SBJ/August 31 - September 6, 1998/No Topic Name

Fleet team back after hard times

When Patrick McAuliffe assumed the leadership of Fleet Financial Group Inc.'s sports lending team a year ago, it was not exactly a moment for celebration.

The group had been decimated by the defection of several critical members who had worked for the recently acquired Shawmut Bank. Disgruntled with Fleet's management, they left to form their own company.

And just as the dust settled, things got worse. A key bank client had lied about his personal assets in obtaining a loan to buy the New York Islanders, landing Fleet back in the spotlight. The sports team chief resigned in disgrace.

Perhaps fed up with its sports people, Fleet turned to seasoned bankers with little or no sports experience.

Putting the team in the hands of bankers with minimal connections to sports was risky. More than most industries, sports has its own unique way of doing business, and outsiders can and do stumble.

While Fleet's once steady stream of deals has slowed — a lot of the bank's more than $900 million sports loan portfolio predates the current eight-member group — Fleet has persisted as a major player in the sports industry.

Fleet spent much of the last 12 months re-establishing the group with team and league executives familiar with its predecessors. Half of the team has been added since August 1997, including McAuliffe, who arrived that month.

"In the space of three to six months, I got a pretty good feel pretty quickly for ...the economics of the different leagues and teams," said McAuliffe, who had been a corporate banker with Fleet in New York. "When I call on someone to do business, Fleet Financial's [name] precedes me, and that is what opens the door."

In the year since McAuliffe arrived, Fleet has structured an innovative credit facility for Major League Baseball that contained the largest asset-backed securitization ever in sports. Fleet also managed the National Hockey League's credit facility and is advising Cablevision Systems Corp. chief executive Charles Dolan on his bid to buy the Cleveland Browns franchise.

Fleet wants to establish as its trademark sophisticated transactions, rather than the cozy relationships that produced sports loans in the past.

Traditionally, banks looked at sports relationships as image enhancers: Connections to popular icons helped bring in business. But ask a Fleet banker today about bonds, and he will tell you about the financing, not the left fielder for the San Francisco Giants.

This is emblematic of a major shift in sports finance. With teams selling for hundreds of millions of dollars, large banks like Fleet believe the stakes are high enough that financial expertise and product breadth will win the day. Don't expect Fleet sports bankers to talk sports, because they are, well, very bankerly.

"They are very straight-spoken, they get right to the point," said Joe McCormack, chief financial officer for the Los Angeles Lakers, who recently completed a Fleet-led debt restructuring.

The serious, big-bank approach, however, can backfire. The Boston Celtics, who, ironically, play in the Fleet Center, severed their longtime connection with Fleet in October and now bank with Rhode Island's Citizens Bank.

And despite Fleet's work for the Lakers, BankAmerica Corp. got the nod to finance construction of the new Staples Center, where the team will play. Philip Anschutz, a team co-owner, has close ties with BankAmerica.

But in at least one high-profile case, Fleet succeeded.

"This is not to disparage Crestar [Financial], but I was so impressed with Fleet I opened a personal account with them," said Art Modell, owner of the Baltimore Ravens, who lauded the bank for structuring a $185 million debt issue last year. Modell said he had given his bankers at Crestar and NationsBank Corp. opportunities to structure the deal, but because of NFL debt limits, no transaction materialized.

Fleet, however, proposed a complicated partnership structure that the NFL agreed to. Fleet's Dan Williams, a corporate finance banker who spends most of his time on nonsports matters, helped structure the Ravens transaction.

Being the new kid on the block has its advantages for McAuliffe, too.

Fleet was scorched last year after lending $80 million to John Spano's effort to buy the New York Islanders. Spano lied about his personal assets, and the brouhaha that ensued led to the ouster of some Fleet bankers.

The fiasco came after much of the group, who had worked at Boston-based Shawmut, had left to form Beacon Sports, a sports investment banking boutique.

So McAuliffe, not connected to those affairs, started with a clean slate. He is eager to make his mark.

"We have a comfort and a track record with teams and the leagues," he concluded. "We are flexible enough to change with the market, and see ourselves growing this business."

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