Diesel's New Revelation on McDavid/AOL

[Diesel]

After reading a post here and some related posts about the Phil.... To say that McDavid wants to finance this deal means 2 things:

1. He don't want to spend his funds on the Hawks.

2. AOL is very desperate.

What does that mean Diesel?

Well, with the Phil, the City gave whoever owns it a Sweet deal. Basically, the Phil pays for itself and more. There's a 140 million dollar debt to whoever owns the Hawks for the Phil. However, There's about 30 million dollars in revenue per year made from the Phil. The contract to pay for the Phil is a 30 year deal. My simple math tells me that whoever owns the Phill will be making plenty of MONEY. It was said that the deal was made that way so that the Hawks will always be in Atlanta (basically). I didn't think that the city cared. The other thing is that if the owner gets behind on payments (which is [censored] near impossible) then The Hawks will be sold to pay off the Phil.

I thought what if McDavid is the biggest crook in the world and he took the money and ran??

It Makes no sense. He would make more money from the city being the owner of the Phil than he would losing the Hawks and the PHil. It's almost an Iron Clad agreement.

Now, why do I say McDavid doesn't want to spend his own money. Let's think again:

IF McDavid has very deep Pockets. It is still to his advantage to Finance the Deal rather than dent them to pay for it. Really, owning the PHil will pay for his financing and HE will still be filty rich. I think this is wherein the problem may have lied. AOL didn't want to go through Financing. For them, they could have kept the PHil and made the same money....

Really, what is happening is that McDavid has AOL bent over a table and is taking it to them with no grease and NO Kiss.

Really, if all of us here on Hawksquawk could have put up $100.00, we could have bought the Hawks and the Phil under the same circumstance that McDavid is buying them. We could have financed an Arena that pays for itself and owned a team that nobody but us came to see and still made much profit.

You have to love this deal from McDavid's prospective: He puts down a quarter on the deal (about 120 million). He finances the rest. In the meanwhile, he's getting revenue from the Phil of about 30 Million per year. He's getting revenue from the Hawks (as long as he keeps them under the Luxury tax) of about 30-100 million per year. He has really spent no money if he manages things wisely. For him, getting people in to watch the Hawks and to buy luxury boxes is his main concern. That's his revenue. His debts are the upkeep of the Phil (maybe 10 million). His payment to the city maybe 8 million. His payment to the players/Staff somewhere between 50-80 million.

I'm not sure about Hockey.

However, I think he didn't go after the Braves because the Braves eat up a lot of MONEY. They donot create a profit.

So, McDavid may have deep Pockets... BUt I think he may also be very very smart..... AOL is Desperate.

[Diesel]

But, there's one other thing:

http://www.bizjournals.com/dallas/stories/.../05/daily3.html

According to this source, Hawks and Thrashers lost more than 40 million dollars last year. That changes the perspective a little.

Salary Players + Staff = -40 million?

This works against the mandate

[RLHawk]

What you say is pretty simplified business.

If McDavid analyzes the business there are 3 entities:

1) The arena - lets say it clears 20M / year (probably a lot less, but lets keep it simple)

2) Hawks - Lets say they loose 20M / year

3) Thrashers - Lets say they loose 20M /year

How much do you pay for an enterprise that looses 20M /year collectively. It depends on what you believe you can do to change that. There are 2 possiblities for return: Profit and capital appreciation.

All you have to do is get the business to turn an annual profit. The best team at doing this is the LA Clippers. They clear more profit than any other NBA team. (Does anyone remember what the Mavericks did during the years that David McDavid owned them? remember the Mavs pre-Cuban?)

The other way is to ge the business to not loose too much and look to market the teams and sell them for higher in a few years. This is the concept that many MLB teams use. They try to make the team break even while they own it and watch the appreciation grow. Kind of like a retirement account.

Time will tell how McDavid sees his investment.

[Diesel]

I agree with what you have said and It's hard to know which avenue McDavid will take with the Hawks. I don't know what's going on with the Thrashers... BUT here's a few examples.

