Reports: Senators close to bankruptcy filing
January 7, 2003 Print it
OTTAWA -- The Ottawa Senators are on the verge of filing for bankruptcy protection, according to media reports Tuesday.
Canadian television's The Sports Network reported that an official announcement that the team will file for protection from its creditors would come "as early as the next 24 hours." The Ottawa Sun reported the franchise would file for protection in both Canada and the United States and receive a short-term cash infusion from the National Hockey League.
Senators spokesman Phil Legault declined comment Tuesday afternoon.
Bankruptcy protection allows a company to continue operating and prevent creditors from going after the team's assets. It also gives a business time to deal with creditors and come up with a long-term business plan, and could lead to a sale of the Senators and their venue, Corel Centre.
The Senators' debt is around $160 million to creditors, with its main creditors the NHL, owed about $14.3 million, CIBC, $40 million and U.S. bank FleetBoston Financial, $20 million.
Total debt, including the arena, is in excess of $350 million.
A complex $234 million financing deal that would have seen investors pump some $42 million in cash into the franchise -- which was unable to pay its players last week -- failed on New Year's Eve after at least one major creditor rejected the plan.
Court-ordered protection does not allow a company to abandon union contracts, such as the Senators have with the NHL Players' Association.
The Companies Creditors' Arrangement Act in Canada -- similar to Chapter 11 bankruptcy protection in the United States -- gives a company protection from its creditors, usually for an initial 30-day period that can be extended by a judge if progress is being made towards a restructuring.
Under bankruptcy protection though, outside interests can put in offers on all or just part of a troubled company and a judge can rule if a sale is in the company's and creditors' best interests.
Bankruptcy protection isn't always successful. Companies such as northern Ontario's Algoma Steel have successfully restructured under CCAA protection and made a return to profitability this year. Others -- such as Canada 3000 -- failed in its attempts to restructure in the fall of 2001. The now defunct airline was unable to secure financial assistance from the federal government, a key part of its restructuring plan.
NHL commissioner Gary Bettman said Monday he expects an interim financing plan to be in place this week to help the Senators pay their players.
The Senators, 25-9-5-1, play in Vancouver on Wednesday.
The Canadian Alliance, meanwhile, formally asked the federal ethics counselor Tuesday to investigate Finance Minister John Manley over a telephone call to a banker regarding the Senators.
The party says Manley may have been in a conflict of interest when he called the chief executive of the Bank of Commerce about financing for the NHL team.
Manley has defended calling CIBC executive John Hunkin, saying he was doing his duty as an Ottawa member of Parliament.
AI
