Sensung
[mod]
that increase in debt comes from the franchise not being able to sustain itself. You can argue that it comes from Melnyk not injecting cash but either way the root cause is the same which is not sustaining itself. It isn't a shell game,it's not fancy accounting where the Sens lose all the money and other legal entities make money.
I don't think that the info we have clearly shows that the debt comes from the franchise not being able to sustain itself.
When Bryden sold the team here are the
main reasons he gave for the bankruptcy:
- High players salaries during a non-salary cap era of the NHL
- Low Canadian dollar
- Financing from Covanta Energy Corp who had to seek bankruptcy protection due to Enron collapse
- Government requirement for private land developer to pay for $27m overpass
1 - Fixed with salary cap.
2 - Dollar was trading about 50c at the time. Still not great but better (and was a lot better for a period between 2008-2012)
3 - Original building debt was around 200 mil.
4 - More original debt.
So really we are talking about the original debt and the dollar.
- When Melnyk bought the team all the debt was refinanced/negotiated down significantly. By 2007 it had all been rolled into 110 mil at 7% interest. Or approx 8 mil per year to maintain.
- By 2013 another 94 mil had been "invested" in the team on top of maintain the original debt.
- By 2018 the team debt has gone up to 200 mil. Could all the debt just be from the original debt that was never paid off. In other words, 110 mil x 1.07% x 10 years = approx 190 mil. ( I am sure Melnyk has put some money into the team but hard not to see how most of this is Debt and Debt maintenance charged back tot he team)
I think this all makes a lot of sense because otherwise I don't see how the organisation is doing so poorly compared to other similar situations.
Here is a great write-up on Calgary. Are the dynamics in Ottawa really that different other than the debt? How are all these other clubs with relatively the same amount of revenue and player costs making it work and Ottawa is supposedly this financial train wreck.
The simple answer is that you can make an NHL franchise work in a small Canadian market on revenues of 120 million, but when you have to drain 15-20 mil per year into debt, and your owner is not willing to cover losses while the value skyrockets like some other small market owners, or consider the team/arena one entity like say Florida...then you have a problem.