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May 12, 2010
NBA approves Nets sale to Prokhorov
So much for that whole Zimbabwe thing: The NBA Board of Governors (in other words, the league's owners) voted yesterday to approve Mikhail Prokhorov as owner of the New Jersey Nets. Prokhorov now becomes the league's first non-North American owner, as well as its second richest after the Portland Trail Blazers' Paul Allen.
The final tally: Prokhorov pays $200 million, plus assumed $180 million in team debt, in exchange for 80% of the team and 45% of their new Brooklyn arena. Prokhorov also agrees to buy $100 million worth of arena bonds, something that looks like a worse deal for him now that the bonds may fall below junk status. As for how much Prokhorov will reap from the deal, that's hard to say without knowing how revenues will be shared between the Nets and the arena; in any case, this deal is more about face time with the American public than a few extra rubles in his bank account.
The sale probably marks the last major hurdle for the Atlantic Yards arena project in Brooklyn; despite the bond downgrade and a couple of lawsuits still kicking around, there's not much that can stop the project now that the residents of the arena site have all been removed and the financing is in place. So figure on them becoming the Brooklyn Nets by 2012, or 2013 at the latest.
sorry, that dispute was resolved a long time ago. Normie is focusing on a two month old Reuters story that I can't believe he missed. It was a dispute between the investment bankers and ratings agencies over details.
Posted by Bobbo on May 12, 2010 09:45 AM
Do I have this right? Prokhorov paid, in effect, $360M, and in exchange got 45% of an arena that should cost about $600M to build (that's $270M, right there) and an NBA franchise in a lucrative market?
Wow. I knew the value of franchises was falling, but in effect, he paid $90M for his 80% share of the Nets. So the franchise is only worth $120M?
I refuse to believe I'm correct. What am I missing? How can NBA franchises now be worth only $120M? I am sure, though, that the arena that cost $600M to build is immediately depreciated to about $300M, so that does mess up my numbers. But even at that, Stern and the other 29 owners can't be happy today.
Posted by MikeM on May 13, 2010 11:56 AM
Okay, I see one problem with my numbers, and it helps a little, but not much.
Prokhorov paid $380M, not $360M, for 45% of a building worth $600M ($270M) and 80% of a franchise for, in effect, $110M. So the franchise is actually worth $137.5M.
Still can't make Stern happy.
Posted by MikeM on May 13, 2010 12:00 PM
I think you answered your own question, Mike: a $600 million arena isn't really worth $600 million. How much it is worth depends on how the arena and the team have agreed to split the revenues (I don't believe a lease has actually been made public), but it's more likely somewhere between $0 and $200 million.
That said, Prokhorov still got a pretty fine deal. It had to help that he had Ratner over a barrel - without his money, the whole Brooklyn plan fell apart.
Posted by Neil on May 13, 2010 02:03 PM