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Hicks creditors look for response from NHL
Published August 17, 2009
The more than three dozen creditors of Hicks Sports Group, the owner of the Dallas Stars and Texas Rangers that defaulted on its debt in March, sent a letter to the NHL four weeks ago asking the league how it planned to help address their concerns, according to financial sources, but there has been no response.
At the same time, HSG owner Tom Hicks has suggested that he believes he can hold onto the Stars despite the default through August 2010, which is far later than the October deadline the creditors assumed existed for resolution of debt crisis, the sources said.
A process to sell the MLB Rangers is under way, but no such activities are believed to be occurring around the Stars. The situation could shape up as a major battle between the creditors on one side and the NHL and Hicks on the other.
“There will be litigation for sure,” one of the sources said.
The NHL declined to comment. Galatioto Sports Partners, believed to be the largest creditor in the more than $500 million debt deal, also declined to comment. A spokesman for Hicks said he had no comment.
Hicks missed a $10 million quarterly interest payment on March 31. That led the creditors to believe Hicks had until October to resolve the default or the lenders could take over the team, because the NHL has a six-month standstill period in which teams are protected from bank takeover in the event of a default.
However, the loan document that HSG, the league and the creditors signed has a different timetable, depending on when the clock starts ticking. According to the document, the sources said, if the default happens within six months of the start of an NHL regular season, the creditors then have to wait through that season, plus another 60 days.
“This is not an unusual provision,” said Irwin Kishner, a partner with New York-based law firm Herrick, Feinstein, where he has negotiated these agreements, known as consent letters, in all four major sports leagues. “There is a very good business reason not to have creditors [taking over a team] during the regular season.”
Six months from March 31 is right at the start of the regular season, but the loan had a five-day grace period for its payments, and starting from the end of those days, Hicks would meet the criteria for being within six months of the start of the season.
The development comes as the NHL is embroiled in the Phoenix Coyotes’ contentious bankruptcy proceedings. Hicks also is one of the most influential owners in the NHL, serving as vice chairman of the board of governors and one of 11 owners on the league’s executive committee. He was one of the executive committee members to question Jim Balsillie, who is seeking to buy the Coyotes, in late July about Balsillie’s refusal to follow through with commitments he made regarding prospective ownership of the Pittsburgh Penguins in 2006.
Even if he is strapped, Hicks may still have the funding to keep the Stars going.
The debt deal contains a $17 million interest reserve, one of the finance sources said, and despite the default, the team can still use it.
It also is possible the situation never gets to October. Hicks could sell the Rangers and come up with the money to cure the default. He also owns half of Liverpool Football Club of the English Premier League. He and co-owner George Gillett are seeking investors in that club, sources said, and success in that regard could free up cash for Hicks to solve his Texas issues.
Staff writer Tripp Mickle contributed to this report.