Detail, east Portland photo, courtesy Miles Hochstein / Portland Ground.



For old times' sake
The bojack bumper sticker -- only $1.50!

To order, click here.







Excellent tunes -- free! And on your browser right now. Just click on Radio Bojack!






E-mail us here.

About

This page contains a single entry from the blog posted on February 29, 2004 3:01 AM. The previous post in this blog was Update. The next post in this blog is At long last. Many more can be found on the main index page or by looking through the archives.

Archives

Links

Law and Taxation
How Appealing
TaxProf Blog
Mauled Again
Tax Appellate Blog
A Taxing Matter
TaxVox
Tax.com
Josh Marquis
Native America, Discovered and Conquered
The Yin Blog
Ernie the Attorney
Conglomerate
Above the Law
The Volokh Conspiracy
Going Concern
Bag and Baggage
Wealth Strategies Journal
Jim Hamilton's World of Securities Regulation
myCorporateResource.com
World of Work
The Faculty Lounge
Lowering the Bar
OrCon Law

Hap'nin' Guys
Tony Pierce
Parkway Rest Stop
Utterly Boring.com
Along the Gradyent
Dwight Jaynes
Bob Borden
Dingleberry Gazette
The Red Electric
Iced Borscht
Jeremy Blachman
Dean's Rhetorical Flourish
Straight White Guy
HinesSight
Onfocus
Jalpuna
Beerdrinker.org
As Time Goes By
Dave Wagner
Jeff Selis
Alas, a Blog
Scott Hendison
Sansego
The View Through the Windshield
Appliance Blog
The Bleat

Hap'nin' Gals
My Whim is Law
Lelo in Nopo
Attorney at Large
Linda Kruschke
The Non-Consumer Advocate
10 Steps to Finding Your Happy Place
A Pig of Success
Attorney at Large
Margaret and Helen
Kimberlee Jaynes
Cornelia Seigneur
Mireio
And Sew It Goes
Mile 73
Rainy Day Thoughts
That Black Girl
Posie Gets Cozy
{AE}
Cat Eyes
Rhi in Pink
Althouse
GirlHacker
Ragwaters, Bitters, and Blue Ruin
Frytopia
Rose City Journal
Type Like the Wind

Portland and Oregon
Isaac Laquedem
StumptownBlogger
Rantings of a [Censored] Bus Driver
Jeff Mapes
Vintage Portland
The Portlander
South Waterfront
Amanda Fritz
O City Hall Reporters
Guilty Carnivore
Old Town by Larry Norton
The Alaunt
Bend Blogs
Lost Oregon
Cafe Unknown
Tin Zeroes
David's Oregon Picayune
Mark Nelsen's Weather Blog
Travel Oregon Blog
Portland Daily Photo
Portland Building Ads
Portland Food and Drink.com
Dave Knows Portland
Idaho's Portugal
Alameda Old House History
MLK in Motion
LoveSalem

Retired from Blogging
Various Observations...
The Daily E-Mail
Saving James
Portland Freelancer
Furious Nads (b!X)
Izzle Pfaff
The Grich
Kevin Allman
AboutItAll - Oregon
Lost in the Details
Worldwide Pablo
Tales from the Stump
Whitman Boys
Misterblue
Two Pennies
This Stony Planet
1221 SW 4th
Twisty
I am a Fish
Here Today
What If...?
Superinky Fixations
Pinktalk
Mellow-Drama
The Rural Bus Route
Another Blogger
Mikeyman's Computer Treehouse
Rosenblog
Portland Housing Blog

Wonderfully Wacky
Dave Barry
Borowitz Report
Blort
Stuff White People Like
Worst of the Web

Valuable Time-Wasters
My Gallery of Jacks
Litterbox, On the Prowl
Litterbox, Bag of Bones
Litterbox, Scratch
Maukie
Ride That Donkey
Singin' Horses
Rally Monkey
Simon Swears
Strong Bad's E-mail

