Gary Chouest was oh, so close to buying the New Orleans Hornets. He already had 25 percent and was going to buy out the rest from George Shinn. Then he got a better look at the $83 million in debt they had, or his business supplying vessels to the off-shore gulf oil industry took a big hit after the BP oil spill, or whatever the reason he decided to pull back.
When he stepped away from buying the Hornets the league had to step in and take over the team, purchasing all of it from George Shinn. The league is also buying Chouest’s minority share.
But don’t thing that Chouest wants the team out of town. That’s not what he told the Associated Press. He said his goal is to keep the team in the city and didn’t rule out some level of future interest.
“As far as my future involvement, the purpose hasn’t changed as to why I invested from Day 1,” Chouest said. “The same situation still exists and the same reasoning for continuing to support the team still exists.”
Just to be clear, he wants all the perks of the Hornets in New Orleans, he just doesn’t want to be the one who has to pay for it. How very American.
Chouest would not comment on why his negotiations to buy the team fell apart.
David Stern has said the goal with the Hornets is to find an owner who wants to buy the team — at a nice little markup over what the league paid — and keep the team in New Orleans. How they accomplish that remains to be seen as the Hornets have some serious financial issues.
This is starting to remind me of the bank bailouts, where once the government decided to help them out the depth of the morass just kept becoming clearer.
The Hornets lost $18.24 million dollars in 2009-10, according to Jonathan Abrams at the New York Times Off The Dribble blog. And the numbers after this season should be even worse (which is a little sad because the team is better this season, last season if nobody wanted to watch them it was understandable).
That is just operating losses, we’re not figuring in the long-term debt, which at last count was about $83 million.
It was those losses that had George Shinn trying to sell the team and that forced the league to step in and buy the franchise when a deal with Gary Chouest fell through.
David Stern and Jac Sperling — Sterns appointed man to run the team — have both said they want to take their time, do it right and find a local owner if at all possible. But once the other 29 owners start having to write checks that cover those operating losses you can count on there being pressure to speed up the process.
You knew if the New Orleans Hornets were making money George Shinn would not have been trying to sell the team (he would have done a Donald Sterling and run a team poorly for profit as long as he could).
But the leaked financials of the New Orleans Hornets painted a bleak picture, team where the owner is paying out of his pocket every year and drowning in debt like a college kid with credit cards. Fantastic new purchase, David Stern. (Note: Deadspin posted these first and broke the story, although I first saw a hard copy of them from Larry Coon of ESPN.)
Basically, the Hornets turned a modest profit between June 2008-2009 ($5.9 million) and lost money the year before ($6.4 million), but meanwhile they are up to their eyeballs in debt — $83 million as of June 2009. It had long been rumored that taking over all that debt was one of the concerns Gary Chouest had with the purchase of the team.
What’s more, as Deadspin points out, that in the two years of KPMG-audited numbers George Shinn had to reach into his pockets for about $8.8 million to keep the team operating.
Stern has said there is no timetable for the sale of the franchise and they want to work hard to find local owners. But now the other 29 NBA owners run that team and if they are going to be asked to reach into their pockets for the Hornets you can bet they will push for a faster sale. Whether the team stays in New Orleans or not.
This story just promises to get more and more ugly.