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This is news from May-2006.

Many of you may already know about it....I thought I would post it for those who don't.

HAWKS-THRASHERS
Atlanta owners' infighting costs big
Affidavit: Group lost $20M since August

By TIM TUCKER
The Atlanta Journal-Constitution
Published on: 05/24/06

The legal battle within the Hawks' and Thrashers' ownership group is causing significant financial and morale problems for the Atlanta sports franchises, one of the owners says in a new court document.

Bruce Levenson, in an affidavit filed in a Maryland court, says the teams have lost $20 million since August and are projected to lose another $20 million in the "coming months."

Levenson says the uncertainty created by estranged part-owner Steve Belkin's lawsuit against the teams' other owners has made it difficult to obtain adequate financing or to bring in additional investors to help cover the losses, "subjecting us to extraordinary financial pressures."

The affidavit says the $20 million in losses since August have been funded by five members of the Atlanta Spirit ownership group that owns the basketball and hockey teams: Washington businessmen Levenson, Ed Peskowitz and Todd Foreman and Atlantans Michael Gearon Jr. and Rutherford Seydel. The affidavit says Levenson, Peskowitz and Gearon will be required to fund the projected upcoming loss of another $20 million.

Under terms of a deal struck between Belkin and his partners last summer, Belkin has not had to help fund the teams' losses since August.

Levenson's four-page affidavit is in part a response to suggestions in an earlier court filing by Belkin that the other owners are benefiting from a delay in resolving the protracted dispute.

Contacted by the Journal-Constitution, Levenson would not discuss his affidavit. He declined to comment when asked how the financial situation described in the affidavit will affect the teams' operations, and he also was mum when asked how long he and his partners will be willing to sustain the current level of losses.

"I'm not able to talk about it," he said.

Neil Jacobs, one of Belkin's attorneys, declined to comment on Levenson's affidavit. Belkin has said he won't comment on the legal proceedings until they are completed.

It is not clear how Levenson arrived at the projection of $20 million in additional losses in the "coming months." The figure might include money to retain or acquire free-agent players this summer.

Levenson's affidavit also says the lawsuit, in which Belkin seeks the right to buy out his partners at cost, has "created major morale problems within Atlanta Spirit, especially among our key executives.

"Our top executives and coaching staffs fear for their jobs should [Belkin] obtain control of the teams," Levenson's affidavit says. "This lawsuit has also generated considerable on-going negative media coverage in Atlanta, causing a loss of fans and revenue to the teams. The local media coverage in Atlanta has also held up my Atlanta partners to public ridicule in their community."

The next hearing in the fight for the franchises is scheduled for June 2 in Montgomery County (Md.) Circuit Court.

It is not rare for sports teams to post substantial operating losses for short periods. For two teams to lose $20 million since August is "a big deal" but "not unusual," said former Atlanta sports executive Stan Kasten.

"This doesn't mean it's good or desirable, but it does happen," said Kasten, now president and part-owner of the Washington Nationals baseball team.

Generally, the strategy for getting out of such financial holes is to improve the product, win more games and generate more revenue. The Hawks-Thrashers owners previously have described such a strategy.

Another way to significantly cut financial losses is to reduce the player payroll, as the Atlanta Braves, for example, have done in recent seasons. The Hawks and Thrashers took the opposite approach last season, when both teams substantially increased their payrolls.

The new owners acknowledged from the outset that the financial losses would continue for at least several years. However, last summer's buyout agreement meant one fewer person to share the losses, with Belkin, a Boston businessman, off the hook at least for now.

The remaining primary owners have, by all accounts, deep pockets. Levenson and Peskowitz own a lucrative business information company, and Gearon made a fortune in telecommunications.

Under last summer's agreement, which was supposed to end the ownership feud, Belkin was to sell his 30 percent stake in the teams to Levenson, Peskowitz and Gearon for a price to be determined by a series of appraisals. But disagreement soon arose over the appraisal process, and Belkin filed the lawsuit in November.

Belkin contends the other owners breached the terms and timetable of their agreement to buy him out, triggering his right to buy them out at cost instead. The other owners contend they have not breached the agreement, arguing that Belkin scuttled the timetable by filing the lawsuit and that they have not been able to complete the buyout of his stake because a final purchase price hasn't been established.

Belkin's side contends the price was effectively established by a December appraisal that, according to calculations made by the Journal-Constitution from information contained in court documents, put the value of his stake at about $140 million. The other owners argue that that appraisal, which would represent a 1,100 percent return on Belkin's investment of $11.7 million, is invalid.

At the June 2 hearing, Belkin will ask Judge Eric Johnson for a summary judgement declaring he now has the right to buy out the other owners.
 

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Hawks, Thrashers given more flexibility

Associated Press
7/11/2006 7:40:11 PM

ATLANTA (AP) - The Atlanta Hawks and Atlanta Thrashers were given significant added flexibility on Tuesday in their ability to trade and sign players.

The Maryland judge who last week ruled the teams couldn't sign a free agent to a deal longer than one year, changed that to four years. But the Hawks and Thrashers cannot go over the salary cap in order to sign a player.

It was not known what prompted the new ruling Tuesday from Montgomery County (Md.) Circuit Court Judge Eric Johnson.

''We now have the needed flexibility to be able to enter into player transactions for both teams,'' said Bernie Mullin, the president of the NBA and NHL clubs.

Mullin added that Hawks general manager Billy Knight and Thrashers general manager Don Waddell have been notified of the new ruling and will pursue deals in an effort to improve both teams.

Even before Tuesday's change, the Hawks and Thrashers were fairly confident they could put together rosters as planned for the coming year. The Hawks already had initiated negotiations with free agent point guard Speedy Claxton, and the team is expected to announce Wednesday that Claxton has been signed to a four-year deal. That was planned before Johnson's ruling.

The Thrashers had already finished most of their free-agent negotiations, too, for next season.

However, without the added flexibility, the Hawks likely would have had difficulty negotiating a sign-and-trade deal involving free agent forward Al Harrington. It would have been a significant blow to the team to lose Harrington without receiving any compensation.

Johnson's new ruling specified that the Hawks can enter a sign-and-trade deal that would bring the team a new contract of up to four years.

Last month, Johnson said Boston businessman Steve Belkin is entitled to buy the Hawks and Thrashers from his former co-owners. The judge has said the current ownership and management team should retain control while the appeals are heard.

Any new free-agent signing of more than four years during the appeal must now be approved by Belkin.

The judge has ordered the current owners to post an appeal bond of $11.4 million US to protect Belkin against any decrease in the value of the franchises during the appeal. Johnson said Tuesday the bond must be paid by July 20.

Johnson ruled last month the ownership group did not abide by the terms of an agreement to buy out Belkin. The judge said the group's actions triggered Belkin's right to buy them out.

The appeal of last month's ruling could last a year or longer.
 
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