Oregon News
KGW-TV
The Oregonian
Portland Tribune
KOIN
Willamette Week
KATU
The Sentinel
Southeast Examiner
Northwest Examiner
Sellwood Bee
Mid-County Memo
Vancouver Voice
Eugene Register-Guard
OPB
Topix.net - Portland
Salem Statesman-Journal
Oregon Capitol News
Portland Business Journal
Daily Journal of Commerce
Oregon Business
KPTV
Portland Info Net
McMinnville News Register
Lake Oswego Review
The Daily Astorian
Bend Bulletin
Corvallis Gazette-Times
Roseburg News-Review
Medford Mail-Tribune
Ashland Daily Tidings
Newport News-Times
Albany Democrat-Herald
The Eugene Weekly
Portland IndyMedia
The Columbian

Music-Related
The Beatles
Bruce Springsteen
Seal
Sting
Joni Mitchell
Ella Fitzgerald
Steve Earle
Joe Ely
Stevie Wonder
Lou Rawls

E-mail, Feeds, 'n' Stuff

Sunday, February 29, 2004

Bankruptcy and the billionaire

The corporation that owns the Rose Garden arena, home of the Portland Trail Blazers, has filed for bankruptcy. The company, Oregon Arena Corp., is owned, as is the Trail Blazer team, by Microsoft co-founder Paul Allen, the fifth wealthiest individual in the world.

The move is part of a prolonged attempt by Allen to get Oregon Arena out from under its obligations on the mortgage for the building. That loan, a 25-year bond deal, essentially precludes refinancing, which in turn forces the company to pay interest at nearly 9 percent through 2020. According to "the debtor," as the defaulting borrower is known in bankruptcy, the arena has lost money in all but two of the nine years that it has been open.

The bankruptcy prompts interesting questions from a number of different angles. First, Portland and Multnomah County taxpayers are holding their breaths with their eyes shut tight, waiting for another blow to their wallets. So far, everyone at City Hall and the county building says the Chapter 11 case won't matter to the local governments. I'm not so sure I'd agree. For example, you can bet that Oregon Arena will be looking for a reduction in its property tax assessment, and that its compliance under existing contracts with the city for matters like maintaining the Memorial Coliseum (next door) may deteriorate.

Second, the uncertainty surrounding the Rose Garden should caution the city to sit tight on its proposals for the Coliseum. Plans for a gigantic recreation center in a renovated Coliseum ought to go on hold until it's determined just what the future of its upscale neighbor is. Of course, the city has proved its ineptitude in managing projects like this in recent years, and it may plow ahead with something, only to find out that new management at the Rose Garden -- or some other outcome of the bankruptcy -- could render its best-laid plans unworkable.

Next, the Blazers deny that the bankruptcy has anything to do with their increasingly vocal opposition to bringing a Major League Baseball team to Portland. But without question, the arena bankruptcy will negatively affect that effort. This makes two bad Portland stadium deals in a row for the powerful TIAA-CREF pension fund, based in New York. TIAA-CREF invests retirement money for college and university professors throughout the country, including me and probably several hundred others in Oregon. It's also in the middle of the Portland Civic Stadium/PGE Park fiasco with the City of Portland. You can be sure that it won't be back for a third stinko sports deal in Stumptown, and that its troubles here will not go unnoticed by other potential "financing sources" for a baseball stadium.

Major League Baseball is doubtlessly going to hear about it, too. Although Portland baseball backers will seek to reassure the big leagues that Portland can be a two-professional-team city, the Blazers are obviously trying to show them that the fan base may not even be able to cover one.

The Chapter 11 filing is another consequence of the failed management of former Blazer president Bob Whitsitt, who took a sure thing, the Portland NBA franchise, and wasted it through stupidity and arrogance. In the last six months or so, the new team management has blown up the roster in the hopes of winning back fans turned off by the street-thuggishness to which the Blazers have sunk over the past five years. In the new PR campaign, character is supposed to matter.

Character -- as in not repaying your debts? It would be one thing if the arena were owned by a mere mortal whose prime tenant was an unrelated entity. But here the owner is a certified multi-billionaire, and the tenant is his basketball team, whose outrageous salaries and poor personnel choices are to blame for its financial woe. Allen signed the arena bond deal in '95, back when he held absolutely all the cards. Now he's weaseling out of it.

Taking the building into bankruptcy and flipping the bird to the nation's retired college professors are not the actions to take when you're supposedly showing your commitment to character.

Indeed, word coming out of the negotiations with the bondholders has been that they would gladly release Allen from the onerous mortgage rate if only he would personally guarantee the bonds. And if he were sure that his company was going to repay the bonds, one would think he'd have no trouble with the guarantee. But apparently he's specifically refused to sign it. To him, bankruptcy is a better option.

