Yes, because that would take time away from his misogynistic, vile diatribes against women and late US Senators and his completely unsubstantiated revelations about the Jerry Sandusky case.
Did they not know about the debt when they bought it?!? If so, is this a semi-slimy way to get out of obligations?
Well, I doubt if they're able to get out of paying off any accrued debt. I'm guessing they're admitting they can't afford to continue to pay players and stadium debt at this rate ... this allows them to present a new plan to creditors who get to approve (or not) so they can operate at a level they can afford. I'm not a lawyer, a creditor, or an owner of anything I can't afford, so I don't know how all this works ... just don't know if it's as bad as you would like to paint it most likely ... and then again, maybe it is ... and good for you for making sure everyone knows how bad it is !
If the stadium debt is what is dragging them down, then they could have merely re-financed that obligation. People rarely file bankruptcy just to re-shuffle debt, but more as a legal tool to either negotiate their existing debt (usually at a discount), catch their breathe, cancel contracts, but oftentimes to head off potential legal issues like lawsuits, liens, etc... Being DIP would now give them some leverage over their debtors to negotiate a payment structure more on their terms and to prioritize the debt (the stadium load could get first payment rights which would usually result in a more favorable arrangement). To your comment - if you believe they're admitting they can't afford to continue to pay everyone at this rate, the only thing that might alter the scenario is to restructure the accrued debt with extended terms or reduce what you owe. This was the part that scares me "The owners said the restructuring was necessary because current operating and revenue models could not support continued debt obligations that were largely incurred during the stadium’s construction in 2012 and 2013." I'm not sure what the new operating and revenue models are, but the revenue streams are most likely going to be the same, supposedly the total debt amount isn't changing, etc.... If anything this would give them some breathing room (since they wouldn't be obligated to make any current debt payments) to generate some cash flow with the season just about to start. They are smart to have structured the corporate entities they way that they did so this headache is separate from some of the other operations, but my hunch at the end of the day, a lot of the smaller folks won't be getting 100% of what should be coming to them or they are going to have to be very, very patient.
In the press release they say that all events will happen in 2014. But elsewhere it is said that they will maintain "lean" operations. What is the future of the not yet existing PDL team? Recently created, only tryouts, no coach announced, no expenses yet, no emotional bond created : could it be sacrified to reduce operating costs? It looks like an easy quick win for an urgent cost cutting exercise. And I guess they already knew their financial troubles when they announced this new PDL team. So if they did not have the means to operate it, why did they make this move? Confusing, isn'it? Any thoughts about the future of the PDL team?And what do Houston Dynamo think about this?
A PDL team shouldn't be a hugely significant expense (with only four road trips, no player costs, obviously, and no rent). If it's a mission critical situation where they're literally looking to cut every dollar, sure, but they've paid for the franchise already. I know the Sunken Costs Fallacy is just that, but until someone says otherwise, we would be speculating to believe they're having a garage sale to try to raise enough money to keep the lights on.
Very telling that they couldn't get the stadium (which seems to be the big drag) refinanced. It means banks took a look at the books and don't think the team could cover the stadium debt with their business plan. It also likely means that the stadium isn't valued at near what the team paid for it. I wouldn't be surprised if they are essentially 'upside-down' in their brand new crib. Unique structures like stadiums don't have a huge resale market. It is kind of like trying to put a value on bridge. Filing bankruptcy means you can kiss any further stadium improvements goodbye. The owners can afford them and a bank won't finance them now that they have filed bankruptcy. They may finish 2014, but I put their odds of returning in 2015 as 50/50.
No, I meant they're not great deals for the teams unless they are taxpayer-funded. Very, very few stadiums are completely privately-financed (I believe AT&T Park - or whatever it's called now - is one of the few in recent years). There's a reason for that: if it were a great deal, you'd just pay for it all yourself and keep all the money. But if you can get someone else to pay to build it and STILL keep most of the money (as Cincinnati did with Paul Brown Stadium), it's a wonderful deal. It's almost never a great deal for the taxpayers, no matter how many times they try to convince you about ancillary development and job creation and gentrification and all that. There's just no evidence that it actually happens universally or near universally.
[MR TONY]Everything in life is 50/50.[/MR TONY] Given the failure rate of Division III franchises, you're not exactly going out on a limb predicting anyone as being 50/50 to return in a given year.
They'll be fine as long as the attendance doesn't drastically dip. After the initial dust has settled indications are it's not nearly as bad as some would have you believe.
Fair enough and true. My point was that the conventional wisdom for ten plus years has been get your own yard and then things will be great. It isn't that simplistic. The paint wasn't even dry on the Hounds stadium and the fanboys (many not from Pittsburgh) were already jonesing for them to expand it with no regard as to real world financial issues. As it turns out the Pittsburgh folks bit off more than they can chew and now are in over their heads financially. I would think that their stadium silver bullet has become a millstone around their necks. That makes them more likely to fold.
