Sponsor Bankruptcy is Bad News for Sacramento Kings
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Sponsor’s Bankruptcy Is Bad News for Sacramento Kings

February 27, 2012


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The Kings, Sacramento’s NBA team, are facing more money troubles as one of their sponsors, athletic bracelet producer Power Balance, works through its bankruptcy case, reports the Sacramento Bee. Power Balance entered a stadium naming rights deal with the Kings, changing its home court of Arco Arena to Power Balance Pavilion in 2011.

But since then, Power Balance has filed for Chapter 11 bankruptcy protection, in part because of lawsuits over the apparently misleading claims the company made about the properties of its wristbands. Among the company’s debtors is Sacramento’s NBA team, to whom Power Balance owes $8.3 million as part of the stadium naming deal.

It seems that Power Balance was originally scheduled to pay the remainder of that sum between now and 2016, but because of its bankruptcy filing may be able to discharge some or all of the debt. In addition to the lost revenue from expected income from Power Balance, the Kings could apparently have to spent as much as $200,000 on removing the Power Balance name and logo from the pavilion.

After filing its bankruptcy petition, Power Balance was taken over by Hanyang, LLC, one of the company’s largest creditors. Hanyang officially ended the naming rights contract with the Kings, but sources indicate that the team’s ownership is still in negotiations with the firm about how to handle the situation.

Tough Times for The Sacramento Kings

While the naming rights issue has been a major blow for the Kings financially, it was not entirely unexpected. Apparently, when the team signed the naming rights contract, Power Balance had already been accosted with consumer complaints regarding the claims it had made about its bracelets.

Despite the warning signs, the Kings entered the contract, which would have been more lucrative than its agreement with Arco. The Arco agreement reportedly yielded the Kings $750,000 per year in naming rights payments; the deal with Power Balance was scheduled to pay the Kings $975,000 in the first year, $1.53 million in the second year, $1.9 million in year three, and so on.

At the time of the company’s bankruptcy filing, however, it seems the Kings had only collected $700,000 of the first year’s payment.

In addition to severing ties with the entire team, sources note that Power Balance broke off a sponsorship relationship it had with Tyreke Evans, a player for the Sacramento Kings.

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