Maybe Allen is getting ready to pull out of basketball. If that is his desire, then all I ask is that he find a halfway responsible buyer, leave the team here, and not let the door hit him in the backside on the way out.

More ominous is the prospect that he's thinking of taking the franchise out of town. That would be a disaster for many area residents who rely on the team for their livelihood. Although it seems unlikely, the new Allen philosophy, "This is a business, and we're tired of subsidizing it," points to that outcome as a distinct possibility. Moves like this bankruptcy put the Blazers in play to a frightening degree.

It's like an old boyfriend calling from his aging BMW at 3 a.m. to say, "Love me or I might kill myself."

Comments (12)

More like an ugly, but rich boyfriend calling from his new yacht.

I'm glad you wrote about this so I don't have to. We have more in Tiaa-Cref than in our house, so I wasn't too pleased.

And to think I joined his little self-indulgent EMP just so I could go to the opening concerts.

I'll never forget his pear-like shape calling from the stage on a cell phone to the helicopter filming the show for VH-1. Imagine being able to call off attack-helicopters or own a hanger at Boeing.

No one should have that much money, and if anyone does, they shouldn't get out of debts they owe.

What a jerk.

Please, PLEASE take the Blazers away.

Every year those-who-haven't-learned get excited that "They Might Go All The Way This Year(TM)". Since Drexler left, and they fired Drexler's coach (forgot his name) - the team consistently blows the big games at the end of the 4th. Everytime.

Leave the city in peace, Mr. Allen. But take your mess with you.....

The newspaper reports that "PaulCorpOne" (Oregon Arena Corp., which owns the Rose Garden(TM)) has lost $20 million over the last 10 years. That's about $2 million/year.

"PaulCorpTwo" (the Trail Blazers) is reported to have the highest or second-highest player payroll in the NBA, at about $105 million/year. The Puget Sound Business Journal reported (June 30, 2003) that the Blazers were expected to lose $90 million or more last year.

Mr. Allen controls what rent PaulCorpTwo pays PaulCorpOne. So the solution is simple: PaulCorpTwo pays $2 million a year more in rent to PaulCorpOne. PaulCorpTwo cuts its payroll from $105 million to $103 million.

I can see the lawyers for TIAA-CREF asking what rent Mr. Allen pays PaulCorpOne for his apartment in the Rose Garden, what rent he pays for the skybox, and how the PaulCorpTwo rent was fixed, and (if they don't like the answers) arguing to pierce the veil and hold Mr. Allen responsible for PaulCorpTwo's debts. Not a can of worms that I would want to open, if I were Mr. Allen.

I can see Allen's lawyers asking why the hell that's relevant.

If you were Allen's lawyer, would you recommend that he personally guarantee bonds in that amount? Hell no.

How much do you pay on your mortgage? 9 percent? I bet not. I bet you refinanced when rates dropped. I bet you saved a lot of money doing it. And that is exactly what Allen is doing here, in the only way possible. I have money in TIAA-CREF too (it's not just university professors; it's educators of all stripes, including high school teachers), so I'm not particularly happy about the reduced return they'll get on this investment, but it's a drop in the bucket compared to their asset pool.

The suggestion that the Blazers might leave town is bare speculation and nothing more. I'm not a huge Allen fan, I just hate to see the rich pilloried for things the rest of us wouldn't think twice about. Why *should* he keep subsidizing an unprofitable business?

Oh, and Isaac, I hope you're not a lawyer, because if you think this is a proper situation for piercing the corporate veil, you've got another think coming.

Whether it's a proper situation for piercing the corporate veil depends on whether Mr. Allen has been faithfully keeping the books separate. I don't know whether the facts support piercing the veil here, but I'm pretty sure that TIAA-CREF's lawyers will be asking some questions to see if the facts are there.

Hey, Brett, before I signed my mortgage, I checked to see whether it allowed refinancing. If it didn't, I wouldn't have signed it.

Bankruptcy's for people in true financial hardship, not billionaire children who've grown tired of paying for their toys.

What a creep.

Why is it relevant? To the bankruptcy court, every transaction between PaulCorpOne and Mr. Allen and the other entities controlled by Mr. Allen, going back at least a year, is fair game for investigation as a possible preferential transfer.

