Monday, March 23, 2009

Controversy Of The Week

Canadiens Possibly Up For Sale

We took a week off the off-ice controversies after 3 solid soap-opera plots, but we're back in business.

According to the Globe and Mail (via La Presse), the Montreal Canadiens may be put up for sale by American owner and perennial worldwide debt leaderboard member:
“BMO Capital Markets has been retained to evaluate all the possible financial strategies involving the Gillett family's interests in Montreal (which include the Bell Centre and Gillett Entertainment Group),” Habs president Pierre Boivin told La Presse, which reported speculation of a sale in today's editions. “We could be talking about re-capitalization, restructuring of debt, new investors, or even an outright sale. The process is under way, but we are still at the beginning of it.”

This all sounds very familiar, as there have been stories about Gillett's intentions for the team already this season.

In December, I commented on the story and highlighted the fact it could be true, precisely because Gillett is known to this Liverpool FC fan to be a slippery character. But as I said in December, the biggest reason for concern is not Gillett's character, but the way he runs his businesses – that is on the edge with a huge debt load.

In December, George denied the rumours (of course, he's denied the Dubai bids for Liverpool in the past too). But there's a saying isn't there: "Where there's smoke, there's fire."

In case anyone has been so immersed in hockey that they haven't noticed, running businesses on a massive operational deficit is not really working out for many people these days. Since the banks went under in the US and the UK, borrowing has dried up and rates for borrowers have been tightened. With Liverpool FC in astronomical debt and no buyer, it is not inconceivable that Gillett would dangle the Canadiens and their $240 million debt to help his own personal portfolio out from under a bit.

Last year I asked: Can people like Gillett continue to operate businesses as they always did without any consequences?

We may be about to get our answer.

What does this mean for the Canadiens?

That's a hard question to answer, especially for someone with such limited understanding of the ins and outs of big business deals.

However, you can be sure that if the Canadiens ownership is under review, it is not the coin-minting machine we all assumed it was. One reason must surely be the burden of the interest on Gillett's debt which could be crippling to the owner, if not the team. It certainly does not auger well for the team (a best case is a neutral outcome). It does not auger well at all for the league either, if a franchise with sell-out after sell-out and 24-hour TV coverage can be a loser.

This spring fans have been calling widely for a retooling, presumably through the free agent market (unless they fancy a Maxwell and Ryan White on the top lines). One has to wonder what a team stretching to pay interest on a league-high debt will behave like at the moment of truth. Big offers for many big stars? You'd have to be skeptical. A trigger-shy Gillett on July 1 could lead to another year of bridesmaid signings and another year of watching the teams who beat us that day, beat us later on in the year.

As for the rest of this season – will it be a distraction? I tend to believe this is quite minor compared to all the other distractions.

It is out of the players control and could hardly make them any worse than they have been. Will it hinder any rebound? If it does stop players from playing for their pride and championship aspirations, then that off-season retooling, big purse or not, probably can't come soon enough...

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