Kukla's Korner

The Puck Stops Here

Tampa Bay Lightning Sold

The Oren Koules and Len Barrie reign of error is officially over in Tampa Bay.  Since buying the Tampa Bay Lightning, they managed to create a circus atmosphere around their inconsistent management decisions.  It was a lack of money that brought this to an end.  It was never clear that they had enough money to run an NHL team, given how they had to finance their purchase of the team by a private loan from outgoing owner Bill Davidson.  This loan was eventually defaulted upon and that led to the sale of the team.  In under two years, the Koules ownership managed to kill any momentum from their 2004 Stanley Cup victory and saw attendance at Tampa Bay attendance decline.

The new owner is Jeffrey Vinik.  He is a Boston hedge fund manager.  Although we have no idea what will happen under Vinik, it is highly likely to be a better situation than the Koules ownership.

Vinik is believed to be paying about $110 million for the team.  This is a significant decline from the $206 million price paid by Koules to buy the team.  The sale comes with the lease to the St Petersburg Times Forum and 5.5 acres of land adjacent to the arena.  Most of Vinik’s payment pays off existing debts of the Lightning organization and Koules and Barrie walk away with very little to show for their ownership other than financial losses.

Vinik is buying the team cheap.  If he can rehabilitate the Tampa Bay Lightning to be a moderately successful market, their value will climb significantly and he can make a profit selling the team - which he hopes will be larger than the day to day losses to run the team.

This is the financial reality in many NHL markets.  There are few NHL teams and the price to buy a team is usually increasing from year to year.  The weaker markets lose money, but if they lose money at a slower rate than the team appreciates in value, they make a profit on their NHL ownership.  With a low purchase price, Vinik has a good chance to see the price of his team appreciate.  This model assumes that the NHL is never forced to contract teams.  If teams are contracted, due to financial problems in individual markets, it will likely pop the bubble that inflates the prices of existing teams.  The current economic climate makes that a threat, but the NHL seems to have staved off the worst of it.  As long as several teams do not run into significant financial issues simultaneously and the NHL is unable to underwrite finances of several teams at once, this seems unlikely to happen.

Tampa Bay has a fresh start.  There was no possibility of success under the old ownership.  It is unclear what the Jeffrey Vinik ownership will bring, but it would be hard to be worse.

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About The Puck Stops Here

imageThe Puck Stops Here was founded during the 2004/05 lockout as a place to rant about hockey. The original site contains over 1000 posts, some of which were also published on FoxSports.com.

Who am I? A diehard hockey fan.

Why am I blogging? I want to.

Why are you reading it? ???

Email: y2kfhl@hotmail.com