When the rumor had surfaced last night that former Texas Rangers partner Chuck Greenberg had pulled out of a possible deal to buy the Carolina Hurricanes, your trusty correspondent went directly to the source. Greenberg told me that he in no way has pulled out of the deal, but that it’s not where it was two weeks ago. Out of respect for the process, Greenberg declined to get into specifics.
As it turns out, his negotiating partner had no such reservations. Hurricanes’ owner Peter Karmanos told the Raleigh News and Observer today that the process has hit a snag because Greenberg is having difficulty raising the $500 million it’s going to take to buy the team and assume its debt. “I’m telling you he can’t raise the money,” Karmanos was quoted as saying. “That’s the complication.”
Imagine that. A guy who is trying in earnest to put a deal together is having some troubles because he’s been unable to convince a bunch of people to part with millions of dollars to buy a franchise that has traditionally been a black hole that eats money. (In fairness, the Hurricanes did report a profit last season even before they got their share of expansion money. But that profit does include what they received from the league in revenue sharing.)
Greenberg is an attorney and he’ll be the first to tell you that he doesn’t have the cabbage to be able to cut a $500 million cheque to buy a team. But he can raise that kind of money. He did it when he led the group that bought the Texas Rangers. And he can put deals together. He was one of the lead players in the Pittsburgh Penguins’ emergence from bankruptcy and was at the forefront of putting the deal together to get the Penguins a new arena.
The problem here is that there is no local billionaire who wants to take on the Hurricanes as a civic project. As one person close to the team recently said, “We have one billionaire in town and he collects rocks,” referring to James Goodnight, chairman of the SAS Institute, the largest privately held software company in the world. So if this deal is going to get done, it’s going to be a collective effort. According to a source, the Hurricanes have about $38 million in local ownership and the deal that Greenberg is trying to put together has significantly more than that, so the will is there.
A few other things make this deal difficult. The main one is, and people in Carolina and the NHL don’t want to hear this, but the Hurricanes are far, far more appealing to a potential buyer as a relocation candidate than if it has to remain there. Karmanos, who moved the team from Hartford to North Carolina in 1997, doesn’t want that on his legacy. He and everyone else involved in the process also know very well that if there is even a hint of relocation possibilities, what little the team has in season tickets and local corporate sponsorship will disappear. That’s not a real fun tightrope to have to walk.
So those people to whom Greenberg is appealing have to know there is potential for growth and, while the Hurricanes on the ice are a team on the rise with some real potential to be a contender, the financial picture isn’t stellar. The majority of revenues for an NHL team always come from ticket sales and the Hurricanes have been dead-last in NHL attendance the past two years and were second-last three seasons ago. After selling out their home opener, the Hurricanes have had two home games with attendance figures of 7,892 and 10,498. Local TV and radio deals, corporate sponsorship and revenue sharing bring in about another $40 million to $50 million.
The team, meanwhile, has debts of about $200 million – and this is included in the purchase price, which makes the $500 million price tag rather misleading – and annual losses somewhere in the $7 million to $10 million range. No wonder Greenberg is reportedly having a difficult time finding investors. Another problem, according to a source, is that Greenberg will be in control of the franchise and have equity in it despite the fact he is not putting up the same kind of money as the people to whom he’s appealing to invest in the team.
Karmanos, meanwhile, is going on about how there are a “dozen different groups” that have interest in purchasing the Hurricanes, but Greenberg is the only one who has come anywhere near anything tangible in terms of interest and action. So if Karmanos wants to drum up any more interest in his asset, this so-called “solid interest all over the place,” is going to have to step up from simply being tire kickers.
Unless and until that happens, the uncertainty surrounding the long-term future of this franchise isn’t going to go away, even if it does have a 20-year arena lease. That’s not to say the Hurricanes are going anywhere anytime soon, but Karmanos appears to be losing patience. And that is not a good thing.