Sunday, March 27, 2011

Sacramento Bee: Anaheim Arena Operator Structuring Complicated Loan

 Anaheim arena operator would loan Maloofs $50 million

Published: Sunday, Mar. 27, 2011 - 12:00 am | Page 1B
Anaheim arena officials are willing to spend millions of dollars to lure the Sacramento Kings, but the financial package isn't completely a gift.

The proposed deal calls for the Kings to borrow $50 million from the organization that runs the Honda Center.

The loan, spelled out in a proposed lease unveiled by Anaheim city officials Friday, would be part of a $75 million package offered by Honda Center's management, sources said. The money would go for arena renovations and other relocation expenses.

It wasn't clear how quickly the Kings would have to repay the loan, which has been dubbed a "venue contract advance payment."

Nor was it clear what would happen if the Kings defaulted on the loan. The Maloof family, which owns the team, is already having debt problems on its Las Vegas casino.

Kings co-owner Joe Maloof couldn't be reached for comment Saturday.

His family has been negotiating for weeks with Orange County billionaire Henry Samueli, who manages the Honda Center for the city and owns the arena's main tenant, hockey's Anaheim Ducks.

Under the proposed deal, Samueli would be responsible for repaying the $75 million in bonds – $50 million of which would be loaned to the Kings.

Also Saturday, the Kings issued a statement rejecting a plan by former Kings officials to renovate Power Balance Pavilion. A group including Greg Van Dusen, John Cassidy and Tom Peterson spoke with George Maloof Jr., who runs the Palms Casino Resort in Las Vegas, on Friday in a half-hour phone conversation. City Councilman Rob Fong and county Supervisor Phil Serna, whose late father, Joe, pushed the original loan to keep the Kings here, also participated in the conference call.

"A representative of the Maloofs listened to their plan in depth, but they do not have the financing in place and a renovation of the existing structure is not an adequate solution," the team said.

Van Dusen, who led the effort to refurbish the arena as a temporary solution while a permanent facility was pursued, defended the plan in an interview, saying the renovation "could meet NBA standards." But he said he believed the proposal got a fair hearing from the Maloofs' representative.

The Kings have become frustrated with Sacramento's inability to build a new arena. And the Maloofs may be facing financial pressures to move the team to a potentially more lucrative market.

Sources have said no deal has yet been struck to relocate the Kings. But a financial package would be a key ingredient in any deal.

Samueli's arena-management company is offering to spend $25 million to upgrade the building, including new locker rooms, office space and other improvements. The money could also be spent on a new practice facility, although at first the Kings would practice at an existing venue about two miles from the Honda Center.

In addition, Samueli would pay for $50 million in "transition costs." Sources have said those costs would include the relocation fee imposed by the NBA, which could run to $30 million or more.

The city is proposing to issue $75 million in bonds to cover those expenses, but Samueli's organization would be responsible for repayment.

The Maloofs in turn would commit to repaying $50 million to Samueli.

The City Council is scheduled to vote Tuesday on whether to approve the bond offering.

The Maloofs have until April 18 to ask the NBA for permission to relocate the team. If the Kings do leave, the team must immediately pay the city of Sacramento around $76 million to retire a loan approved by the City Council in the late 1990s. If that loan isn't repaid, the city will gain ownership of Power Balance Pavilion and a $25 million stake in the team.

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