Penguins File For Chapter 11
Double numbers are a Pittsburgh Penguins tradition: Mario Lemieux's 66, Paul Coffey's 77, Ulf Samuelsson's 55. So are these: Chapter 11.
The last major pro sports team to file for bankruptcy protection, the Penguins did so again Tuesday as they battle four major lawsuits -- one by Lemieux, the biggest star in their history.
Penguins co-owner Roger Marino cited losses of $37.5 million over the last two seasons and an inability to negotiate a more favorable lease at the Civic Arena, which will soon be the NHL's oldest.
Bankruptcy isn't unprecedented in the NHL; the Penguins also filed in 1975 after the IRS padlocked team offices. But it is a public relations black eye for the league during a potential showcase season that might be played without opposition from the labor-gridlocked NBA.
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Under NHL rules, the league can seize any insolvent franchise. But, citing the Penguins' recent progress in negotiations with Lemieux and TV rights holder Fox Sports, the NHL suggested that would be counterproductive.
"While we are disappointed ... we have a commitment from ownership that the team will be adequately funded and we are optimistic this process will ultimately ensure that the franchise will be financially and competitively successful in Pittsburgh," NHL commissioner Gary Bettman said.
Marino said the payroll will be met Thursday, a day after the Penguins' next game, and the filing will not affect their playing schedule.
But the Penguins' myriad problems, including the Marino-Lemieux dispute over $33 million in deferred payments agreed to by co-owner Howard Baldwin, are alienating some of the NHL's most loyal fans.
The Penguins, who have played to more than 90 percent capacity during the 1990s, have more than 2,000 unsold seats for Saturday's home opener against the New York Rangers.
Sports agent Tom Reich, who represents Lemieux, said Marino now can pour fresh cash into the franchise without it going immediately to creitors.
"Some may see this as a gloom-and-doom event, but it's not," Reich said. "The quality of the dialogue with the Penguins around the horn, not just with us but with everybody, is at a considerably higher level than at any time since this started."
On Friday, Lemieux settled many of the outstanding issues in his suit, and Reich said, "Mario will get paid."
The Penguins' financial problems accelerated after Baldwin, strapped for cash after the Penguins lost $25 million during the lockout-delayed 1994-95 season, signed unfavorable deals with Fox Sports and Spectator Management in exchange for up-front money that kept the team in business.
Now, Marino wants $4 million a year in lease concessions from Spectacor and a better contract with Fox Sports. Fox is willing to negotiate, but, so far, Spectator isn't.
"The Penguins simply cannot survive with the current chokehold lease," said interim chief executive officer J. Garvin Warden, a bankruptcy specialist hired in August.
Mayor Tom Murphy, who met Friday with Marino and Bettman, is upset that Marino shopped the Penguins to Houston, Kansas City, Oklahoma City and Las Vegas even as he insisted the team wouldn't move.
Those trips prompted the city and Allegheny County to seek a court order barring any discussions about relocating the team before its lease expires in 2007. That lease was extended only last year, after Baldwin agreed to $12 million in Civic Arena improvements instead of lobbying for a new arena.
Marino, who has criticized Baldwin for not including the Penguins in the plan to build new stadiums for the Pirates and Steelers, was aware of the Penguins' financial plight when he bought into the team in early 1997, Murphy said.
"My opinion about Mr. Marino is he should have done the due diligence. If he didn't, shame on him," Murphy said. "We've known for years it would come to a situation where the team was undercapitalized. This is about sober people negotiating deals for the short term rather than the long term."
Baldwin, a movie producer who lacks Marino's deep pockets, and Marino have feuded for months, but issued a statement Tuesday pledging to work together. Marino might ultimately emerge as the majority owner.
The Penguins' first bankruptcy filing 23 years ago came after former owners Tad Potter and Peter Block couldn't pay $6.5 million in debt, including $500,000 owed in federal taxes. The IRS imposed a lien and seized its assets, prompting the Chapter 11 filing, and the team was later sold.
Former Los Angeles Kings owner Bruce McNall was forced to sell the team in 1994 after landing in bankruptcy court and, later, going to prison.
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