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Saturday, January 21, 2012

New Jersey Devils' Road To Hell Paved With Debt

The New Jersey Devils are paying the price for too much debt.

The Eurozone nations, governments in this country at all levels, most businesses and most households have found out over the last five years that massive debt can be crippling in the face of declining revenues, increasing expenses and the unavailability (or revocation) of credit.

As this morning's New York Post report indicates, the Devils (a) are losing $20 million this season, (b) already missed an $80 million loan repayment deadline, and (c) are considered by their minority owner Ray Chambers to be worth less than the outstanding $200 million in debt on the franchise.  In other words, the Devils' liabilities exceed their assets, meaning the franchise has "negative equity" and can be considered functionally bankrupt.

Now, if Bain Capital stepped in to rescue the Devils, it would be awfully interesting to see what they would do.

Eric Dixon is a New York investigative lawyer who handles business due diligence and investigations, and who offers economic and policy analysis on a professional basis.  Mr. Dixon spent the bulk of his early legal career performing corporate transactions, and is a longtime observer of the economics of professional sports.


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