NFL tells Ravens to rework finances League rejects borrowing against stadium corporation

December 14, 1996|By Jon Morgan | Jon Morgan,SUN STAFF

The debt-heavy Ravens are rewriting their financial plan after the National Football League recently rejected the team's initial blueprint, objecting to the franchise's practice of borrowing both against the team and its affiliated stadium operating corporation.

Team officials say the league's rejection is not a serious setback in their efforts to establish a short-term plan of borrowing to get the franchise through this season and next.

But the team is under a squeeze as it tries to line up credit to begin paying off early next year its obligations to Cleveland and to a former Ohio-based minority investor who is being bought out. Also, it must begin making payments in 1998 on its relocation fee to the NFL.

"It can all be handled. It's programmed. We knew this going in, that things would not loosen up until we move in the new stadium," said team owner Art Modell.

Among the possible solutions: selling a stake in the team to local investors. Modell said he has considered taking on additional investors but has no immediate plans to do so. Prospective investors "have been banging at my door," he said.

At least one bank payment has been tardy -- to Citibank -- and there are reports of some vendors complaining about overdue bills. But team officials dismiss most of the troubles as related to personnel changes in the financial department and to efforts to consolidate borrowing to local banks.

Since its days in Cleveland, the team has borrowed up to the league's $55 million limit against the franchise. It has then borrowed against its stadium corporation, a separate entity also controlled by Modell that derives revenue from concessions, skyboxes and other facility-related sources.

When the team submitted a similar plan to the league in recent weeks, however, the league and the finance committee of owners balked. The league frowns on borrowing against affiliated operations as a way to evade the league-imposed borrowing limits. The limits are intended to keep franchises from drowning in red ink.

"We put together a strategy we thought would work. What we learned is that some of the rules had changed," said Ravens Executive Vice President James Bailey.

"The league office asked us if we would pursue other avenues. It's no problem other than it took us by surprise," Bailey said.

He said the team can maintain the same level of debt in a manner that complies with the league's new guidelines. "It's going to take us some more time," he said.

Some team owners in the league, still upset with the uproar over the Browns' move, may be reluctant to temporarily raise the debt ceiling or delay the relocation fee payments, other ways of easing the squeeze raised by the team, according to sources familiar with the deliberations.

Ultimately, the team may choose to take on additional investors to raise cash. But Modell has had bad experiences with minority stakeholders.

Robert Gries, part owner of the Browns, sued Modell in the early 1980s. Modell has agreed to buy out Gries' stake in the team, and the payments begin early next year. Currently, Modell owns 91 percent of the franchise. The other 9 percent is owned by Cleveland financier Al Lerner, who also owns half of the Ravens' stadium corporation. Lerner and Modell have had a chilly relationship since the team's move. The two have discussed Modell buying out Lerner's share so the latter can pursue an expansion team for Cleveland.

Modell said Lerner has not asked to be bought out.

The team is trying to consolidate more of its debt with local lenders and away from institutions such as the New York-based Citibank, Modell said. First National Bank of Maryland provided some bridge financing to get the team here, but Crestar was named the team's primary local bank.

The team is scheduled to move into a new stadium in the fall of 1998, which should prove a veritable gold mine. The problem is getting from here to there. This season and next are being played at Memorial Stadium, which has none of the skyboxes and lucrative premium seating planned for the new park.

"We're not sitting around in a pile of gold counting it, but we'll be fine," Bailey said. The results of the current personal seat license campaign are being closely watched by team executives. If the new stadium is sold out, the team will receive $64 million from seat licenses.

Payments on the seat licenses are front-loaded, with fans being required to put down 40 percent of the total this year and 30 percent in each of the next two years. That is designed to give the team a badly needed infusion of cash over the next two years.

Team spokesman Kevin Byrne said the Ravens are pleased so far with the response. Of the 3,000 or so first- and second-priority customers -- the fans who bought mythical club seats during Baltimore's expansion quest -- about 2,500 have bought more than 11,000 tickets. Some entire sections of club seats and 80 of the 108 skyboxes have been sold.

Applications for current season-ticket holders are due on Wednesday.

Pub Date: 12/14/96

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