SBJ/November 10 - 16, 2003/Facilities

Arena hires firm to trim debt

Arrowhead Pond and city officials in Anaheim think a new private facility-management firm with more favorable contract terms will eventually stem the tide of red ink flowing around the 10-year-old arena, home to the NHL Mighty Ducks.

Last Tuesday, the Anaheim City Council approved an agreement with newly formed Anaheim Arena Management to take over building management from Covanta Energy Corp. (formerly Ogden Entertainment), which went into Chapter 11 bankruptcy protection in 2002. Henry Samueli, chairman and chief technical officer of tech firm Broadcom Corp., owns Anaheim Arena Management.

Arrowhead Pond hopes to reduce $10 million annual payment on construction debt.

A federal Bankruptcy Court must approve the transaction, which should be completed by Dec. 31, said Arrowhead Pond general manager Tim Ryan. The new contract is for 20 years with a 10-year option.

As part of the deal, the city negotiated an estimated $100 million settlement with creditors in court over debt from construction costs. Anaheim Arena Management is responsible for $45 million in existing debt. Annual payments were reduced from $10 million to $4.5 million.

"Now we can start the clock over in terms of debt on the building," said Ryan, who has been at the Pond since its pre-opening period in the early 1990s.

Unlike the previous contract, the city will not pay a $3 million to $5 million management fee. Without the benefit of that fee, Ryan said, the new management company would "in the simplest terms, run the arena as a traditional business" by focusing on facility rentals, event production, premium seating and sponsorships among other revenue streams.

Securing a second major tenant, perhaps the NBA's Los Angeles Clippers, could boost revenue for Anaheim Arena Management because it would activate an incentive fee that would increase the leaseholder's share of revenue from 75 percent to 80 percent.

The Clippers have played about 40 games at the Pond in the last decade.

Team executives could not be reached for comment.

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