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SBD/December 8, 2010/Franchises
Hornets Audit Shows Shinn Was Heavily In Debt, Borrowing To Pay
Published December 8, 2010
An audit of the Hornets' finances published yesterday by Deadspin.com indicated that prior to selling the team to the NBA, Owner George Shinn was "heavily in debt and borrowing to pay the team's on-going operations," according to Jimmy Smith of the New Orleans TIMES-PICAYUNE. The Hornets "actually made an operating profit in 2009," but the problem for Shinn was the team's "long-term debt." At the end of '09, the Hornets' long-term debt was $111M, and they had to pay $8.9M in interest on it, which "wiped out an operating profit" of $5.8M. Contributing to the "small positive net income was that the NBA forgave a $3.9 million payment on the $30 million relocation fee that Shinn owed to move the team" from Charlotte in '02. Broadcasting and cable rights revenue from the team's TV and radio rights brought in $38.4M in '08 and $41.2M in '09; of that total, the Cox Sports Television agreement brought the Hornets $8.3M in '08 and $9M in '09. The documents also show that in January '05, Shinn borrowed $30M from the team through a separate company, GIS of Nevada. That note was "unsecured, meaning it was a promissory note from Shinn," but it was "listed as an asset on the Hornets' balance sheet." Shinn on Jan. 21, 2005 "bought out then partner Ray Wooldridge for a reported" $70M. Wooldridge had bought 35% of the team in '99. Smith notes a "bright spot for the next owner is that the audit revealed that the team's bottom line was hugely affected by its performance, as the club was enriched one year following the 2007-08 division championship season." But the audit "did raise questions about the ability of the partnership, including at least three separate entities owned by Shinn, totaling 65 percent, and one by Gary Chouest (Slam Dunk LLC) totaling 35 percent, to continue operating because of continued financial losses" (New Orleans TIMES-PICAYUNE, 12/8).
HOMETOWN HERO: The AP's Brett Martel noted that newly appointed Hornets Chair & Governor Jac Sperling yesterday said his "assignment is to make the club more attractive to a buyer who would keep the team in New Orleans." Sperling, who also serves as Vice Chair of the Wild, was born and raised in New Orleans. Sperling said NBA Commissioner David Stern has been "very positive" about the city, "going back to when the team was awarded in 2002." Sperling: "We're in a difficult spot, yes, but I think his selection of me is a further indication of what is in his mind. He wants to try to make this asset more attractive so perhaps a local buyer will step up." Sperling said that there is "no rush to sell the club and one of his first orders of business will be to see whether revenue streams from ticket sales, sponsorships and the government inducements can be enhanced." He added it would not be wise "to go try to find a buyer now when the asset is not performing at it's best." Sperling also said that he "wants to meet soon with state and city officials to talk about whether the arena lease and other government incentives can be modified to provide a better baseline level of financial security for a future local owner of the club" (AP, 12/7).
HEALTH CARE COMES BEFORE HORNETS: Louisiana Gov. Bobby Jindal yesterday said that he "will not sacrifice funding for state services to keep the Hornets" in New Orleans. Jindal: "We want the Hornets to stay here. We aren't going to do anything that jeopardizes health care or higher education." Jindal "declined to directly answer a question about whether he would assemble some type of incentive package to retain the team." He said that the "best way to ensure the Hornets stay in Louisiana is to buy tickets to the team's games as stocking stuffers for Christmas" (Baton Rouge ADVOCATE, 12/8).
ON THE MOVE? Boston Globe columnist Bob Ryan said, "The Hornets, unfortunately, are doomed. … If you couldn't support pro basketball in the 1970's, when there was oil and gas money, you surely can't do it now. We can see that. There's no corporate support." ESPN.com's J.A. Adande said, "I don't really see any reason for optimism that the Hornets will stay in New Orleans" ("Around The Horn," ESPN, 12/7). ESPN's Michael Wilbon: "I fear that New Orleans ... cannot support two professional franchises with the current population." ESPN's Tony Kornheiser: "The corporations left after Katrina, and there's not enough people with enough money or enough corporations with enough money to support a 41-game season." Meanwhile, Wilbon said of the NBA buying the team, "I would like for it to mean that some team ... returns to Seattle, where they can support basketball" ("PTI," ESPN, 12/7).
WAITING IN THE WINGS: In Seattle, Steve Kelley writes the "inevitable collapse of the Hornets raises all kinds of questions about the future of the NBA in Seattle." Kelley: "Can the Hornets become the new Sonics? ... Does Seattle even care about the NBA anymore?" New Orleans "doesn't care about the NBA," as it "never has supported the Hornets." New Orleans is an "NFL town," and "losing an NBA franchise wouldn't feel catastrophic to those fans the way it felt for many Seattle sports fans" (SEATTLE TIMES, 12/8). Meanwhile, in K.C., Sam Mellinger writes the city's chances of "landing a major pro sports team for the Sprint Center remain very, very low." That "holds true even today, with the NBA's Hornets being taken over by the league," as there is "no apparent potential owner to make it work." Sources in or close to "four of the wealthiest families" in K.C. said that they "have no interest." Mellinger, on the apparent lack of local ownership interest coupled with the NBA having to approve any franchise relocation: "Neither fact eliminates us. But it does mean we're a long way from season-ticket deposits" (K.C. STAR, 12/8).