Thursday, August 11, 2011 Ozanian: Meruelo's Purchase of Hawks Partly Financed By Seller

Mike Ozanian of reports that Alex Meruelo's purchase of the Atlanta Hawks may be more "pending league approval" than previously thought:
Alex Meruelo's purchase of the NBA’s Atlanta Hawks and lease to Philips Arena, pending approval from the league’s owners, would be heavily financed by the current owner of those assets, Atlanta Spirit LLC.

According to a person with first-hand knowledge of the deal, 40% of the purchase is to be financed by Atlanta Spirit LLC for five years, which is probably why there has been so much confusion regarding how much Meruelo is paying for the money-losing team we valued at $295 million this past January.

Seller financing is unusual in sports and typically involves poorly capitalized teams. The purchase of MLB’s currently bankrupt Los Angeles Dodgers by Frank McCourt from Fox in 2004 involved considerable financing from the News Corp. subsidiary. And the sale of the NHL’s Tampa Bay Lightning in 2008 by William Davidson to Oren Koules and Len Barrie was partially financed by Davidson. Shortly thereafter Koules and Barrie sold the under-capitalized hockey team to Boston Red Sox minority owner Jeff Vinik for much less than they paid for it.

This deal will likely be scrutinized extra closely by the NBA and, in my opinion, is no sure thing to be completed as currently constituted.

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