No kidding. But you can be sure that Allen has had the best lawyers from the beginning, who would have been absolutely sure to keep scrupulous records and to avoid transfers. No allegations of fraud have surfaced, the RG is not Allen's alter ego, and it sure wasn't undercapitalized. So there won't be any veil piercing.

And Professor, I guess I just don't see the moral dimension of a corporate bankruptcy. It's not as if he's leaving people out in the cold by doing this. When TIAA-CREF and the other investors performed their due diligence on this investment, they knew it was relatively risky. Hence the 9% return. They have enjoyed that return, FAR above the typical bondholder return over the past 10 years, only because they accepted that risk. Now, the risk has ripened into bankruptcy. But this isn't a pennies-on-the-dollar situation - it's just an adjustment of risk. In fact, an argument could be made that this is better for TIAA and the other investors - they will come out of this with a lower rate of return, but also lower risk, allowing them to more accurately forecast revenue. No one could predict in 1993 that interest rates would go as low as they are right now. If you told the principals that rates would go to virtually zero in 10 years, I bet they could have predicted this.

In fact, if bankruptcy is the best fiscal option, the company's directors have a fiduciary obligation to its shareholders (Allen) to put it in bankruptcy. They have to do what's best, financially, for the corporation.

> For more than a year, Allen's representatives and Oregon Arena have sought to negotiate changes to their obligations to no avail.

They tried to negotiate - the bondholders wouldn't respond. This is a perfectly normal step. It would be gross negligence on the part of Allen's and the RG's lawyers *not* to go Chapter 11.

On another note, I love the blog. Wish my professors had had any idea what a blog was. I think their response would have been something like your fictional Mayor's: "I hardly have a chance to blob."

Brett: You may not see a moral aspect to bankruptcy, but some folks do.

Up until recently, the whole Allen Persona with the Blazers, Experience Music, and many other ventures has been as a lovable "player" -- an eccentric guy who's so wealthy he could burn money in pursuit of his passions. His word was good because he loved these things, and he invited the public to share his enthusiasm. Now, suddenly, they're all just hard, cold businesses, from which he is cutting and running. His promises are voidable.

Many other people lost their shirts in the tech bust, and some of them are still nobly struggling to make good on the promises they made in their fat days. Allen's not one of them.

He can exercise his rights to the max, as you suggest, but the public can also exercise its rights to stay home and change the channel rather than spend any more money on his wares.

Don't conclude that this Chapter 11 is such a great idea for him until after it's over.

You're right - an entertainment business does depend on the goodwill of its patrons, and if people start staying home because of Allen's perceived greed, that could kill the business. It might have been a good time to do it, though, in the spirit of cleaning house. Got rid of the bad players and the bad debt in the same week. Nowhere to go but up.

Wouldn't it be delightful if Larry Ellison topped Mr. Allen's bid and then renamed it the Oracle Arena?

TrackBack

Listed below are links to weblogs that reference Bankruptcy and the billionaire:

» Bankrupt billionaires from Bankruptcy Information
A post on bankrupt billionaires at http://bojack.org/mt-arc/001059.html... [Read More]


Sponsors


As a lawyer/blogger, I get
to be a member of:

