How bankers struck deal for new Boston Garden

May 10, 1992|By Mitchell Zuckoff and Jerry Ackerman | Mitchell Zuckoff and Jerry Ackerman,Boston Globe

BOSTON -- After three decades of bull and bluster, the deal announced Thursday to build a new Boston Garden began streaking toward reality on a warm Sunday in March when, fittingly, the Celtics were at home, destroying the Atlanta Hawks.

While Larry Bird was busy scoring 20 points, Japanese bankers were watching the game from the hard plastic seats of the decrepit North End landmark that is scheduled to be replaced in 1995.

Earlier in the day, officials from Toyo Trust & Banking Co. of Tokyo had toured the Garden, seen the obstructed views during a Harlem Globetrotters game and met with Garden officials, including Jeremy Jacobs, chairman of Delaware North Cos., which owns the Garden, and Garden president Larry Moulter.

The bankers also received VIP treatment during brunch at the Four Seasons hotel with Boston Mayor Raymond Flynn and Lt. Gov. Paul Cellucci.

News of the Japanese bankers' March 29 visit to Boston spread quickly through the city's financial community, as did a sense of anxiety among local banks that they might be left out of a high-profile deal.

Thursday, after it was announced that the $120 million loan would come solely from New England's three largest banks -- Shawmut National Corp., Fleet Financial Group and Bank of Boston Corp. -- the visit by the Japanese bankers was described as the crucial moment in the long-awaited deal.

"That was the turning point for me," said Gail Edwards, chief financial officer for Delaware North and a lead negotiator for the company. "The Boston banks became convinced that this was going to go forward," she said. "They thought, 'My goodness, the stars are aligning.' "

The five weeks that followed make for a story of bankers rousted from bed by late-night telephone calls, of midnight meetings to sign documents, of phone lines kept humming between Boston and Buffalo, where Delaware North is based, and of alliances between banks that were formed, broken and reconstituted virtually up until the announcement at 10:30 Thursday morning that the deal was done.

In its final form, the 10-year accord calls for each of the three banks to take $40 million of the debt. The borrowers will only make interest payments during the three years of construction, then will begin repaying interest and principal until they convert the debt into a long-term mortgage. The remainder of the money for the $160 million arena will come from equity commitments by Jacobs and from an eminent domain settlement between New Boston Garden Corp. and the state after a support building next door to the old Garden is razed.

Before that financing package could take shape, however, the would-be lenders and the would-be borrowers would engage in games of strategy and one-ups-manship that pitted the Boston banks against international giants such as Toyo Trust and Fuji Bank of Tokyo, which learned only Wednesday that the financing proposal it made with a Philadelphia firm had been rejected.

Perhaps the greatest intrigue surrounded the question of what role, if any, Bank of Boston would play.

At various points, each of the three major New England banks had offered to take the lead role in financing the new Garden, essentially saying they would put up the money and spread the risk among other institutions. The New England banks, Fleet in particular, also at times were poised to participate in deals structured by one of the foreign banks.

As early as February, Fleet and Shawmut were willing to participate with Toyo in the loan, while Bank of Boston appeared to have been left behind.

"Shawmut's always been there. They had the most coverage of everyone," Jacobs said Thursday. "Bank of Boston was late in on this. They were brought in. Basically, they got very active at the end and took a leadership role at the end."

During the third week in April, Bank of Boston chairman Ira Stepanian and president Charles K. Gifford reportedly contacted Shawmut and Garden officials, asking to "take a crack at this."

But after flirting with a joint proposal with Shawmut, sources close to the negotiations said, Bank of Boston fell back. As of an April 28 meeting in Buffalo, the main deal on the table in the eyes of Garden officials was a Toyo financing package that included Shawmut and Fleet, without Bank of Boston.

Garden officials were still hopeful, however, that they could do the deal with local banks alone. For his part, Jacobs said his preference all along was to have U.S. financing, ideally all from Boston, but in the midst of a national recession found that only foreign banks were interested -- until recently.

With April ending, Stepanian reached out again to Shawmut, and the two presented a milestone, 50-50 lending offer for the full $120 million needed. This was the first proposal that called for the entire financing to be done by local banks.

That threw open the competition, and alliances and proposals began to blur and shift as each local bank sought to present itself as a potential leader in the deal.

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