Modell's wife assumes ownership, not control Shift allows Ravens to skirt debt limits

September 17, 1997|By Jon Morgan | Jon Morgan,SUN STAFF

The Ravens are scheduled tomorrow to finalize a complex financial restructuring in which the team will take on $185 million in debt and shift majority ownership -- but not control -- from Art Modell to his wife, Pat.

NFL rules limit the amount of debt that a team owner can take on using the club as collateral. The rules, however, do not prohibit a minority investor from borrowing liberally against his or her holdings.

So Modell, working to pay off debts from Cleveland, buy out two Ohio-based minority partners and pay the considerable bills from his move of the franchise to Baltimore last year, transferred ownership of 70 percent of the team to his wife of 28 years.

Much of the restructured financial deal is based on her holdings in the team.

He will retain 30 percent of the team's stock, the minimum that the league requires for a general partner. As general partner, he will retain the ability to make all decisions affecting the franchise and vote on its behalf at league meetings.

It is not uncommon in the NFL for the general partner to own less than a majority of a club's stock.

"I am the general partner and she is a limited partner. That's how we get around the debt limits," Art Modell said.

The deal also uses institutional investors in a way unique to the NFL, which has resisted anything resembling corporate or public ownership.

Fleet Financial Group of Boston will raise $90 million in capital through partner banks, setting up a variety of loans and revolving credit facilities.

It also will arrange for the sale of $95 million in notes similar to corporate bonds. The notes, which will carry a 15-year maturity, will be sold to institutional investors such as insurance companies, pension funds and others.

"We believe that this is a milestone transaction for the industry, tapping a new source of long-term capital," Patrick F. McAuliffe, head of Fleet's sports lending group, said in a written statement.

Modell applauded the lenders and said: "I am very pleased with the structure and the credit terms, and now it's back to football."

The franchise's finances have been under stress since the move of the team, reflecting the high cost of the transfer -- which compelled the team to pay off $12 million in rent and legal bills in Cleveland and pay the league a $29 million relocation fee -- and the diminished revenues of Memorial Stadium.

The picture is expected to improve greatly next season, when the team moves into a new downtown stadium, stocked with skyboxes and other cash-generating amenities.

Jim Bailey, the Ravens' executive vice president/legal and administrative, said the team hopes to pay off the bank debt early through the new stadium revenues.

"It's a real good capitalization structure. It puts us in a position to be able to operate as we expected to when we came here," Bailey said.

Part of the deal included Modell's buying out two Ohio investors held over from the team's days as the Cleveland Browns: Alfred Lerner, a longtime friend of Modell's who received $32 million for his 9 percent of the Ravens and 50 percent of an affiliated stadium operating company, and Robert Gries, who took Modell to court in the 1980s over disputes involving the team.

Gries received $41 million for his 43 percent of the franchise.

Both men are rumored to be interested in owning another team in Cleveland and had to divest their Ravens ownership to accomplish that. The NFL is obligated to put another team in that city by 1999.

Marc Ganis, a Chicago-based sports financial consultant, said: "The notion of having $185 million in debt on an NFL franchise is unprecedented.

"There's going to have to be $15 million to $20 million a year in pure interest payments. If you're going to compete with players' salaries, that's going to be a tremendous strain," Ganis said.

"There's only so much cash to go around."

Modell said the interest would not be that high and would be financially "comfortable" for the team.

"Everybody can take solid comfort out of this. It's strictly a Modell family business now; no more Ohio investors or anybody else. We will run it in a way that will make Maryland proud," he said.

Pat Modell gained fame as an actress under her maiden name, Patricia Breslin, in the 1950s and 1960s. She co-starred opposite Jackie Cooper in the television series "People's Choice" and played Meg Baldwin in "General Hospital."

She declined to comment yesterday.

Pub Date: 9/17/97

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