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Under Eugene Melnyk, Senators have lost $94 million

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08-17-2013, 06:52 AM
  #1
The Fuhr
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Under Eugene Melnyk, Senators have lost $94 million

Article from the Ottawa Citizen detailing Melnyks financial troubles

http://www.ottawacitizen.com/touch/s...tml?id=8799118

From the article
On Melnyk’s decade-long watch, they say, the team has generated a grand total of just $6 million on operations — that is, total revenues minus the costs associated with paying and moving the players, advertising and managing the arena. After subtracting items unrelated to operations — such as interest on the team’s debt and capital expenditures to keep the arena up-to-date — Melnyk has had to absorb cumulative cash losses of $94 million. In short, he is losing an average of $9 million to $10 million a year. And this excludes the additional interest and fees related to the debt extensions.


Last edited by The Fuhr: 08-17-2013 at 06:58 AM.
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08-17-2013, 07:15 AM
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John Holmes
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Man...I really hope he gets that casino!!!

If not we're in BIG trouble.

Failing that, I think another possible solution would be to ask the Canadian Government to print off a $95 Million dollar bill.

Euge can buy a pack of gum at the 7/11 and pocket the change.

Problem solved.

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08-17-2013, 07:18 AM
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Chip Chipperson
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"Again, without seeing the books, it’s difficult to know if these numbers exaggerate the team’s financial condition or not. But they do seem to line up with Melnyk’s behaviour during the past couple of years: his drive to secure a casino in Ottawa; his determination to keep the Senators’ salary capped at $51 million annually; and the new, more lucrative naming deal for the Senators’ arena, called Canadian Tire Centre as of last month."

AKA we have no idea how much money he is making from all the other events at the CTC, the fact that the Senators pay rent to him, as well as the fact that the value of the team has almost doubled since he bought it. This is a pretty lame story. It just reinforces what everybody already knew.

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08-17-2013, 07:40 AM
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pepty
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Melnyk in the Sun today saying there are no financial problems with the team and throwing darts st Yost.

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08-17-2013, 07:47 AM
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Chip Chipperson
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NHL Deputy Commissioner Bill Daly also dismissed the claims of a current issue at present time:

"Yes, it's all B.S.," Daly said in an e-mail to the Sun. "There is no 'watch list.' And there is no concern (about the Senators). And you can quote me."

http://www.hockeybuzz.com/blog.php?p...0#.Ug9w7pKsjph

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08-17-2013, 07:51 AM
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StefanW
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The figure is complete BS. It used to be sport to go back through past comments to try to find contradictions in comments, but now the contradictions are happening on the same day. On one hand the team is doing fine financially and bloggers who say it is not are blowing smoke out their *****, and later the same day all of a sudden the team lost 94 mill over 10 years.

I can respect Melnyk wanting a casino to help fund another mansion in Barbados, but I am getting very resentful about the circus that is swirling around Melnyk this summer. I may start calling him PT Barnum. Anyway, none of this crap is good for the team.

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08-17-2013, 07:51 AM
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John Holmes
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If you read what Yost wrote, he says repeatedly that the Senators are fine.

It's Melnyk's other ventures that he is writing about.

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08-17-2013, 07:52 AM
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Quote:
Originally Posted by pepty View Post
Melnyk in the Sun today saying there are no financial problems with the team and throwing darts st Yost.
It's in the actual paper? Because they pulled it off all of their websites (the Sun plus various Quebecor media outlets).

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08-17-2013, 08:01 AM
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the doctor
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Originally Posted by Quo View Post
It's in the actual paper? Because they pulled it off all of their websites (the Sun plus various Quebecor media outlets).
??

http://www.ottawasun.com/2013/08/16/...t-negotiations

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08-17-2013, 08:03 AM
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Quote:
Originally Posted by John Holmes View Post
If you read what Yost wrote, he says repeatedly that the Senators are fine.

It's Melnyk's other ventures that he is writing about.
The latest has yost quoting some NHL source about a watch list. Daly clearly denies this, strongly even. This yost dude seems like a clown.

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08-17-2013, 08:06 AM
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Originally Posted by the doctor View Post
All I'm getting is the Melnyk vs. Barry debacle. True of the Standard Freeholder (Cornwall) and the Owen Sound Times.

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08-17-2013, 08:07 AM
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The Fuhr
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Quote:
Originally Posted by the doctor View Post
The latest has yost quoting some NHL source about a watch list. Daly clearly denies this, strongly even. This yost dude seems like a clown.
The citizen paper says the Sens debt load is close to 150 million

Quote:
Senators’ debt load, which is approaching 50 per cent of the estimated $300-million value of the team and the arena. This is high, even by the standards of the NHL. The Senators consider it manageable.