And there is the rub, attendance usually does dip once the new car smell is gone. This is an organization with a cash flow problem. Their only alternative was to file bankruptcy? Not a good sign that they couldn't refinance the debt over a longer term to help their financial situation. The Hounds have a very difficult uphill battle on their hands now. Businesses find it difficult to operate and expand without access to credit and they have just given up on that option with a bankruptcy.
I think it really depends on; the city, the site, the stadium itself. In the 90's Oklahoma City built what is now the Chesapeake Arena as part of the original MAPS Project. It was 100% taxpayer-funded. And it was built, at the time,totally on spec with no major league tenant in town. There were people who tried to defund it saying it was a waste. I'm glad we didn't listen to those fools. Ive heard that FCD's stadium makes money every year. But I hear that Chicago Fire's stadium has been a major drain on the city its in.
Except you have it all wrong. The PREVIOUS owners were financially over their heads. The new owner has deep pockets and most likely is not in debt, however this Chapter 11 filing is a way he sees the organization fixing its debt problems without him writing a bunch of big checks. I'm fairly certain the Hounds are decent shape and should continue existing.
Plain and simple. Don't build a stadium before you count the cost. Tremendously foolish undertaking without being able to pay the bills. The new guy BETTER have deep pockets because he WILL have to write a bunch of big checks to cover the stadium debts. Usually a chapter eleven just seeks to modify the repayment terms of debts while protecting assets from seizure through default on the original terms of the loans. This move is to prevent creditors from seizing their single largest asset: Highmark Stadium. It is sensible and I do wish them well. Unfortunately for them, they weren't able to refinance the debts without bankruptcy, which will severely hinder their ability to run this club long term. They will be very dependent on ever increasing revenues and those of us who live in the real business world know that isn't a sure thing. Soccer businesses should know this in particular. The point I am making is this should be a cautionary tale for all the myopic dullards who think that building a stadium will solve everything and make a club instantly profitable. It isn't a silver bullet.
If he potentially has the deep pockets that you mention, then he could fix this in 2 minutes....however, he is a businessman and is making the smart, legal business decision by filing Chapter 11. Unfortunately, I'm predicting some may not get back all that they are owed (usually what happens in these cases). My bigger concern would be on-going since according to everything I've ever seen on this blog, D2 & D3 soccer teams are financial drains so I can't see how their cash flow position would dramatically improve moving forward. And I agree with the previous comment about access to capital now being diminished. It would seem to me that they will need an infusion of cash ("writing a bunch of big checks") or they will merely limp along. The team will not go away since if the current owner decides to bail, someone would be able to purchase all the assets at a huge discount which could potentially now turn it into a viable entity. The team will be around for a long time - not sure about the current ownership group.
So glad that the Crew didn't partner with Pittsburgh. Just doesn't look good whatever the whole story is. Crew don't want to be partnered with that -- even if the stadium is nice.
So funny to read all the comments from all the experts. Most clubs (in the USL) that come and go are mismanaged, have virtually no assets, don't understand the economics enough to realize they will operate in the negative (they should have a 5 year plan to reach a break even, maybe) especially without major sponsorship, will generally play in HS or similar small stadiums before a few hundred fans (and will have to give away a lot of free tickets to get them in the seats) and struggle to be competitive agains the established clubs (who also run on lean budgets). National travel generated by visiting new clubs is no small burden and has been almost unpredictable the last couple of years (one reason for this year's terribly unbalanced schedule). Pittsburgh made a fundamental decision 2 years ago to move to the next level, understadning there would be a cost and a certain amount of risk. To get a privately funded stadium built for soccer in Western PA was no small feat. The Highmark stadium is, however, a 2-headed beast: one that is full every week, helps the local Station Square businesses draw customers, and boosts income; the second is the onerous debt it brings without a major sponsor to underwrite the cost. Customary bank or creditor re-financing sounds good but is particulalry difficult in the current economy (everyone wants their money and expects to be at the top of list to get it). Rather than sucking up all the debt as personal, the new (yes, he's deep pocketed - he built a brand new soccer facility in western PA at his own expense) owner chose a sensible route to reorganize, realign creditors, and better manage existing debt which is substantial and largely a function of the stadium. Without the stadium debt, the team would most likely be stable but playing in a HS stadium like Dayton. I'm betting things work out, sensibly, and the team hums right on. As long as USL gets its cut, it will be happy and could care less about anyone else.
So how are things going in Pittsburgh? My daughter is moving there this summer, so I'd love to plan my visits around Riverhound home games. Are they getting things sorted out?
I haven't heard anything on the chapter 11 front in a while. They're still operating so I guess everything is ok for now