Steve said, Larry said
I wanted to review the recent interviews of Steve Donner and Sabres GM Larry Quinn that were broadcast over the last day or two on WHTK. They're certainly worth reviewing. A few things to ponder (and some of this will mesh with comments made by readers of this blog):
• In my mind, perhaps the most important subject addressed was whether the Sabres (Quinn and/or Tom Golisano) actually made overtures to the Amerks/Donner about the Sabres buying the Amerks. Donner said the Sabres NEVER made any such inquiries, "not even a hint." Quinn countered by asserting that the Sabres camp sent not one but TWO letters this year raising the subject of a buyout. So whom would YOU believe, the guy whose business acumen made him a billionaire, or the guy who's getting sued by his partner and owes money all over town?
Equally as significant, I think, is Quinn's assertions that he (Quinn) had discussions with Walter Turek, the Amerks' third owner, about a buyout. Wow.
This again raises the issue of what Turek's roll in this whole drama is and has been. The public needs to know where Turek is coming from, but we haven't heard a peep from his camp. That's largely because it seems like no one in the media has even bothered trying to talk to Turek or his attorney, Peter Durant. I tried to talk to him a few months ago, but he basically told me to buzz off. I believe his exact words were: "I won't talk to you. I don't talk to reporters."
• The interviews made it seem like the biggest issue between the Sabres and Amerks is whether the Amerks should be strictly a developmental team or one that uses some veterans to win championships. Of special note is Donner's claims that the Amerks simply haven't been able to go out and sign some veterans who will put fans in the seats.
Quinn counters, however, that because the Amerks only pay the Sabres roughly $200,000 a year to use the Sabres' top prospects, the Amerks should have loads of extra money to sign attractive free agents and veterans. Again, whom would you believe?
• It was amusing how Donner discussed all the debt he and the Amerks have racked up over the years, calling it "a very manageable debt," one that really isn't all that extraordinary. He then asserted that "most of that debt is loans back to ourselves." He added that "we financed debt through loans from shareholders."
At this point, I will say again that I'm pretty much a financial doofus; the concepts of financing yourself by loaning yourself money and borrowing from shareholders are things I don't really come close to understanding. Is it really standard business practice to do stuff like this?
However, even with that, this all STILL sounds somewhat fishy, like something Enron or the federal government would do, a whole "robbing Peter to pay Paul" type of deal.
But, as I reported in early October, Donner has on multiple occasions had the number of shares of Rochester Amerks Inc. legally increased. This happened twice in 2002 (in March and in October). Was there some major fiscal crisis that year?
(As a final note, there's still the issue of how much capital flows between the teams at Blue Cross Arena and the ones at PAETEC Park. Is Donner taking money from the Rhinos — another financially strapped venture — to buoy the Amerks, or vice versa?)
• Regarding the fate of the Knighthawks ... Quinn noted that even if the Sabres wanted to buy the Rochester indoor lacrosse team, they couldn't, because they already own the Buffalo Bandits and NLL by-laws say one entity can't own more than one team in the league.
For his part, Donner said the Amerks and Knighthawks come as a package deal, largely because the Knighthawks couldn't operate and survive on their own. So we'll see.
• Donner almost made his two anonymous "interested investors" out to be two knights on white steeds. He said their financial involvement "would clean the slate" in terms of the teams' finances and debts.
That includes paying off and buying out Latona to get him out of the picture. A buyout of Latona "would rid us of him and his actions to really hurt the teams." (He also called Latona "a 20-percent partner who's raised a lot of bad blood.")
However, Donner again declined to identify these two financial saviors, although he did say that one is local, another is "regional." He also hinted that a deal might happen within 30 days.
But I will ask again ... who in their right mind would want to get into business with Donner, a guy with beaucoup legal and financial baggage? And any new investor better have enough money to make damn sure the teams' are never again reduced to loaning money to themselves to stay afloat. Rochester has had quite enough of (excuse the language) half-assed sports team ownership.
Rochester, the teams and their fans deserve owners who are financially stable and can make things happen without borrowing money or begging for scraps from the government or trolling for other investors.
Is that too much to ask for?
• In my mind, perhaps the most important subject addressed was whether the Sabres (Quinn and/or Tom Golisano) actually made overtures to the Amerks/Donner about the Sabres buying the Amerks. Donner said the Sabres NEVER made any such inquiries, "not even a hint." Quinn countered by asserting that the Sabres camp sent not one but TWO letters this year raising the subject of a buyout. So whom would YOU believe, the guy whose business acumen made him a billionaire, or the guy who's getting sued by his partner and owes money all over town?
Equally as significant, I think, is Quinn's assertions that he (Quinn) had discussions with Walter Turek, the Amerks' third owner, about a buyout. Wow.
This again raises the issue of what Turek's roll in this whole drama is and has been. The public needs to know where Turek is coming from, but we haven't heard a peep from his camp. That's largely because it seems like no one in the media has even bothered trying to talk to Turek or his attorney, Peter Durant. I tried to talk to him a few months ago, but he basically told me to buzz off. I believe his exact words were: "I won't talk to you. I don't talk to reporters."
