Front Court, Back Court, Fed Court: The Game Goes On
Anyone who follows basketball knows one thing about the game's final minutes: the game lasts longer in real time than the minutes on the scoreboard.
If anyone doubts the Gordian Knot that has become the sale of the Sacramento Kings is now in real time, they're kidding themselves. This deal is going to federal court.
So, it may well be up to a judge to find the 7% solution.
That's the block of Kings' shares now in control of the court-appointed trustee for the creditors of Bob Cook, the upside-down developer whose corporate life now lies in bankruptcy court. Do know that the trustee only has one objective, and that is to maximize the recovery of as much money as possible for the creditors. The way he does that is put assets up for auction.
Continuing the obviosity, the more the bidders, the higher the gain for the asset. So the trustee wants these shares to be front and center of any transaction involving the Kings.
If those shares are truly subject to a standard clause known as the 'right of first refusal' -- meaning existing shareholders get the first shot at purchasing them at the given strike price -- then the trustee will get his wish.
Both the Maloofs and the Seattle consortium who signed the purchase and sale agreement to transfer majority control of the Kings say that this matter is a non-issue. Why? Well, that's what the trustee wants to know. He's asked those parties nicely if they'll share the terms of the agreement. If that doesn't work, he'll ask the judge to order them to share.
As a result, the auction of the 7% stake in the Kings is now scheduled for 9 April, ten days before the NBA governors are due to decide whether or not to approve the sale as it stands. Currently, the judge has rejected a creditor's request for a further, one-month delay in holding the auction. How the pending auction date affects the Seattle group's transfer of a $30million non-refundable earnest payment by today and/or the 1 March deadline for franchise re-location applications is anyone's guess.
Meanwhile, NBA fearless leader David Stern is now listening to the proposed Sacramento saviors, Pittsburgh Penguins owner Ron Burkle and 24-Hour Fitness freak Mark Mastrov. The more time they have to organize their counter-offer, the stronger their position is going to be. They'll be able to firm their financial structure, substantiate a new arena scenario, and even promote Sac-Town as a more attractive location than the Emerald City by nature of the Kings' status as the only pro game in town.
Price at this point is a non-factor. The white knights by definition will need to at least match the Seattle group's offer. The NBA is going to see the comparable value of all other franchises rise no matter which side prevails. In that respect, they'll be more prone to consider intangibles. And if there's one lesson sports can teach, it's that the home team usually has the edge when it comes to intangibles.
Should a judge be called upon to view the pending transaction documents and rule the right of first refusal clause is valid and enforceable, the Kings will surely remain in Sacramento.
Either way, the real game of where the Kings will be playing next year has now begun.