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08-17-2013, 08:46 AM
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To balance things out, what has been the change in the value of the franchise since Gene bought the team?

For example, if Gene bought the team for $100 million (too lazy to look up true cost), and now it's worth $194 million, then in reality he breaks even, if he sells the team for its market value. Just making the numbers up, perhaps he still loses out, perhaps he gains a bit.

Too bad he didn't have cash to buy the team instead of financing. Then the loss would be miniscule. He has the same problem as Bryden had, just on a smaller scale.

Lucky he bought the arena for $30 million.

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08-17-2013, 08:48 AM
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Why isn't it manageable?

If we believe the Forbes valuations and debt figures from last year a debt load of 50% on a team value of $300mm is not that anomalous...by NHL standards. It's high but, if we believe Forbes to be even remotely accurate, not bad in comparison to many other teams.

see: LA Kings, Washington, Dallas, Columbus, NJ, probably more. According to Forbes the Montreal Canadiens were about $288mm in debt. Many teams leveraged on par or higher than the Sens. Our own debt would be only about $20mm higher from the previous year if all these numbers from Forbes and the recent Citizen article are to be believed (and I remember how to math ). That's concurrent with an approx. $80mm jump in team valuation from Nov. 2012 to now.

The article states the lockout was a major obstacle to Melnyk in getting the debt refinanced. That led to penalties over and above the losses to date over 10 years + the loss in gate receipts which in turn led to further penny-pinching over the shortened season and reaching into this off-season. Probably damaging what progress they made in turning the books around in the previous years. A hiccup. Entirely plausible. Not threatening.

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08-17-2013, 08:55 AM
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Good to see Quo lay down some facts... it is funny how many gloom and doomers have shown up on these boards lately.

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08-17-2013, 09:26 AM
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Quote:
Originally Posted by John Holmes View Post
Man...I really hope he gets that casino!!!

Failing that, I think another possible solution would be to ask the Canadian Government to print off a $95 Million dollar bill.
Don't be silly, Canadian Tire can print off a $95 Million dollar bill.


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08-17-2013, 09:37 AM
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PeterSidorkiewicz
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Quote:
Originally Posted by DylanSensFan View Post
Good to see Quo lay down some facts... it is funny how many gloom and doomers have shown up on these boards lately.
The sky is falling people always seem to yell the loudest, it's an interesting article, but hardly the bombshell that so many posters were waiting for that would help lend credence to their belief the Yost article had any merit to it. Bill Daly shot him down pretty hard, of course you'll have the people choose to believe what they want no matter what and will discredit Daly as lying, or something along those lines.

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08-17-2013, 09:44 AM
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Erik Alfredsson
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OH NO!! You mean a business is having manageable finical troubles? End of the the world, stuff like this never happens.

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08-17-2013, 09:46 AM
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Quote:
Originally Posted by Quo View Post
Why isn't it manageable?

If we believe the Forbes valuations and debt figures from last year a debt load of 50% on a team value of $300mm is not that anomalous...by NHL standards. It's high but, if we believe Forbes to be even remotely accurate, not bad in comparison to many other teams.

see: LA Kings, Washington, Dallas, Columbus, NJ, probably more. According to Forbes the Montreal Canadiens were about $288mm in debt. Many teams leveraged on par or higher than the Sens. Our own debt would be only about $20mm higher from the previous year if all these numbers from Forbes and the recent Citizen article are to be believed (and I remember how to math ). That's concurrent with an approx. $80mm jump in team valuation from Nov. 2012 to now.

The article states the lockout was a major obstacle to Melnyk in getting the debt refinanced. That led to penalties over and above the losses to date over 10 years + the loss in gate receipts which in turn led to further penny-pinching over the shortened season and reaching into this off-season. Probably damaging what progress they made in turning the books around in the previous years. A hiccup. Entirely plausible. Not threatening.
In the currently reality it is probably manageable or the lenders would have never have authorized the loan.

However the problem is if the "affordable internal budget" falls below the cap floor, or the CDN$ drops, then the loan is potentially no longer affordable unless Melnyk has the cash from other sources to offset the losses.

One cannot just use other team's debt loads in comparison to the Senators, then make the huge jump in logic to suggest if those franchises can afford their debt Melnyk can afford $150M of debt based on appraised value. Affordability is based on the owner's ability to cover all expense, nothing else.

