Special Cold Water Edition

Cleveland Cavaliers guard Delonte West was arrested Thursday after officers pulled him over for speeding on a motorcycle while carrying two loaded handguns and a loaded shotgun in a guitar case. OK DAVID STERN: What message will YOU be sending your players about this kind of behavior? Innocent until proven guilty? He had a good excuse for having two loaded handguns and a loaded shotgun? Maybe he wasn’t really speeding? It must have been racial profiling? Plexico got two years for shooting himself in the leg with a handgun in a nightclub. I wonder what the laws in Ohio are about West’s behavior? Who has watched YI play defense? I think jail is too good for him! I think I need to go back into therapy.

Paul. I could tell You need the season to start already.

A Chinese poll shows that over 91% of Chinese fans(a sample of more than 60000) support that decision of Yi staying with the Nets to play the season openner. They are actually very understanding. I guess the only people who want him back to play the All China Games are the self-serving officials.

Net Income I have to disagree on some points.

1. First I believe that the Mikhail will be gaining controlling interest and that Ratner and Forest City will maintain some ownership by buying out some of the other minority owners that are in place.

2. This will enable the Ownership of the arena to remain in the hands of the New Jersey Nets owners. This will greatly enhance the value of the team.

3. Ratner will not be able to turn down this buried treasure that has now shown up on the doorsteps of profitability. You are correct the Nets would be the team of the world for the NBA and what better place than Brooklyn and New York city where the diversity melting pot is endless.

4. It was a brilliant move to leak out the MIkhail opportunity. One it may be closer as you have said to happening quickly. Two as you mention the critics delaying train, with this happening (hopefully it happens) is basically halted. The economic boom that some parts of Wall Street and New York city will feel will wash away many of the political detractors that maybe. This also helps in the eminent domain case where the question of financing cant be dragged in.

5. My question is and can you find out from your sources. How much interest or profit does Mikhail investment company plan to make off these bonds. Is the interest over a period of years. I have heard that a 45 million profit would be made every year for ten years (Just a pal of mine who works with Fidelity) for the investment company is typical in these strange and complicated dealings and large cash ventures. Also how much is the worth of these tax exempt savings.

6. What happens to the current debt that the Nets owe?

Last I will say again that Ratner is a brilliant business person and has put even better minds around him. Just the idea is brilliant, go get a billionaire that owns a investment company to finance the deal, sell him the majority of the team, and he make money on his company, pays nothing for the Nets and is a NBA owner of a team with a very lucrative future. I just hope that Viola keeps a or purchase a significant amount of the team. Mikhail, Viola, Jay-Z, Ratner, Bill Cosby (thinks he is still a minority owner) maybe Katz are music to my ears. Viola and Mikhail with their similar banking and investment background should get along well

The issue is not the team. Ratner has been willing to sell the team for months. The issue continues to be control of the arena. Does Prokhorov gain anything from buying controlling interest in the team, along with its enormous debt, while not having any role in the arena other than as a passive financier?

Are you speculating about Ratner and Forest City buying out other investors or do you know this? Ratner does not have a lot of cash. To buy out investors he and Forest City would have to borrow more money. And the financial structure of the team, with Viola controlling a lot of the preferred shares, is not amenable to this kind of a deal…unless Viola is satisfied.

You make several assumptions here: 1) that Ratner leaked the Prokhorov offer. I suspect that’s possible, even probable…and I am told there is a Russian intermediary Ratner is dealing with but who knows. 2) that the buyout will result in the Nets owners retaining control of the arena. Which owners and how does that make the team more valuable? 3) that the debt is not an issue.

I do not see a lot of the Nets investors hanging on after a sale. They will want to be bought out…and the price will be high.

As for the profits, who knows how this would be structured? I have never heard or seen any indication Cosby is an investor. Finally, Ratner has hardly shown he is a brilliant businessman in recent years. He has lost a lot of his net worth mainly because he overreached.

Finally, I have not seen any indication that Prokhorov wants to do this deal. A lot could be lost in translation and I may have missed something, but I remain highly skeptical.

@ at Net Income

you heard the Nyets here first… right. Thought no one would pick up on it. I didn’t add the Nix part… but it fits. Just the kinda corny word play my Dad loved and my kids still groan at.. Ha

NI,

Finally, it seems you have come to your senses and realized that much of what is going on regarding moves by current ownership (with respect to controlling interest in the arena) doesn’t make much sense. As you point out, how does having the Nets as a tenant in Brooklyn make their situation any better than the Meadowlands? Also, for someone who’s had six years to arrange financing of said arena, why has it taken so long to line up investors. The critics (opponents) have played a role, but realistically speaking, they have no control over financing issues. If a lender/ investor thought the arena was going to be profitable, money would have flowed in. The fact of the matter is that the lenders/ potential investors looked at the project and said NO. This is a poor plan that will not be the revenue generator Ratner promised because he was unable to secure financing or come to some sort of agreement with citizens. Maybe the arena might have been delayed, but we both know the delays have as much to do with Ratner’s lack of resources as lawsuits. Obviously, the current economic situation didn’t help, either.

I thought I would post this except from the 10Q recently filed by FCE for anyone interested in the Nets financial situation.

Our equity investment in The Nets incurred a pre-tax loss of $8,307,000 and $18,988,000 for the three and six months ended July 31, 2009, respectively, representing a decrease in allocated losses of $241,000 and $3,033,000 compared to the same periods in the prior year. Generally accepted accounting principles require us to report losses, including significant non-cash losses resulting from amortization, in excess of our legal ownership of approximately 23%. For the six months ended July 31, 2009 and 2008, we recognized approximately 51% and 57% of the net loss, respectively, because profits and losses are allocated to each member based on an analysis of the respective member’s claim on the net book equity assuming a liquidation at book value at the end of the accounting period without regard to unrealized appreciation (if any) in the fair value of The Nets. For the six months ended July 31, 2009, we recognized a lower share of the net loss than in the prior year because of the distribution priority among members.
Included in the losses for the six months ended July 31, 2009 and 2008 are approximately $10,238,000 and $13,544,000, respectively, of amortization, at our share, of certain assets related to the purchase of the team. The remainder of the losses substantially relate to the operations of the team. Comparable to prior years, the team is expected to operate at a loss in 2009 and will require additional capital from its members to fund the loss.

I found it interesting that $10M of the reported losses are related to amotised acquisition costs, sounds like since the Nets have little in the way of book assets, most of the purchase is being written

Great article NI. One more to go!

It’s good to see honesty finally breaking it’s way to the surface in regards to Ratner’s halfbaked plan of selling the team yet charging the Nets RENT to play there. If that is the case it makes no sense to move out of new jersey.

Continuation….

down. Since the $10M represents a 51% share, $20M of non-cash losses are being recognized each year, so that would be $100M of the $350M in losses over the 5 year period.

Also of interest is that on the surface, FCE reported a $3M improvement year over year in the Nets operation for the 6mo, however in the discussion above you can see that it is due entirely to a reduction in FCE’s ownership share of the overall loss.

@MR T
As you no doubt know, but carefully avoid to disrupt your latest rant, I wrote extensively about the tenant issue in the Nets Future FAQ. My point then and now, which you completely fail to understand, is that ownership of the team without ownership of the arena is a loser. Thus, my skepticism re the Prokhorov deal, as reported.

As Norman Oder, the critics’ favorite blogger notes today, there is no “Plan B” for the Brooklyn Nets and that “Nor, at this moment, do they need one. For now, Atlantic Yards—well, at least the arena portion of Atlantic Yards—looks ever more likely…”