• More Stars Bankruptcy

    by  • November 1, 2011 • Hockey • 1 Comment

    I’m still fiddling around with the Stars bankruptcy stuff and came across some interesting stuff.

    For example, as of the Commencement Date, Dallas Stars had collected approximately $17,248,195 in ticket sales for the upcoming 2011-2012 NHL Stars season, $2,151,168 in sponsor payments for, among other things, advertisements at upcoming NHL Stars home games, $9,291,467 as a signing bonus for a multiyear concessions contract, $1,084,610 as a signing bonus for a multiyear local television contract, and a $400,000 signing bonus from the NHL for a multiyear television contract. Such claims for future performance by the Debtors were not listed in Schedule F because no amounts were due and owing as of the Commencement Date, the Debtors intend to satisfy such obligations in the ordinary course of their businesses, and all such obligations will be assumed by the Purchaser under the Prepackaged Plan.

    Now, it’s not entirely clear to me how you account for all of these sums, because some of them relate to payments for multi-year deals. The ticket and sponsor money looks to be all attributable to this year; it’s blurry after that. For the sake of discussion, call it $21MM in revenue related to this year.

    The bankruptcy filings also contain a bunch of daily cash flow projections for Sept. 15, 2011 to Dec. 31, 2011. I’ve summarized them in the table that follows.


    There are a couple of entities that have declared bankruptcy here, which confuses things a bit, I think. For example, there are a bunch of Star Centers, hockey rinks, owned by the Stars that I don’t think would generate revenue that counts as HRR. Similarly, there’s something called COC distribution that I think refers to a distribution of rink profits – also not HRR.

    What you’re looking at is the pre-season and the first 37 games of the season for the Stars, 19 of which are at home. So roughly half a season, in which the Stars produce about $21.7MM worth of revenue. If you add it all up, you come up with an estimate of between $60MM and $65MM in revenue, although I wonder how well they’re doing at hitting those numbers, given how empty the rink has been.

    Of note – there was a post at Defending Big D that talked about the Stars TV contract, which is up for renewal in 2014. The TV deal looks to be producing a decent amount of money for the Stars at present. This appeared in the post:

    Dallas Stars television ratings, while up last season, were still low enough that when the club tried to secure a broadcast home for a Sunday afternoon game against the Avalanche last March, they were (someone told me in the press box) told “no thank you” by local broadcasters. Their television deal is not congruent with other markets of similar hockey interest. We take it for granted. Ever look at the Carolina Hurricane tv schedule? Imagine the Stars going on a road trip and not having any way to see the game.

    That doesn’t sound particularly good to me and it makes you wonder about the extent to which local TV money will decline in the future.

    Also of note: the Stars are collecting revenue sharing, although not very much of it. We can infer that they’re in the bottom ten in NHL revenue from that and, given the small amount that they received (assuming that distributions are somewhat equal over the course of the season), they’re probably closer to 20 than 30. That doesn’t say much good about the health of the bottom end of the NHL.

    There seems to be a consensus that the Stars are just in a financial tough spot because they’ve been milked for money by Tom Hicks to fund his various purchases of sports teams. The affidavit of Robert Hutson, which I’ve referenced previously, says this:

    As discussed above, due to cash flow shortfalls, Mr. Hicks has had to contribute and loan $150,000,000 to the Debtors over the past 10 years to fund, among other things, player salaries and other operating expenses. Moreover, in the most recently completed fiscal year, the Debtors lost $37,900,000, and over the past three seasons, the Debtors lost $91,500,000. The Debtors are projected to lose in excess of $31,000,000 this season, before interest expense, legal, and professional costs related to the Sale and restructuring process, and taxes.

    That’s a pretty astounding amount of money to lose, particularly given that the Stars are running pretty lean. I note though, that Hutson claims that this is before interest, legal and professional costs and taxes – in effect, I think he’s referring to EBITDA. This suggests that the problem hasn’t been money being pulled from an otherwise cash rich entity to fund Hicks’ other adventures but that the Stars don’t generate anywhere near enough money to fund an NHL team.

    With that said, I have a hard time reconciling a $31MM loss with revenues of $60MM or $65MM and a payroll of $50MM or so. So who knows. Maybe I’m overestimating the revenue.


    One Response to More Stars Bankruptcy

    1. Passive Voice
      November 1, 2011 at

      Any idea what’s with the distribution of TV revenue? 300k for October but 12x that for December?

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