• The interviews made it seem like the biggest issue between the Sabres and Amerks is whether the Amerks should be strictly a developmental team or one that uses some veterans to win championships. Of special note is Donner's claims that the Amerks simply haven't been able to go out and sign some veterans who will put fans in the seats.
Quinn counters, however, that because the Amerks only pay the Sabres roughly $200,000 a year to use the Sabres' top prospects, the Amerks should have loads of extra money to sign attractive free agents and veterans. Again, whom would you believe?
• It was amusing how Donner discussed all the debt he and the Amerks have racked up over the years, calling it "a very manageable debt," one that really isn't all that extraordinary. He then asserted that "most of that debt is loans back to ourselves." He added that "we financed debt through loans from shareholders."
At this point, I will say again that I'm pretty much a financial doofus; the concepts of financing yourself by loaning yourself money and borrowing from shareholders are things I don't really come close to understanding. Is it really standard business practice to do stuff like this?
However, even with that, this all STILL sounds somewhat fishy, like something Enron or the federal government would do, a whole "robbing Peter to pay Paul" type of deal.
But, as I reported in early October, Donner has on multiple occasions had the number of shares of Rochester Amerks Inc. legally increased. This happened twice in 2002 (in March and in October). Was there some major fiscal crisis that year?
(As a final note, there's still the issue of how much capital flows between the teams at Blue Cross Arena and the ones at PAETEC Park. Is Donner taking money from the Rhinos — another financially strapped venture — to buoy the Amerks, or vice versa?)
• Regarding the fate of the Knighthawks ... Quinn noted that even if the Sabres wanted to buy the Rochester indoor lacrosse team, they couldn't, because they already own the Buffalo Bandits and NLL by-laws say one entity can't own more than one team in the league.
For his part, Donner said the Amerks and Knighthawks come as a package deal, largely because the Knighthawks couldn't operate and survive on their own. So we'll see.
• Donner almost made his two anonymous "interested investors" out to be two knights on white steeds. He said their financial involvement "would clean the slate" in terms of the teams' finances and debts.
That includes paying off and buying out Latona to get him out of the picture. A buyout of Latona "would rid us of him and his actions to really hurt the teams." (He also called Latona "a 20-percent partner who's raised a lot of bad blood.")
However, Donner again declined to identify these two financial saviors, although he did say that one is local, another is "regional." He also hinted that a deal might happen within 30 days.
But I will ask again ... who in their right mind would want to get into business with Donner, a guy with beaucoup legal and financial baggage? And any new investor better have enough money to make damn sure the teams' are never again reduced to loaning money to themselves to stay afloat. Rochester has had quite enough of (excuse the language) half-assed sports team ownership.
Rochester, the teams and their fans deserve owners who are financially stable and can make things happen without borrowing money or begging for scraps from the government or trolling for other investors.
Is that too much to ask for?
posted by Ryan Whirty at
4:41 PM
1 Comments:
Ryan,
There really is such a thing as "manageable debt." Ordinary people resort to carrying manageable debt all the time. A mortgage would be an example of manageable debt. You don't wait until you've accumulated $85,000 to buy a house. Instead you save $12K or $15K for a down payment and to cover closing costs, and then you take out a mortgage to cover the rest. You know you'll by paying $700 a month for the next 15 years of $375 a month for 30 years, but you also know that you're making $35,000 a year now and expect annual raises that keep you ahead of inflation.
Now, how does "manageable debt" apply to pro sports franchises? In short, it doesn't unless you own the arena that you use for home games. Teams in that sort of situation can afford to accumulate some debt because at the end of payments in 20 or 30 years they're going to own the building free and clear in addition to the franchise. The arena will still be costly to maintain, but you have the ability to rent it out as often as the market will bear.
Donner and the Amerks, though, don't own Blue Cross Arena. Other than a nicely equipped bus to transport the team (something that some franchises do not have), his biggest expenses other than front-office payroll would be the things that you can't carry mortgages on -- the working agreement with the Sabres, food and lodging for road trips, arena rentals, buying radio time, etc.
Those items are pay-as-you-go stuff that need to be covered in a timely fashion by ticket and marketing income and whatever other revenue streams there are. If you run a deficit, you either have to get a bank loan or dip into your own pocket to cover it, Either way, it's bad news because you're paying off items that helped the team a year ago but provide no benefit this year.
That's where Donner is at this stage. He's $1.8 mil in debt, give or take a few loonies, and he's running out of ways to pay down the debt. About the only assets he has are the stakes in the various pro franchises.
He can get out of this jam for now just by selling the Knighthawks, but that poses some problems: He's unlikely to find local investors, so the team would probably be sold and moved out of town, which means Donner loses a cashflow-positive asset and he also takes a PR hit for letting a beloved team leave.
He can't just sell off the Amerks and keep the lacrosse team because of economies of scale. It would be prohibitively expensive to maintain a front office for a lacrosse team that will play just eight or 10 home games a year.
Methinks he's screwed.
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Anonymous, at 10:24 AM
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