SBJ/November 30 - December 6, 1998/No Topic Name
Creditor-lender battle threatens Penguins' loan
Published November 30, 1998
A planned $20 million loan to the Pittsburgh Penguins may be in jeopardy because of a dispute that has broken out between the secured creditors and the possible lender.
Societe Generale's plan to help the ailing team is being contested by the secured creditors, including BankAmerica Corp., who want to place more conditions on the loan, according to Societe Generale.
While it is unclear what those conditions are, Societe Generale said they would make the loan "unpalatable." The loan would be a debtor-in-possession financing, or DIP, which grants the new lender priority status among all creditors.
Societe Generale "has offered an extremely favorable DIP that is customary in Chapter 11," said Gordon St. Denis, an investment banker with the French bank's New York office, which is a frequent financier to major North American professional sports teams. "The senior creditors have been extremely difficult to deal with. ...[They] are asking for certain rights that will limit the team's flexibility and are not in the best interests of the Penguins."
The parties are expected to appear today before U.S. Bankruptcy Judge Bernard Markovitz, who has final say on whether to approve the financing.
The $20 million would fund the team's operating losses this year as it reorganizes under bankruptcy protection. The Penguins declared Chapter 11 in October after suffering under more than $120 million of debt, caused in part by unfavorable TV and arena deals and deferred compensation contracts with key players.
The secured creditors include Bank-America Corp., Principal Mutual Life Insurance Co. and TMG Life Insurance Co.