- The Washington Times - Friday, January 10, 2003

The Ottawa Senators filed for bankruptcy protection in Canada yesterday, marking the most drastic step yet in a bitter, four-year struggle for solvency.
With more than $100million in debt, the club now will seek to reorganize and could exit the Canadian capital within months, with Houston and Portland, Ore., as potential new homes. The bankruptcy filing happened after majority owner Rod Bryden unsuccessfully attempted to piece together a complex, $151million refinancing deal involving more than 650 investors.
The Senators, despite an Eastern Conference-leading 56 points this season and a history of fiscal restraint, have never made a profit. Add in a distressed Canadian dollar and the NHL's uncapped player salary structure that has hampered franchise economics across the league, and the filing came as little surprise .
"There is more than a chance that this team will not play in Ottawa," Bryden said. "Now more than ever, support of the community will determine the future of the franchise."
PricewaterhouseCoopers will seek buyers for the team, and Bryden said he would bid to retain control himself. Bryden will have a short exclusive window to submit an offer to the bankruptcy court before outside bids are accepted.
The Senators will continue playing during the attempted reorganization. The team, however, did not pay its players as scheduled Jan.1, and has yet to make those payments. An $8.8million package of interim financing now being provided to the Senators by Fleet Financial Corp. and the Canadian Imperial Bank of Commerce two of the club's primary creditors will help it sustain itself for the immediate future.
The club's financial state, however, is further clouded by its home arena, Corel Centre. The building is under the financial control of Covanta Energy Corp., itself bankrupt, and has another $136million in debt on it.
"We have been working with the club and the interested parties to finalize the club's short-term financing arrangements and consider today's filing a necessary and constructive step in that process," said NHL commissioner Gary Bettman. "Now, we can focus on the club's long-term needs."
NHL Players Association executive director Bob Goodenow also said he expected the filing, but added that it was "indeed unfortunate that both the club and the arena have been undercapitalized since their inception."
The Senators' current protection from their creditors will last until Feb.10, but an extension to that deadline is very likely if a long-term plan is not defined by then.
The bankruptcy filing also provides another black eye for an already bruised NHL. Another ailing club, the Buffalo Sabres, is operating under league control; four of the other five Canadian clubs are experiencing financial distress; and an expected work stoppage next year could pull more teams into bankruptcy.
"This is now in the hands of the court, but it's going to be very tough for the Senators," said Jeff Citron, a former attorney with the NHL Players Association and now a Toronto-based corporate finance lawyer. "Ottawa was always a market not ideally suited to the current economics of the sport. A new collective bargaining agreement could help, but I wouldn't want to hang my hat just on that."
Sports team bankruptcies, although rare, are not unprecedented. The Pittsburgh Penguins filed for Chapter11 protection in October 1998, and for nearly a year expectations were high that the club would be relocated or dissolved. Mario Lemieux, one of the team's largest creditors, then filed a reorganization plan in 1999 where he converted much of the $32.5million owed to him in deferred salary into equity and ultimately became majority owner.
Five other pro teams have filed for bankruptcy protection since 1970, including the Baltimore Orioles in 1993 and the Los Angeles Kings in 1995. In each instance, a new owner arrived after the filing and the franchise remained intact.

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