While I agree the article did cover the increased expense due to Melnyk's inability to refinance, this is a one time occurrence and really doesn't provide any insight into the overall picture. The article also didn't provide any insight into why Melnyk needed to increase the debt by $30M.

I have no idea what the interest charges are on $130M, nor on the new $150M debt.

However is fairly safe to assume that of the $93M the Citizen reported EM has lost on the Senators during his ownership, a large portion of that is interest charges on loans. One can only assume those charges are going rise in accordance with the higher level of debt, so unless the revenue grows the losses will grow.

It also wasn't obvious whether or not that loss included the total P&L of Capital Business Holdings Inc, or even for that matter the P&L of Capital Sports and Entertainment, the company that owns the Senators.

So while the Citizen article does provide some clarification on the debt arrangement, it doesn't truly show any insight into the total financial structure of Capital Business Holdings Inc. (nor would I have expected Melnyk to provide this info.).

Lastly Melnyk spent in the mid $50M range on player salaries in the most costly years. People tend to suggest the Sens spent to the cap prior to the rebuild, however the cap in those years was mid-$50M. So in truth the internal budget is only holding spending at or slightly below the highest spending years.

2013-14: $64.3M
2012-13: $70.2M (lockout, transitional cap)
2011-12: $64.3M
2010-11: $59.4M Sens started rebuild (Fisher, Kelly, et al) Sens player cost $~$56M.
2009-10: $56.8M
2008-09: $56.7M
2007-08: $50.3M
2006-07: $44M
2005-06: $39M


Last edited by Holdurbreathe: 08-18-2013 at 10:19 AM.
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08-17-2013, 09:54 AM
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Lonnie Loach
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I take what the NHL says with a grain of salt. Rules 1, 2 and 3 in the NHL playbook: deny, deny, deny.

Right now the Sens have the benefit of carrying a high debt load in a low interest rate environment. When rates start to rise, servicing the debt burden will be increasingly difficult and unless the debt can be lowered because of an equity infusion then this team may get into financial difficulty.

Frankly, $150mm is not a lot of money for the truly wealthy. Even if ownership was flush with cash it still may want debt for corporate finance purposes as part of an optimal capital structure but if ownership doesn't easily have enough unencumbered wealth to pay off the debt, that's a sign of vulnerability.

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08-17-2013, 10:12 AM
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Quo
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Quote:
Originally Posted by DylanSensFan
Good to see Quo lay down some facts... it is funny how many gloom and doomers have shown up on these boards lately.


To be fair, this is a confusing and highly sensitive topic.

Quote:
Originally Posted by Holdurbreathe View Post
In the currently reality it is probably manageable or the lenders would have never have authorized the loan.

However the problem is if the "affordable internal budget" falls below the cap floor, or the CDN$ drops, then the loan is potentially no longer affordable unless Melnyk has the cash from other sources to offset the losses.
Yes and yeah. Those things something to keep an eye on. Nothing out of the realm of possibility. I have to think/hope they've accounted for the internal budget and the cap floor in their projections. The CDN$ probably harder to peg.

keep a cool head

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08-17-2013, 10:37 AM
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Holdurbreathe
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All I'm getting is the Melnyk vs. Barry debacle. True of the Standard Freeholder (Cornwall) and the Owen Sound Times.
Yup, looks like it was retracted.

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08-17-2013, 11:23 AM
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Karl Cowensson
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Every time the financials of the team come up I'm reminded of this quote:

“I can turn a $4-million profit into a $2-million loss and get every national accounting firm to agree with me,”

The team is run separately from the arena, so while the team may lose 10M per year, the arena I'm sure is making that back and then some on the games, concerts and events that take place there. A lot of teams do this for tax break reasons. The team itself is fine, Melnyk wants the casino to line his pockets more.

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08-17-2013, 11:30 AM
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Chip Chipperson
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Quote:
Originally Posted by Quo View Post
All I'm getting is the Melnyk vs. Barry debacle. True of the Standard Freeholder (Cornwall) and the Owen Sound Times.
http://www.ottawasun.com/2013/08/16/...t-negotiations

Seems to be working now.

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08-17-2013, 11:51 AM
  #25
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Originally Posted by rattler280 View Post
If you hover over your own link you'll see it directs to the Melnyk/Barry article, which is also the case on the Sun's website. But the article headline "Owner Eugene Melnyk denies claims the Ottawa Sens are hurting financially" is still prominently displayed on the site, so it's probably just a misattributed link rather than a retraction.

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