Business

VICTORIES ON AND OFF THE ICE

The Ottawa Senators may have a shot at the Cup and, with new ownership, survival

JULIAN BELTRAME May 12 2003
Business

VICTORIES ON AND OFF THE ICE

The Ottawa Senators may have a shot at the Cup and, with new ownership, survival

JULIAN BELTRAME May 12 2003

VICTORIES ON AND OFF THE ICE

The Ottawa Senators may have a shot at the Cup and, with new ownership, survival

Business

JULIAN BELTRAME

THE DAY AFTER Ottawa’s only big-league sports team, the hockey Senators, dropped a 2-0 slugfest to the Philadelphia Flyers last week, there was still joy in hockey’s Mudville. The local heroes’ chances of emerging from the second round of the National Hockey League playoffs—something they have failed to accomplish in six previous tries—may not have been any better, but the league had approved the sale of the perpetually cash-strapped franchise to Toronto pharmaceutical billionaire Eugene Melnyk. “The lawyers have some I-crossing and Tcrossing to do,” cautioned league commissioner Gary Bettman. But he added it was his “belief” that all would be well.

Even casual followers of the Senators’ woes know how meddlesome those I’s and T’s can be. Ottawans have been living with the threat that the Senators might pull up stakes and move south of the border—like the Quebec Nordiques and Winnipeg Jets— almost from the drop of the first puck in 1992. The franchise’s original owner, Bruce Firestone, soon had to be rescued by local entrepreneur Rod Bryden, who borrowed heavily to keep the team in town. By 1999, even though the Senators were winning regularly on the ice, the team and its Kanata arena were drowning in debt. So Bryden began a four-year attempt to unload his $390-million burden—an effort that ended in failure earlier this year.

With Melnyk, the Senators are getting something neither Firestone nor Bryden could provide—deep pockets. The Biovail Corp. CEO, who lives in Barbados for tax reasons, owns about $1.6 billion worth of his Mississauga-based company’s stock. Unlike his predecessors, who needed other people’s money to finance the team, Melnyk’s

proposal is to pay cash for the squad and the Corel Centre. And if he gets it, it’ll be on the cheap—he’s reportedly offering between $115 and $125 million for a team that was the NHL’s best in the regular season, and for the seven-year-old arena. Trouble is, his purchase agreement is conditional on acquiring the Corel Centre, which cost $170 million to build, at the fire-sale price of about $15 million. And one of the arena’s creditors, U.S.-based Covanta Energy, is reportedly owed $50.7 million and has yet to agree on the markdown.

Then there’s the question of whether Ottawa, with a population of774,000, can play in the big leagues. The team is again a legitimate Stanley Cup contender, but not all of this year’s playoff games have been sellouts. And since the collapse of the city’s hightech sector two years back, the Senators have lost crucial corporate season-ticket and private-box revenues. On the plus side, Ontario Premier Ernie Eves suggested the province may forgive all or some of the $21 million it is owed by the franchise for constructing the freeway interchange that services the arena.

Despite the doubts, Ottawans appear to be optimistic. Manny Montenegrino, a

lawyer who co-chairs the Ottawa Senators Community Coalition group, formed in January to seek ways to keep the team in the city, says he’s confident Melnyk can succeed where Bryden failed. “I don’t know if anybody could have made a go of it with what Bryden had to deal with,” Montenegrino says. As well as local economic problems, that included having to pay player salaries in U.S. dollars at a time when the Canadian dollar was wallowing at a record low. But Ottawa’s population is growing—meaning more potential ticket sales—and the loonie is surging in value. If the region’s slumping hightech sector recovers even a little, Montenegrino adds, Melnyk’s purchase “will be a very sound business investment.”

Melnyk isn’t commenting until the deal’s final. In the meantime, the biggest immediate benefit will come if the Senators break their habit of early playoff exits and go all the way to win Lord Stanley’s mug. That would add millions of dollars in ticket revenues from the extra home playoff games, and boost civic pride. And if Melnyk’s purchase is approved, the team that once seemed destined to be knocked out by financial woes could emerge a double winner—on and off the ice. 171