The pending sale of the Lightning to Hollywood producer Oren Koules has lingered almost four months. Steve Pagliuca is not surprised.
A managing director at Bain Capital, a Boston investment firm, doesn't know specifics or background, so he would only speak generally. But he does know the lay of the financial land.
"There is no liquidity in the banking system right now," he said Tuesday. "People are not extending credit."
There have been all kinds of rumors on why Koules hasn't closed the $200-million purchase from Palace Sports & Entertainment that includes the team, the St. Pete Times Forum lease and 5½ nearby acres. He needs more investors. The group can't come up with 50 percent of the purchase price before financing as the NHL prefers.
But interviews with several investment bankers familiar with sports lending indicate the holdup likely is the worldwide credit crunch tied to the subprime mortgage crisis.
"There are a lot of places in the last three to six months that have shut down all lending," Pagliuca said. "Even for a hockey team, as good as the collateral might be, in this environment, they're not loaning."
"Even if you have the 50 percent, you still have to go out and find financing," said Brian Marler, senior vice president of the media, sports and entertainment group at Houlihan Lokey, a Los Angeles investment bank. "Due to the credit market, it may be tougher to get."
Koules, responsible for the popular Saw movies, lost up to $110-million in financing when Societe Generale, France's second-largest bank, closed its U.S sports lending business. Still, he has a purchase agreement with Palace Sports that gives him until May 28 to find financing.
Koules declined comment as did Sal Galatioto, president of New York's Galatioto Sports Partners, which is brokering the deal.
But Randy Vataha, co-founder of Game Plan LLC, a Boston investment bank, said with enough up-front money, the odds should be good.
"There is not a lot of credit in the marketplace," he said. "But sports teams have been impacted less on the credit side than most. Because all leagues maintain fairly restrictive debt limits, you don't have the equivalent of subprime loans."
On Tuesday, Stephen Ross bought 50 percent of the NFL's Dolphins for $550-million.
During the 2004-05 lockout, Game Plan and Bain Capital teamed to offer $4.3-billion in a failed attempt to buy the NHL. Vataha said his company also looked into buying the Lightning but could not elaborate because of a confidentiality agreement.
The league, he said, is a good investment.
The former Patriots receiver said franchise valuations are on the rise (Palace Sports bought the Lightning for about $100-million in June 1999), and league revenues rose 10 straight years.
The New York Post reported revenues will approach $3-billion this season, $900-million more than 2005-06. That could raise the salary cap $6-million to $56-million with a minimum payroll of at least $40-million.
Told Palace Sports claims losses of about $80-million on its Tampa operation, Vataha said, "There is no sport where every team breaks even."
Koules believes it is worth the risk. His group includes Canadian developer and former NHLer Len Barrie, Koules' business partner Mark Burg, California banker Russell Belinsky and several unnamed minority investors from the Tampa Bay area.
Do they have the $100-million that will give them a fighting chance of securing a bank loan?
"When a team comes up for sale, it's the high-net worth guys who are investing," Marler said. "They usually find a way to get a deal done."
Damian Cristodero can be reached at firstname.lastname@example.org.