By Kyle Olson
It’s not very often that a professional sports team is in such financial trouble that it is considering filing for bankruptcy.
The New Jersey Devils avoided such fate after team owner Jeff Vanderbeek reached an agreement to continue trying to sell the team or get out of debt and repay the team’s creditors, according to Yahoo Sports.
After an August 14 deadline passed without the banks forcing the NHL franchise into bankruptcy, the team looks to have a new chance to continue operating.
The report also states that Vanderbeek has already worked the debt down to $35 million and raised roughly half of the remaining funds, leaving the team needing roughly $18 million more to pay off what the team owes the bank.
The reported two-year deal is in place for Vanderbeek to either refinance the remaining debt or come up with the capital to cover the rest, according to the NY Post.
Yahoo reports that the deal isn’t an ironclad get-out-of-debt-free plan but it is better news than the franchise has heard in quite some time regarding their finances.
In November of 2011, Forbes ran a report that the “ice was cracking beneath the New Jersey Devils”.
According to that same report, at the time the New Jersey Devils had $250 million of debt that was due in part because of the team and the arena as well.
They also stated that Vanderbeek was unable to make payments, which experts say would increase the debt that was accrued at the time.
Lessons Not Learned
The shocking thing is that this has happened before to two large-market professional sports organizations. Major League Baseball’s Texas Rangers and another NHL franchise, the Dallas Stars compiled a $600 million debt due to the joint owner’s inability to make interest payments on a number of loans.
The Texas Rangers were ultimately sold in bankruptcy court, whereas the Dallas Stars similarly went through the same process.
According to the NY Post report, Vanderbeek missed a $100 million principal payment that was due on September 1, 2011.
Experts urge that Vanderbeek’s actions to try and sell the team have been the route that one should take in order to avoid the route of Chapter 11 bankruptcy.
Despite his best efforts, he has yet to find a suitor. If a deal cannot be made within the two year extension, a number of outcomes could cripple the recently successful hockey franchise; an outcome many fans do not want to see.