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Volume 21 No. 1
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Debt a common foe in NHL playoff series

On the ice, the New Jersey-Florida first-round NHL playoff series pits a perennial postseason Devils squad against a Panthers team that made it past the regular season for the first time in more than a decade.

But off the ice, the two teams face similar challenges: steep debt loads, financial losses and a search for new equity investors.

The Devils and Panthers have both faced challenges in the equity market.
The Panthers, sources said, were unable to refinance an $80 million loan from Michael Dell’s high-yield fund in December when it came due and rolled it over with the team still paying a steep 10.46 percent rate. The sources were citing figures from an equity prospectus the team’s parent company, Sunrise Sports & Entertainment, has in the marketplace.

That prospectus, crafted by Citigroup, outlines how the club is looking to raise $20 million in private equity and another $15 million of debt to help cover steep losses that sources said in past years were tens of millions of dollars annually for Sunrise Sports & Entertainment.

Any prolonged playoff run this year would be expected to slice away at such losses this season.

“We do not disclose or comment on financial figures, as they are private and confidential in nature,” Sunrise President Michael Yormark said in a statement provided by a spokesperson. “In the past four months alone, the Florida Panthers won the first division title in franchise history and the BankAtlantic Center was ranked No. 9 in the country and No. 21 in the world by trade publication Pollstar.”

The Devils, too, are in the marketplace looking for equity, and the team has been in default on its $100 million of debt with lender CIT Group since last year. Under NHL rules, a lender cannot take action against a delinquent team until two months after the end of the postseason.

Despite league-level successes such as an attendance increase and strong ad sales efforts heading into the postseason, challenges continue at the local level for a number of NHL clubs — including playoff teams such as the Devils and Panthers. And with the NHL girding for a labor battle with the NHL Players’ Association — the league’s collective-bargaining agreement expires Sept. 15 — experts said the poor financial state of such teams is sure to be a battleground. These observers estimate there are at least half a dozen clubs hemorrhaging significant cash.

“The sport is extremely popular in certain regions and not nearly as much in other populations,” said Scott Rosner, academic director of the Wharton Sports Business Initiative. “It is also a factor how the sport monetizes revenues. It is highly local in nature, and where there is not sufficient consumer demand, teams will struggle.”