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Sports Franchises in Bankruptcy

A few weeks ago there was a discussion in the comments about the possibility that some professional sports teams might go bankrupt in the current economic turmoil. As a follow-up, here is a list of all the North American professional sports teams in the "Big 4" leagues (NBA, NFL, MLB, NHL) that have filed for bankruptcy protection in the past 30 years:

  • The Pittsburgh Penguins Partners, who owned 100% of the Pens, filed for Chapter XI protection on June 13th, 1975.
  • The Cleveland Barons, an NHL franchise that started out as the California Golden Seals in 1967 and moved to Cleveland in 1976, were merged with the Minnesota North Stars, who were also having financial problems, in 1978.
  • Bruce McNall, who owned 28% of the Los Angeles Kings, filed for Chapter XI protection on May 12th, 1995
  • The Pittsburgh Penguins, then owned by a group headed by Roger Marino, filed for Chapter XI protection on October 13th, 1998
  • In early January 2003, the Ottawa Senators, who listed debts of $166.2 million, including $50.7 million to Covanta Energy Corp., $40 million to the Canadian Imperial Bank of Commerce, $20 million to FleetBoston Financial Corp., and $14.2 million to the NHL, filed for bankruptcy protection
  • A few days later, on January 13th 2003, the Buffalo Sabres filed for Chapter XI protection, listing $206 million in debt to its 40 largest creditors.
  • On June 6th, 2008, William "Boots" Del Biaggio, who owned 20% of the Nashville Predators, filed for bankruptcy.

In addition, the Tribune Company, owners of the Chicago Cubs, file for bankruptcy protection on December 9th, 2008; the Cubs were not part of the filing.

The dates of these filings are not strongly related to business cycle downturns. The June 1975 filing by the Penguins took place two months after the March 1975 trough (identified by the NBER Business Cycle Dating Committee) and the Del Baggio filing was during the current downturn. The rest took place during expansions. Only one of these franchises, the Cleveland Barons, did not emerge from bankruptcy. In two cases, it was minority owners that were bankrupt.

It's pretty clear that we have not yet reached the bottom of the current downturn. Based on past events, if a North American pro sports team is going to file for bankruptcy protection under Chapter XI in the near future, it will probably be a franchise in the NHL, and that franchise is unlikely to disappear. I have not been following the events on the other side of the Atlantic recently, but I would guess that things could be bad for football clubs in the top European leagues.

Hat tip to Professor Vic for doing the leg work for this post.

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