Just on CNBC: Tilman might be forced to sell

Keep in mind that Congress just passed a 2 trillion dollar stimulus with 500 billion going directly to businesses and the type of business owners that would buy sports teams. The President also mentioned that with the 500 billion he has no intention of letting Congress investigate how that money is being spent even though its law (hasn't stopped him before... IE Impeachment).

If it's a business leader or leaders in industries like tech, etc. they will have more capital to invest in November than ever before. It's the lower wage workers who will be more in debt and on un-employment come that time.

Tillman is actually pretty rare in regards to most new sports owners. Most like Ballmer, Cuban, Vivek, etc. are coming from big tech. Not the hospitality industry.

So I actually think that Tillman will sell, and get his 2 billion back. I think Silver will help with the sale as well as he knows the importance of showing investors that even in a crisis, and with all the nonsense with China, the NBA still holds it's value even in a flip.

 

15% loan over 3 years.... biggest tell that he's selling the Rockets, and thinks he can get well over his 2 billion investment. No way in hell the Landry's restaurant chain is projecting 15% growth in 3 years.

Folks he's selling. Maybe not at this second, but within 6 months it seems likely. Silver's roll will be interesting here to make sure he does not gut the team in the short term, and hurt the league.

 

I just saw the news posted at ZeroHedge https://www.zerohedge.com/markets/m...-loan-market-record-yielding-15-secured-paper

I work in the leveraged loan industry, this is baaaaaaaad

Landry's, which is the parent company of Golden Nugget casinos and hundreds of restaurants including Chart House, Saltgrass Steak House, Bubba Gump Shrimp Co., Claim Jumper, Morton's The Steakhouse, McCormick & Schmick's, Mastro's Restaurants, is hoping to crack the leveraged loan ice by offering investors a record interest rate of 14% over Libor for a $250 million loan, Bloomberg reported citing "people familiar with the matter."


The deal, which is being underwritten by the B2/B focused, middle-market titan Jefferies, a long-time go to bank for Fertita, is offering a spread which according to Bloomberg would be the highest ever on a leveraged loan excluding companies in bankruptcy.


Which such an unprecedented yield on paper that is secured? Because the paper is secured by assets that may well be bankrupt in months, if not weeks: Landry's told investors it is seeking the funds to increase liquidity as it navigates the impact of the Covid-19 outbreak on its business. The pandemic has brought the travel and leisure industry to a near standstill, leaving Fertitta’s businesses shuttered and burning cash with thousands of lay-offs.


In effect, the $250MM, 14%, non-call 2 term loan is a quasi-priming DIP loan with the option to take over the company in bankruptcy.

 

There's only claims of CNN calling Trump a racist on the internet I can find.
Looks like a case of say a lie as often as possible until the gullible believe it.
This is identical to Trump's lie claiming Biden called him a xenophobe about the China flights.

 

Haha you are funny.
Wish you were around here when tillman was wanting to buy rockets. It was a love fest for him here

 

I can't stress enough how Tilman banking billions on the service industry is a catastrophe, even before Covid. His business model pretty much equates foot traffic per square feet. This whole 6' rule is not going away anytime soon. People are not going to be as eager to crowd into densely populated events after this. He will not be able to recover from this.

 

It's true.

 

It's incredible that the NBA allowed Tilman to buy the team at all. In a post-Donald Sterling world, you would think they would carefully vet potential owners from all angles, personal and financial. Tilman being forced to sell a team in the fourth-largest market after only owning them for a few years would be a black eye for the NBA's bookkeepers. How were there not richer owners out there outbidding him? Did they really want to sell to a "hometown" guy that badly?

Here's hoping this era is almost behind us.

 

Les wanted to sell the team to Tilman. That was his choice.
Also loaned Tilman money to get interest on top of the sale.

 

I posted this in another thread last week and some posters who I respect didn’t believe Tillman would sell due to pride, others believed he wouldn’t sell due to the assumption that he would be selling for a loss. Here were my responses in the “Decline in Salary Cap thread.

P.S. All names have been changed for protection.

If he is so leveraged that he has no working capital on hand to withstand the downturn then he would be forced to sell the team. NBA owners aren’t banking on the revenue coming in on a year to year basis but rather the return on their initial investment when they sell the team. Their other businesses make them more money on a year to year basis than team ownership.

Tillman will get back at least what he paid for the team if he were to to sell it today. If he holds it for several more years he could sell it for more. The key is his cash flow. If he is cash poor and hemorrhaging cash in his other business ventures then we could be a couple of months before his companies are insolvent.

This is an interesting time to say the least.

I want to preface my post with this PSA: I do not have intimate knowledge of Tillman’s financials nor am I in the know. I am making an educated guess based off of my understanding of Tillman’s personality traits and having a lot of understanding and experience in the business world.