In Vino Veritas

If You See Kay, Red 2011
Turnbull, Old Bull Red 2010
Cherry Tart, Cherry Pie Pinot Noir 2012
Trader Joe's Grand Reserve Cabernet, Oakville 2012
Benton Lane, Pinot Gris 2012
Campo Viejo, Rioja, Reserva 2008
Haden Fig, Pinot Noir 2012
Pendulum Red 2011
Vina Real, Plata, Crianza Rioja 2009
Edmunds St. John, Bone/Jolly, Gamay Noir Rose 2013
Bookwalter, Subplot No. 26
Ayna, Tempranillo 2011
Pete's Mountain, Pinot Noir, Haley's Block 2010
Apaltagua, Reserva Camenere 2012
Lugana, San Benedetto 2012
Argyle Brut 2007
Wildewood Pinot Gris 2012
Anciano, Tempranillo Reserva 2007
Santa Rita, Reserva Cabernet 2009
Casone, Toscana 2008
Fonseca Porto, Bin No. 27
Louis Jadot, Pouilly-Fuissé 2011
Trader Joe's, Grower's Reserve Pinot Noir 2012
Zenato, Lugana San Benedetto 2012
Vintjs, Cabernet 2010
14 Hands, Hot to Trot White 2012
Rainstorm, Oregon Pinot Gris 2012
Silver Palm, North Coast Cabernet 2011
Andrew Rich, Gewurtztraminer 2008
Rodney Strong, Charlotte's Home Sauvignon Blanc 2012
Canoe Ridge, Pinot Gris, Expedition 2012
Edmunds St. John, Bone-Jolly Gamay Noir Rose 2012
Dark Horse, Big Red Blend No. 01A
Elk Cove, Pinot Noir Rose 2012
Fletcher, Shiraz 2010
Picollo, Gavi 2011
Domaine Eugene Carrel, Jongieux 2012
Eyrie, Pinot Blanc 2010
Atticus, Pinot Noir 2010
Walter Scott, Pinot Noir, Holstein 2011
Shingleback, Cabernet, Davey Estate 2010
Coppola, Sofia Rose 2012
Joel Gott, 851 Cabernet 2010
Pol Roget Reserve Sparkling Wine
Mount Eden Chardonnay, Santa Cruz Mountains 2009
Rombauer Chardonnay, Napa Valley 2011
Beringer, Chardonnay, Napa Reserve 2011
Kim Crawford, Sauvignon Blanc 2011
Schloss Vollrads, Spaetlese Rheingau 2010
Belle Glos, Pinot Noir, Clark & Telephone 2010
WillaKenzie, Pinot Noir, Estate Cuvee 2010
Blackbird Vineyards, Arise, Red 2010
Chauteau de Beaucastel, Chateauneuf-du-Pape 2005
Northstar, Merlot 2008
Feather, Cabernet 2007
Silver Oak, Cabernet, Alexander Valley 2002
Silver Oak, Cabernet, Napa Valley 2002
Trader Joe's, Chardonnay, Grower's Reserve 2012
Silver Palm, Cabernet, North Coast 2010
Shingleback, Cabernet, Davey Estate 2010
E. Guigal, Cotes du Rhone 2009
Santa Margherita, Pinot Grigio 2011
Alamos, Cabernet 2011
Cousino Macul, Cabernet, Anitguas Reservas 2009
Dreaming Tree Cabernet 2010
1967, Toscana 2009
Charamba, Douro 2008
Horse Heaven Hills, Cabernet 2010
Lorelle, Horse Heaven Hills Pinot Grigio 2011
Avignonesi, Montepulciano 2004
Lorelle, Willamette Valley Pinot Noir 2011
Villa Antinori, Toscana 2007
Mercedes Eguren, Cabernet Sauvignon 2009
Lorelle, Columbia Valley Cabernet 2011
Purple Moon, Merlot 2011
Purple Moon, Chardonnnay 2011
Horse Heaven Hills, Cabernet 2010
Lorelle, Horse Heaven Hills Pinot Grigio 2011
Avignonesi, Montepulciano 2004
Lorelle, Willamette Valley Pinot Noir 2011
Villa Antinori, Toscana 2007
Mercedes Eguren, Cabernet Sauvignon 2009
Lorelle, Columbia Valley Cabernet 2011
Purple Moon, Merlot 2011
Purple Moon, Chardonnnay 2011
Abacela, Vintner's Blend No. 12
Opula Red Blend 2010
Liberte, Pinot Noir 2010
Chateau Ste. Michelle, Indian Wells Red Blend 2010
Woodbridge, Chardonnay 2011
King Estate, Pinot Noir 2011
Famille Perrin, Cotes du Rhone Villages 2010
Columbia Crest, Les Chevaux Red 2010
14 Hands, Hot to Trot White Blend
Familia Bianchi, Malbec 2009
Terrapin Cellars, Pinot Gris 2011
Columbia Crest, Walter Clore Private Reserve 2009
Campo Viejo, Rioja, Termpranillo 2010
Ravenswood, Cabernet Sauvignon 2009
Quinta das Amoras, Vinho Tinto 2010
Waterbrook, Reserve Merlot 2009
Lorelle, Horse Heaven Hills, Pinot Grigio 2011
Tarantas, Rose
Chateau Lajarre, Bordeaux 2009
La Vielle Ferme, Rose 2011
Benvolio, Pinot Grigio 2011
Nobilo Icon, Pinot Noir 2009

