 million in cash and $100 million in new debt promised to senior lenders.
The team owes lenders, including an affiliate of the National Hockey League, $448.5 million, according to court documents filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware. It said its assets are worth between $100 million and $500 million. A precise figure wasn’t immediately available.
“Crushing debt and a protracted out-of-court sales process have marked the last few years of the debtors’ history,” the team said, referring to efforts to sell the team.
Hicks, who fell off the Forbes list of billionaires in 2010, sold his stake in the Liverpool Football Club in the U.K. and last year put the Texas Rangers baseball team into bankruptcy, where it was sold at a court-supervised auction. Hicks invested cash and loans worth about $150 million into the team.
Gaglardi and his family own Sandman Hotels, Inns & Suites, Denny’s Restaurants and the Kamloops Blazers Hockey Team.
Under his offer, an affiliate of the NHL would be repaid about $51 million it loaned the Stars. Senior lenders owed $250.9 million would be given a new $100 million note, plus an amount of cash to be calculated later. Another group of lenders owed $146.2 million would be paid $500,000 in cash.
The team said it has filed a “prepackaged” reorganization plan, which typically qualify for quicker action under bankruptcy rules. Gaglardi will automatically win the auction unless another bidder makes a higher offer.
“The purpose of the sale is to allow for a smooth transition in ownership, while ensuring that the Dallas Stars continue to play at the American Airlines Center in Dallas,” the team said in the statement.
The Stars are the fifth professional sports team to file bankruptcy in the last two years. The Los Angeles Dodgers baseball team filed in June, the Texas Rangers baseball team filed last year and the Chicago Cubs baseball team filed in 2009, one year after former owner Tribune Co. went bankrupt.
The Phoenix Coyotes hockey team filed in 2009 and, like the Rangers and the Cubs, was sold under court supervision. The National Hockey League took ownership of the Coyotes and is looking for a buyer willing to keep the team in Arizona.
The Atlanta Thrashers hockey team was sold in May to Winnipeg, Manitoba-based True North Sports & Entertainment, which moved the team to the Canadian city and renamed it the Jets. The Hockey News reported May 20 that the price was $110 million, with the NHL receiving at least another $60 million as part of a relocation fee.
The company and its units’ 30 largest creditors without collateral backing their claims are owed about $58.5 million, according to court documents. CFV I LLC, is the biggest with a claim of $51.7 million. Other creditors include the New York Rangers Hockey Club, with a claim of $2 million, and Marc Crawford, with a claim of $1.1 million for contract termination obligations, court papers show.
The Stars have had 14 straight winnings seasons, though they’ve missed the playoffs the past three years.
Dallas went 42-29-11 last season and finished two points behind the Chicago Blackhawks for the last of eight playoff spots in the Western Conference.
After relocating to Dallas from Minnesota in 1993, the franchise made the postseason 12 times in a 14-year span, including back-to-back appearances in the Stanley Cup Finals in 1999 and 2000. Dallas won its lone NHL championship after the 1998-99 season led by Mike Modano, Joe Nieuwendyk, Brett Hull and Ed Belfour.
The Stars are worth an estimated $227 million according to Forbes magazine, ranking 10th out of 30 NHL teams.
Last year Hicks sold the Rangers after putting the baseball team into bankruptcy and later sold his stake in the Liverpool Football Club in the U.K.
Hicks’s holding company for the Stars and the Rangers defaulted on $525 million in loans after missing interest payments, Bloomberg data show.
Victims of Recession
That default, which became public in April 2009, made the Rangers and the Stars the first U.S. sports teams to fall victim to the recession, said Michael J. Cramer, director of the Texas Program in Sports and Media at the University of Texas at Austin.
The recession, which lasted from December 2007 to June 2009, threatened teams that took on too much debt, including the Stars, the Rangers and the Coyotes, Cramer said. Cramer was President of Hicks Sports Group until 2004. Consumers, hit by higher unemployment and a drop in housing prices, are attending fewer games, he said.
The National Hockey League is “by far, more dependent on ticket sales” than professional baseball, basketball or, the most profitable U.S. sport, football, Cramer said.
The other sports get more money than the NHL from television contracts, he said.
The bankruptcies in the last two years should teach all of the leagues a simple lesson, Cramer said.
“Don’t allow teams to borrow up to the worst-case scenario because guess what, the worst-case scenario is happening,” he said.
The case is Dallas Stars LP, 11-12935, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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