Senators file for bankruptcy protection from creditors
Posted: Thursday January 09, 2003 3:35 PM
Updated: Thursday January 09, 2003 6:35 PM
Martin Havlat and Daniel Alfredsson have continued to play well despite the team's off-ice distractions. AP
OTTAWA (AP) -- The Ottawa Senators filed for bankruptcy Thursday, seeking protection from creditors while they look for a buyer.
The filing under Canada's federal Companies' Creditors Arrangement Act allows the first-place team to keep playing during any negotiations on a sale, owner Rod Bryden told a news conference.
He said he was working with a potential partner on a bid to buy the team and the Corel Centre where it plays.
The filing gives Bryden until Jan. 14 to submit a bid, he said. If it is rejected or he fails to do so, a broader marketing plan will seek other buyers.
Despite their financial woes, the Senators are tied with Vancouver for the most victories in the NHL this season with 25. The Senators lead the Northwest Division with 56 points, and are tied with Detroit for second place overall, behind Dallas.
The club did not pay its players on New Year's Day after a refinancing deal involving Canadian and U.S. banks fell through. That deal would have injected $42 million to cover operating expenses -- including the missed salaries -- and payments to keep its loans current.Statement of NHLPA executive director Bob Goodenow
Today's bankruptcy filing was expected and is another step in the process of restructuring the Senators' finances. It is indeed unfortunate that both the club and the arena have been undercapitalized since their inception. Over the past few years, the club has been successful on the ice and the Ottawa fans and business community have done their best to support the team. However, the excessive debt load when combined with the weak Canadian dollar, have dictated this outcome.
Bryden said the filing provides $8.8 million in emergency funding from creditors to "preserve the value of the product" for its eventual sale. The money would allow the team to pay players, perhaps as soon as Friday, along with other expenses for the next 30 days, he said.
Much of the Senators' financial problem is caused by the weakness of the Canadian dollar, worth about 65 cents in U.S. currency. Like other Canadian teams, the Senators take in revenue in Canadian dollars but pay salaries in U.S. dollars. The team also has struggled for years with heavy debt, and it doesn't have the advantage of being in a bigger market, like Toronto.
NHL owners are expected to use such financial difficulties as bargaining leverage when the current contract with players expires in 2004.
Bob Goodenow, executive director of the NHL Players Association, said in a statement that Ottawa's bankruptcy filing resulted mostly from the franchise's excessive debt burden and the weak Canadian dollar.
The Pittsburgh Penguins and the Los Angeles Kings are the only other franchises in the four major pro sports leagues to file for federal bankruptcy protection in the last 29 years. Pittsburgh did it in 1974 and 1998, with the second filing leading to Mario Lemieux's taking over the club. Los Angeles filed for bankruptcy in 1995 to allow the purchase of the team to proceed.
NHL Commissioner Gary Bettman has held talks with all parties in Ottawa and expects a new financing arrangement soon. Bettman said the league considered the filing "a necessary and constructive step" toward finalizing short-term financing arrangements.Statement of NHL commissioner Gary Berrman
We have been working with the Club and the interested parties to finalize the Club's short-term financing arrangements and consider today's filing a necessary and constructive step in that process. Now, we can focus on the Club's long-term needs.
"Now, we can focus on the club's long-term needs," Bettman said in a statement.
Bryden praised the players for being supportive and told Ottawa residents they must fill the Corel Centre for any potential owner to consider keeping the team there.
The Senators rank 16th in the 30-team league this season with average attendance of 16,355 at the 18,500-seat arena.
"Now more than ever, support of the community will determine the future of the franchise," he said. "The franchise will have a hugely successful future. The support of the community will determine where that future unfolds."
The Senators owe $104 million to major creditors, including Canadian Imperial Bank of Commerce, FleetBoston Financial Corp., the NHL and brokerage J.P. Morgan.
The team also owes $136 million for the Corel Centre, which is owned by the Bryden-controlled Palladium Corp. but effectively under the financial control of Covanta Energy Corp., a bankrupt U.S. firm owed most of the money.
Bryden said the sale of the team and Corel Centre would recover whatever money the creditors could get for that debt, and all would suffer losses. The new owner, whether himself or others, would start virtually debt-free, he said.
Despite reports the team also would seek bankruptcy protection in the United States, Bryden said that isn't necessary because all assets are Canadian.