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SBJ/Dec. 14, 2009/This Week's News
Nets eye pricing on bonds for new arena
Published December 14, 2009
The New Jersey Nets this week are expected to complete pricing of $500 million in tax-exempt bonds to help finance construction of the Barclays Center, one of the last steps needed before the beleaguered franchise can begin building a new arena in Brooklyn.
Nets Sports& Entertainment executives have spent the last two weeks pitching the bonds to institutional investors across the country. The bonds are set to be priced sometime this week. Another $150 million worth of bonds will be issued later. If all goes accordingly, the Nets must then set a master closing date on the Barclays Center, which will be the final step in what has been a protracted and costly effort by the team to move to Brooklyn.
The team must beat a Dec. 31 deadline to begin building the arena or risk losing Barclays as the naming-rights sponsor of the nearly $800 million arena. Barclays last year gave the Nets a yearlong extension to build the arena, and the bank has the option to walk away from its naming-rights deal if the team fails to begin construction by the deadline.
“We expect to have the master closing by the third week in December,” said Brett Yormark, president and chief executive of Nets Sports & Entertainment. “And then there will be a mobilization of heavy equipment and brand messaging with signs around the site.”
Nets officials want to move into the arena sometime during the 2011-12 season, a movethat team executives hope will breathe new life into the franchise, which has been hemorrhaging cash since Bruce Ratner bought it for $300 million in 2004. Ratner is awaiting approval from the NBA to sell 80 percent of the team and 45 percent of the Barclays Center to Russian oligarch Mikhail Prokhorov for $200 million. The Nets are considering playing next season at the Prudential Center in Newark. The decision will be finalized after the team completes its master closing on the Barclays Center.
“The bond sale clears the path to the new arena,” said Marc Ganis, president of SportsCorp Ltd., a Chicago-based sports consultancy. “There will be some procedural steps, but it looks like, after all this time, the Nets have the green light. But if it doesn’t happen, there will be a whole host of problems, including the team sale and sponsorships deals.”
The Nets are struggling as mightily off the court as they are on it. They recently set an NBA record by losing 18 consecutive games to start the season.
According to a Dec. 8 report filed with the Securities and Exchange Commission by Forest City Enterprises, the company controlled by Ratner, Nets Sports & Entertainment saw nine-month revenue drop for the period ended Oct. 31 to $49.7 million, compared with $59.5 million for the same period a year earlier. But Nets Sports & Entertainment’s net loss for the quarter was $14 million, the same quarterly loss as last year. The nine-month loss as of Oct. 31 was $53 million, the same as for the nine-month period last year.
“We saw [the revenue decline] coming and did some cost savings,” Yormark said. “We’ve become more efficient.”