Lenders to the New Jersey Devils on Tuesday have the right to force the team into bankruptcy, as a key contract provision in the club’s defaulted loans kicks in, but sources close to the situation say such action is unlikely to happen, at least not right away.
The lenders, instead, appear willing to wait for a resolution until after the completion of the NHL’s new collective-bargaining agreement. The current CBA expires in September, and talks for a new deal are continuing.
New Jersey Devils owner Jeff Vanderbeek is deep in discussions to sell a stake of the team for $35 million. Separately, he has secured at least one, and possibly more, limited partners, and he is putting more of his own cash into the club to bring the total amount of new equity to more than $50 million, sources said.
All of those efforts together, should they come to fruition, would be enough to satisfy the lenders, who have not been paid interest on $180 million of loans in six months, the sources said. The NHL also has lent about $20 million to the club, an amount that is repaid before the banks are paid. The bank group is led by CIT Group and JPMorgan Chase.
Both lenders declined to comment, as did the Devils.
The consent agreement that the lenders signed does not allow them to move on the team in the event of a default until two months after the close of the season. That date is Tuesday. The lenders could then theoretically push the team into bankruptcy.
Numerous sources, however, said that action is unlikely. Bankruptcy would entail steep legal fees, and the NHL would get paid first, perhaps leaving the lenders with pennies on the dollar.
Waiting could offer several hopeful outcomes, one of which is that the equity does materialize and is used to pay down debt. Additionally, if the new CBA is advantageous to teams, the extra revenue generated there could be pledged to debt service.
While the Devils were successful on the ice this past year, advancing to the Stanley Cup Final, the team has failed to draw the crowds at the Prudential Center in Newark that it needs for the amount of debt it carries ($80 million on the team and $100 million on the arena). Vanderbeek owns 47 percent of the club, and another 47 percent is owned by Ray Chambers. Vanderbeek is managing partner, and he is trying as part of his equity sale to retain that title.