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Crain’s Detroit: Pistons have been borrowing money to meet operating expenses

Crain’s Detroit Business reported today that the Pistons have been borrowing money to meet operating expenses and that Tom Gores will assume that debt as part of purchasing the team:

How much the team has borrowed and how far it is in the red are unknown because those involved have declined to comment.

For some time, the National Basketball Association’s team owners have said they are losing money, and the Pistons are said to be among the 19 franchises to borrow from the leaguewide $2.3 billion low-interest credit facility. The league caps borrowing against the facility at $125 million, and most of the teams that have tapped into it are thought to have taken up to the limit.

Additionally, New York-based Citi Private Bank Sports Finance and Advisory was selected last year by current Pistons owner Karen Davidson to broker a sale of the franchise in part because it was willing to subsidize the team’s operations.

“We were looking to see if the investment banker would finance the operation of the team,” Joseph Aviv, co-managing partner of Bloomfield Hills-based Honigman Miller Schwartz and Cohn LLP, told the trade publication Michigan Lawyer’s Weekly this month. He was part of the Honigman team retained by the estate of the William Davidson, who bequeathed the team to wife Karen Davidson after his March 2009 death.

When asked by email today by Crain’s about the situation, Aviv declined to comment beyond their previous statements.

Citi has declined to comment throughout the sale.

This report doesn’t suggest that the sale of the team is in jeopardy, but it might explain why the negotiations took longer or were more complicated than expected.

11 Comments

  • [...] 3 Shades of Blue. Chip Crain with part one and part two of his Grizzlies season breakdown. 7th: Piston Powered. The Pistons have been borrowing quite a bit of money recently. 8th: SB Nation. Dirk Nowitzki's [...]

  • [...] 2. 6th: 3 Shades of Blue. Chip Crain with Part 1 and Part 2 of his Grizzlies season breakdown. 7th: Piston Powered. The Pistons have been borrowing quite a bit of money recently. 8th: SB Nation. Dirk [...]

  • May 19, 20118:54 pm
    by J.D.

    Reply

    Oh my bleeding eyes…  Your content is great, but did you ever consider going with a background color other than red?

    • May 19, 201110:30 pm
      by Jason

      Reply

      It’s really affecting your eyes bro? If so, get them bad boys checked… Last I checked, Red, White and Blue are Pistons through and through.. Color scheme is quite fitting, and you have to be the first person ive ever seen make that comment..

    • May 19, 201111:04 pm
      by Dan Feldman

      Reply

      J.D., what browser are you using? The background behind the black text should be white. We’ve had some problems that we’re looking into, but if you can send any info about  your browser, operating system, etc., we’d appreciate it.

      • May 20, 20113:28 am
        by neutes

        Reply

        firefox with the adblock add-on on makes the background all red.

      • May 20, 20116:18 pm
        by Jason

        Reply

        I thought he was talking about the red border, around the comment box.. My apologies.. Of course, if he isn’t seeing an actual White background – of course that’s reason to have bleeding eyes!! My fault, JD!

  • May 19, 20119:12 pm
    by Eric

    Reply

    Well putting out that product the last two years puts less butts in the seats.  I don’t know what the attendace was exactly, but there hasn’t been many people the last couple of years.  I would guess jersey sales are down a lot as well.  Hopefully Gores can get some of the dysfunctional players out of here and get a coach that this team can respect.

  • [...] 2. 6th: 3 Shades of Blue. Chip Crain with Part 1 and Part 2 of his Grizzlies season breakdown. 7th: Piston Powered. The Pistons have been borrowing quite a bit of money recently. 8th: SB Nation. Dirk [...]

  • May 20, 201110:20 am
    by gordbrown

    Reply

    My understanding is that the concert end of the business is what is providing the most (or at least best) revenue for the business. Which makes sense of this story, revenues for the concert business are heavily concentrated in the summer. Expenses for the concert business not so much (there is overhead, marketing, advances to secure the best artists, etc.) Also the team expenses would go down in the summer. More to the point, we are talking low-interest credit facility. If you can borrow money at low interest and earn more from that capital than the interest rate, you have a fiduciary duty to borrow. But you are right, outstanding debt and seasonal revenue streams do tend to complicate valuations, which complicates sale negotiations as both sides try to find ways to take advantage of basically everything and write contract language to do this.

  • [...] 2. 6th: 3 Shades of Blue. Chip Crain with Part 1 and Part 2 of his Grizzlies season breakdown. 7th: Piston Powered. The Pistons have been borrowing quite a bit of money recently. 8th: SB Nation. Dirk [...]

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