The New Jersey Devils are in serious financial trouble and may be in default on a large loan payment but they are not about to slide into bankruptcy and a bank repossession. At least not until next June at the earliest.
Thanks to something called a “stand-stillâ€, the Devils’ lenders cannot make a move on co-owners Jeff Vanderbeek, Ray Chambers, Mike Gillfillan and Peter Simon until a minimum of 180 days passes after a missed payment. And if the 180 days end during the NHL season, as they would in this case, then the banks are bound to “stand still†until the day after the last game of the Stanley Cup playoffs.
Every loan to an NHL franchise has a stand-still agreement in the consent letter between the team, the banks and the league. It is there at the insistence of NHL commissioner Gary Bettman, who is understandably averse to seeing one of his teams pushed into bankruptcy by an unhappy lender in the middle of a hockey season.
The consent letter forces the banks to wait a minimum of 180 days after they declare a team in default on its loan before moving to take over the team and place it into bankruptcy. Not only does this spare the NHL some embarrassment during the season, it gives the team owner and Bettman to find new financing and work out an agreement with the lenders.
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The lead lender on the Devils’ loan, which reports say is $100-million (all currency U.S.) and was due to be paid on Sept. 1, is CIT. Devils Arena Entertainment owes another $180-million, so things are far from rosy in Newark.
At this point, Vanderbeek and the Devils say they are not about to fall into bankruptcy and they already negotiated an extension on the $100-million payment. After that, things get murky.
Those close to Vanderbeek are hinting a buyer for Chambers’s shares has been found, but a banking source is dubious. The New York Post, which reported the loan default on Monday, said on Tuesday that Vanderbeek plans to buy the Brick City shares.
Our banking source is also dubious about this, simply because he does not think Vanderbeek has the necessary financial resources.