Modell to sell part of Ravens

Non-controlling partner would ease debt, estate planning

Cash-flow problems denied

Sources: NFL may need to help make payments

June 17, 1999|By Jon Morgan | Jon Morgan,SUN STAFF

Ravens chief executive officer Art Modell plans to sell a share of the debt-laden team to a new investor.

Modell said yesterday that he will hire an investment banker in the next 30 days to advise him and help procure a partner. The buyer would not acquire a controlling share of the Ravens -- which would continue to be held by Modell's wife, Patricia -- but might receive a right of first refusal in the event the team is sold, he said.

"I'd like somebody who's a younger age than me, who can grow with the business, grow with my son, David. I want somebody that has a very strong interest in professional football," said Modell, a week from his 74th birthday.

He hopes his son, David, 37, the Ravens president, eventually will inherit the team.

Modell acknowledges that taking on a new investor would help finances. It would also aid his estate planning, he said. "It would reduce our debt. It puts the company in a more solid position," Modell said.

Money raised by selling a stake could be used to help pay down the extraordinary debt that the team acquired as the Cleveland Browns and in its move to Baltimore. Two years ago, the Ravens completed what was then a record restructuring that required league approval. The team took on $185 million in loans and other forms of credit.

As a private company, the team does not report its finances. But financial experts say interest on debt of that magnitude could be $20 million a year.

The debt total exceeded the league's borrowing limit for a majority owner so Modell transferred the controlling stake to his wife. The team has struggled under its debt load and may need NFL help to meet the payments and other requirements of its loans, according to a number of sources familiar with the Ravens financing who spoke on the condition of anonymity.

Modell denied having cash flow problems. "It's far better than it was three years ago," he said. "We have never missed a payment."

The Ravens have decided to dispute the $29 million relocation fee the league assessed the team in 1996 when it approved the move from Cleveland to Baltimore. The team is arguing that it shouldn't have to pay because other relocated franchises, such as the Houston Oilers -- now playing as the Tennessee Titans -- have not paid.

Lull in revenues

Spring is generally a dry period for NFL franchises, when the costs of camps and contract settlements come in during a lull in revenues from ticket sales and television rights that peak in the fall.

Allison Gibbs, a spokeswoman for Fleet Financial Group's sports lending unit, which coordinated the Ravens' restructuring, declined to comment, citing a policy against discussing confidential information about clients.

With a new, publicly funded stadium, the Ravens are one of the richest teams in sports, earning millions of dollars each year from skyboxes, concessions and other items. The franchise has sold out most of its games in Baltimore, and 57,000 of the 62,000 "permanent seat licenses" it required of most season ticket buyers.

But heavy borrowing, begun in Cleveland when the franchise played in an old stadium and signed a number of expensive players to try to get to the Super Bowl, has left it with high annual loan payments.

Modell said he is also trying to restructure part of the team's debt and may apply for a loan from the league in order to pay off some lenders.

An NFL spokesman did not respond to a request for comment.

The NFL has recently begun lending money to teams in the biggest six television markets to help them finance new stadiums. It also has a long-standing policy of letting teams that are paying off stadium debt keep the share of money made on premium "club" seats that normally goes to the visiting team after each game.

Lucrative stadium, naming fee

The Ravens paid only a fraction of the cost of their $226 million stadium, built by the state as part of the Camden Yards complex in downtown Baltimore and later named PSINet Stadium in a lucrative sponsorship.

Modell, who along with others purchased the franchise in 1961 when it was based in Cleveland, said he has always planned to bring on a co-investor despite his troubles in the past with partners. He was sued by a minority investor in Cleveland in the 1980s.

The team's debt is partly due to Modell's buying out former co-owners, at a cost of more than $70 million, when he moved the then-Browns from Cleveland to Baltimore. Modell also paid Ohio officials $12 million to settle a lawsuit over alleged breaking of the lease on Cleveland Stadium.

Modell said he has been contacted by a number of potential investors, whom he declined to identify.

"They should be in it for the love of sport and the chance for appreciation," he said.

Billick did research

New Ravens coach Brian Billick said he researched the team's financial background before he took the job in late January, but said there were no problems reported by his contacts throughout the league.

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