|Monday, January 13
Updated: January 14, 8:53 PM ET
Sabres officially file for Chapter 11
BUFFALO, N.Y. -- The Buffalo Sabres filed for bankruptcy protection Monday, becoming the second NHL team in a week to seek relief from creditors.
Commissioner Gary Bettman said the Chapter 11 filing in U.S. Bankruptcy Court in Buffalo is a step toward resolving the financial problems that put the Sabres under the league's control in June.
The team is for sale, and Monday's filing could be a step toward a possible move.
"It will enable the Sabres to secure financing that will allow them to continue to operate in the ordinary course, subject to league supervision, while the sale process is completed,'' said Bettman, who addressed Sabres employees and the media.
Bettman acknowledged that while bankruptcy would cleanse the Sabres of their debt and allow a new owner to renegotiate any existing concession and arena labor agreements, it also opens the possibility of the team's being sold to an outside bidder who could move it elsewhere.
The Ottawa Senators filed for bankruptcy protection Thursday with a debt load of more than $160 million.
Court papers indicate the Sabres owe their 40 largest creditors more than $206 million. Creditors include the City of Buffalo, which lists a $750,000 claim for ground rent, and current Sabres players Curtis Brown ($133,000), Jay McKee ($133,000) and Brian Campbell ($25,000), owed deferred signing bonuses. The NHL's Pension Society lists a $29,937 claim.
Other creditors former Sabres player Brad May (now of the Phoenix Coyotes), who's owed $104,000 in deferred compensation, and the Vancouver Canucks, who list a $442,000 claim for an unspecified contract.
"We don't know the nature of this item that they've listed as a liability to us and once we know we'll go public with it,'' Canucks general manager Brian Burke said.
Bettman said the Sabres' filing, under what's known as a debtor-in-possession arrangement, was necessary for the team to make payroll for players and front office staff and to pay suppliers.
The NHL has accepted a bid from Buffalo businessman Mark Hamister, but the financing has been held up by negotiations with the state over Hamister's $33 million request for public assistance.
Hamister and his majority partner, Todd Berman, were granted a second one-week extension from the NHL on Friday to secure their financing.
"As far as we're concerned, we're treating (Hamister's group) as if they have exclusive rights,'' Bettman said. "Under some formulation, it's possible that Bankruptcy Court will insist on a procedure where someone might try to come in and bid on the franchise.''
He said the league has been committed all along to keeping the team in Buffalo. "This was simply another step in the process to making sure that the Sabres continue to operate here,'' he said.
Hamister called the bankruptcy filing "reasonably good news.''
"It helps to stabilize this franchise between now and the closing date ... and it obviously also cleanses the asset, which is one of the things we needed for our particular purchase,'' he said.
The NHL took over the Sabres after the financial downfall of owner John Rigas and his Adelphia Communications Corp., itself now under bankruptcy protection.
Adelphia is the team's largest creditor, listing a $130 million claim, according to court papers. The money was used by Rigas to help purchase and operate the franchise.
Bettman said that while no other NHL teams appear to be on the verge of bankruptcy, the filings by Ottawa and Buffalo underline the need to change how the league, expected to gross approximately $2 billion this year, does business.
"We need to change our economic system because no matter how quickly our revenues have grown, no matter how strong our following is, the economics of this game -- because of the escalation of player salaries -- doesn't work for a number of our clubs.''
The current collective bargaining agreement expires Sept. 15, 2004.
Bob Goodenow, executive director of the players' union, offered a different view.
"It is not surprising that the league and its commissioner would try to convince the public that the bankruptcy filings are directly related to the collective bargaining agreement and thereby attempt to cover up the real cause of the problems -- the bad business decisions and personal situations of the clubs' owners,'' he said.
The Sabres practiced in Minnesota on Monday in advance of a Tuesday game against the Wild. McKee, among the players owed money, said the bankruptcy could change the way he looks at future contracts.
"What can I do? I have to sit back and wait and see what happens,'' he said. "If you're owed money, obviously you'd like to collect on that.''
Coach Lindy Ruff said the bankruptcy had been rumored for months.
"The word does come with some negative baggage,'' he said, "but I think it was necessary for us so you can come out of this in better shape than you're in. Hopefully, it puts some financing in place to shore us up.''