1. McDavid can take over, Invest more money getting a personality that he can sell to come to Atlanta and then play the role of Salesman to Firms and the City.

In Essence, McDavid has to be a breath of fresh air to the CIty... ALA Authur Blank. IF he does that and Puts out a good Product, then he will move luxury boxes and even though the team isn't good right away, the Arenas is making double or triple what it used to. I think this tactic was used successfully first by Cuban.

In a time before Luxury taxes, he made coming to Dallas Arena something that was fun. He had prizes and he spent the money required to put an exciting team on the floor.

I think this strategy could work for McDavid. NOt that he's looking to win a championship this year. BUT that he eyes a championship but he brings fourth a very exciting brand of basketball and he makes a trip to the Phil an Experience. It would also mean that he would have to lower the cost for the cheap fans. He needs $10.00 and $20.00 seats in the PHil. IF you got that, then you can get the companies to spend MORE on the Luxury boxes. Luxury boxes sell a lot better when the Stands are full.

In order to make the team more exciting, he would have to bring in personalities. Keep JT. Bring in Ricky Davis. See about trading for KMart and Richard Jefferson. I kinda Wonder if there's a deal... Shareef/First for Kmart/Jefferson/Filler. I think Kidd might do it... Didn't he and Shareef play together in College?

Mourning/Reef/Kittles/Kidd.

Also, get rid of Grob. Possibly as part of the Ricky Davis trade... Davis/Ilgauskas for Grob/Nazr??

Then you'd have:

Theo/Kmart/RJ/Davis/JT... I bet fans would come out to see this team Play. And it's a team that could grow together. BTW, it's just a hypothetical example... NO need for In depth examination.

The second way he can turn a profit He can gut the team... ALA Sterling. With the contract the Hawks have with the city, they are not going anywhere. McDavid can promise the fan base NOTHING, gut the team to rookies and second year players and possibly make 120 million dollars in profit from the league.

This is least popular with the fans, but it would probably work. He can basically try to do what Jones did in Dallas. what Jones did was Gut everything that was there and started off brand new. Got Coperate Sponsors and a team full of Rookies. He was fortunate to have the right coach and he got good deals for those rookies. Then he had 1 year of bad play from his young team before they started to turn the corner. The difference is that in Football, there's more talent that is collected in the draft than in Basketball. McDavid would need to have the best of the best scouts in order to get a totally new team in place that could win or draw fan interest.

All in all, I think the first approach would work better. Somehow, McDavid is going to have to endear himself to the city and get the fans back in the Phil. Then he can make a profit off the Arena and Maybe he can get to a place where he's making a profit from the organization too.

BTW, I don't think that the second article takes into account how much the Hawks get after Luxury tax kick backs... which would really mean that the Hawks broke even or even made a profit.

[Blunt91]

That team of JT,Davis,RJ,Martinand Theo sucks!! I wouldn't pay any money to see a team that can't shoot.

[Iman]

I'd assume that unless AOL is self-financing that when they make the sale they'll be paid the same whether McDavid pays cash or has someone finance him. I'd guess McDavid doesnt want to sale assets to pay for the deal so he'd rather get financing.

The deal on Phillips is interesting however.

[Diesel]

If McDavid can't pay Outright, I don't see anyone other than another investor jumping into this deal (I mean, i don't think a Bank would cover that deal if the teams are losing 40 million dollars per). This is almost venture capital terroritory... But the bright side is that the Phil pays for itself and could possibly pay for the whole deal if McDavid was to straighten up some things... Mainly he has to sale some skyboxes and get the team out of the luxury tax area before he can really make this negative into a big Positive.

[mdawg]

I have already read other places that McDavid is considering selling the Thrashers immediately. He is not a hockey fan, and the team he really wants is the Hawks, but AOL insisted on selling the Hawks/Thrashers together. I don't know if this is true, but if you think about it, it does make sense. This guy has no history in the NHL, and he has no interest in the game. Why would he want the team? This sale might not be the end of it.

[KB21]

I doubt that's true.

McDavid did try to buy the Dallas Stars recently.