The Occasional Book

Kent Haruf - Eventide
David Halberstam - Summer of '49
Norman Mailer - The Naked and the Dead
Maria Dermoȗt - The Ten Thousand Things
William Faulkner - As I Lay Dying
Markus Zusak - The Book Thief
Christopher Buckley - Thank You for Smoking
William Shakespeare - Othello
Joseph Conrad - Heart of Darkness
Bill Bryson - A Short History of Nearly Everything
Cheryl Strayed - Tiny Beautiful Things
Sara Varon - Bake Sale
Stephen King - 11/22/63
Paul Goldstein - Errors and Omissions
Mark Twain - A Connecticut Yankee in King Arthur's Court
Steve Martin - Born Standing Up: A Comic's Life
Beverly Cleary - A Girl from Yamhill, a Memoir
Kent Haruf - Plainsong
Hope Larson - A Wrinkle in Time, the Graphic Novel
Rudyard Kipling - Kim
Peter Ames Carlin - Bruce
Fran Cannon Slayton - When the Whistle Blows
Neil Young - Waging Heavy Peace
Mark Bego - Aretha Franklin, the Queen of Soul (2012 ed.)
Jenny Lawson - Let's Pretend This Never Happened
J.D. Salinger - Franny and Zooey
Charles Dickens - A Christmas Carol
Timothy Egan - The Big Burn
Deborah Eisenberg - Transactions in a Foreign Currency
Kurt Vonnegut Jr. - Slaughterhouse Five
Kathryn Lance - Pandora's Genes
Cheryl Strayed - Wild
Fyodor Dostoyevsky - The Brothers Karamazov
Jack London - The House of Pride, and Other Tales of Hawaii
Jack Walker - The Extraordinary Rendition of Vincent Dellamaria
Colum McCann - Let the Great World Spin
Niccolò Machiavelli - The Prince
Harper Lee - To Kill a Mockingbird
Emma McLaughlin & Nicola Kraus - The Nanny Diaries
Brian Selznick - The Invention of Hugo Cabret
Sharon Creech - Walk Two Moons
Keith Richards - Life
F. Sionil Jose - Dusk
Natalie Babbitt - Tuck Everlasting
Justin Halpern - S#*t My Dad Says
Mark Herrmann - The Curmudgeon's Guide to Practicing Law
Barry Glassner - The Gospel of Food
Phil Stanford - The Peyton-Allan Files
Jesse Katz - The Opposite Field
Evelyn Waugh - Brideshead Revisited
J.K. Rowling - Harry Potter and the Sorcerer's Stone
David Sedaris - Holidays on Ice
Donald Miller - A Million Miles in a Thousand Years
Mitch Albom - Have a Little Faith
C.S. Lewis - The Magician's Nephew
F. Scott Fitzgerald - The Great Gatsby
William Shakespeare - A Midsummer Night's Dream
Ivan Doig - Bucking the Sun
Penda Diakité - I Lost My Tooth in Africa
Grace Lin - The Year of the Rat
Oscar Hijuelos - Mr. Ives' Christmas
Madeline L'Engle - A Wrinkle in Time
Steven Hart - The Last Three Miles
David Sedaris - Me Talk Pretty One Day
Karen Armstrong - The Spiral Staircase
Charles Larson - The Portland Murders
Adrian Wojnarowski - The Miracle of St. Anthony
William H. Colby - Long Goodbye
Steven D. Stark - Meet the Beatles
Phil Stanford - Portland Confidential
Rick Moody - Garden State
Jonathan Schwartz - All in Good Time
David Sedaris - Dress Your Family in Corduroy and Denim
Anthony Holden - Big Deal
Robert J. Spitzer - The Spirit of Leadership
James McManus - Positively Fifth Street
Jeff Noon - Vurt

Road Work

Miles run year to date: 280
At this date last year: 129
Total run in 2013: 257
In 2012: 129
In 2011: 113
In 2010: 125
In 2009: 67
In 2008: 28
In 2007: 113
In 2006: 100
In 2005: 149
In 2004: 204
In 2003: 269


Clicky Web Analytics