A) I 100% agree with you but it’s not up to Tillman. He will be given ample opportunity to incur more debt as long as the financier is willing to take on that risk. The sale of a franchise takes time for the buyer to be properly vetted by the league and the fellow owners. This is a slow process. Tillman might be able to withstand several months of high cash burn rate but he is not sitting on a pile of cash and he has some huge payments that he will have to make while having zero revenue incoming.

B) He will get at AT LEAST what he paid for. I would venture to say he would easily net $200 million in profit if he were to sell today. Your reason for a loss is irrelevant. Stephen Ross paid $1 billion in 2008 for the Dolphins. This was the same team that was 1-15 the year before. So if your argument is that the economy dictates selling prices this debunks it. If you are saying that the Rockets not being the NBA champions devalues them I give you the Clippers who sold for $2 billion which was wildly considered the most toxic team/ownership that ever was in the NBA. Tillman grossly overpaid for the team and as you stated yourself he really wanted the team and the chance to own his hometown team(more on this next).

C). Look it really comes down to this, there are only 30 NBA teams, 32 NFL teams, 30 MLB teams, and 31 NHL teams. There are 600 plus billionaires in the US alone. These are highly competitive, motivated, well off people. They crave the chase that sometimes their current ventures don’t give them anymore and only a sports team can give them. There are only a finite number of these opportunities for these people and most wont have the opportunity to acquire one of these teams in their lifetimes. Long story short there are buyers right now that would pay $2.5 billion plus for this team.

This is not a mom and pop restaurant. This is the Houston Rockets. One of 4 major sports franchises in the 5th most populated city in the US and the 7th largest media market in the US.

 

Tilman was qualified buyer. Not all qualified buyers are great businessmen. The reality is the team wasn't worth 2.2 billion. Les found a sucker to pay that much.

 

How so? Regardless if you believe Tillman was a real or fake billionaire none of us can deny he was really wealthy nor can we deny his business model was successful. Casinos have been raking in cash for at least a century and so have successful restaurants. Before the pandemic his company was doing fine. As was everyone else in his industry.

 

Tillman grossly overpaid and outbid everyone. That’s why he owns the team now. His reasoning was that he would set the market and whoever wanted a team after would have to pay more. He never expected that he would have to flip the team this quickly. Also he is not Sterling. The closest we have to Sterling in today’s game is Dolan.

 

Same thing I've been thinking/saying. He apparently doesn't believe in diversification. He created an ever-growing, ever-leveraged empire by building on the same risk over and over. Shut up and listen.

 

Im not knocking the service industry directly nor did I ever call out Tilman being a fake billionaire. What I did state is his particular business model is not sustainable over the long term.

To put it in perspective, Tilman is the kind of guy to buy Chic-Fil-A and turn it into Burger King.

 

Sterling wasn't a great comparison. I was just trying to say that after that episode I thought the league would be very careful about agreeing to new ownership with any PR risks. For an organization that was trying to juice valuations of $1-3B out of its franchises, the NBA allowing a highly-leveraged owner like Tilman into the fold without any minority owners was a needlessly risky move.

Most leagues have moved past the "embarrassing" type of owners that were more common in the 1980s and 1990s (Ted Stepien, Marge Schott, Donald Sterling, etc.). The new black marks - James Dolan, Daniel Snyder - are tame in comparison.

 

I think he sustained his business model over a long enough time period to say that it was successful. Whether you or I like it is irrelevant. I mean Mortons is basically an Outback Steakhouse now but it still was making money for his group up until mid March.

I was one of the few who did not want him to buy the team. I was praying Larry Ellison or someone who had the means to win at all costs would prevail in the bidding but it was not my decision to make.

 

A) Your point is taken but I just think he'd borrow a billion before selling. The buddies in the govt will loan him whatever he needs to stay afloat at a very low interest so I don't think the losses caused by the coronavirus will be that terrible.

B) He will get a higher price than he paid for potentially. Consider that whatever that price is, it has to cover transaction costs + interest payments + his operational loss or he ends up underwater. Also consider that part of the value of his buying price is now gone - the contract with the Chinese was lost after the Morey tweet and that certainly has some effect on the value even if only a few hundred million.

C) I am not saying it's impossible to find a buyer but people are gun shy. Just think - nearly every business man in America is taking losses on across the board. Every company has pretty much seen its stock price drop significantly. Every company is seeing their revenue drop. When you've taken a financial hit, you rarely are looking to make a big expenditure of any type especially on one where there is uncertainty about future revenues even if just for the next year or two. In these types of situation you look to buy distressed assets at bargin basement prices. In other words, people who buy are going to look for deals, not to buy things at premium prices. That's why I say the market isnt there right now for him to sell. Anyone smart is going to use his situation as leverage to get a lower price. It's just business.

I think the only buyer would be the NBA itself.

 

Your points are valid as well. We shall see what unfolds. I must say the discussions are a fun distraction to the bigger picture.

Cheers my friends...