Modell sees sale of third of team early next year; Ravens owner's plan to restructure debt would meet NFL dictate


Ravens owner Art Modell, trying to restructure the team's finances, said yesterday that he expects one or two investors to acquire up to a third of the team by early next year.

Modell, who bought the franchise formerly known as the Cleveland Browns in 1961, said he believes he will be able to find the investors and retain control of the team. Speculation on the price has ranged from $100 million to $150 million, but Modell said that it could be more and that potential buyers may be asked to make bids.

"We're still putting together the package," Modell said.

He is restructuring the team's massive debt after the franchise lapsed into technical default earlier this year on $55 million in loans, prompting an unusual bailout from the NFL. The league arranged for credit of up to $85 million, including some contingency funds.

Repayment to the bank is due next August, but the league wants Modell to have investors lined up by early next year in case he is unable to restructure and the league has to sell the franchise, according to two sources familiar with the transaction, who spoke on the condition of anonymity.

That would give the league six months to replace the Ravens ownership, if necessary.

But Modell said he plans to raise the money by attracting a buyer or buyers by February or early March at the latest. NFL rules prohibit corporate ownership. He would like a single investor, or a pair working together, rather than a syndicate, he said.

"I'm not running a dinner party here," he said.

Currently, he and his wife, Patricia, own the franchise. She holds a majority share of the team, but he is the managing director and controls the team's votes in league matters.

The Ravens hired the investment banking firm of Alex. Brown, a unit of Deutsche Bank AG, to restructure the team's debt and help find a minority investor. Modell said he wants to retain control, and for his sons, David and John, to inherit the franchise. David is president of the Ravens.

Experts say such a sale can be accomplished, but it won't be easy. Buyers aren't likely to pay top dollar without obtaining control sooner or later. Modell could offer a "call" option that would pass ownership of the team to the new investor in the future. He also could offer a "put" option through which the team would promise to buy back the share at an appreciated price.

Marc Ganis, a Chicago-based financial consultant, said the Ravens also could promise a certain percentage of profits each year, called a "priority distribution," to the new investors that would reward them without giving them power. These dividends could be funded through the interest savings the team would experience if it paid off a chunk of its loans.

If the restructuring were accomplished, it could provide the cash-strapped team with more money down the road for players, Ganis said.

"In the mid-term to long-term, it should be good for the fans," he said.

The franchise ran into trouble in Cleveland, where it played in an old stadium and spent heavily on players in an unsuccessful bid to get to the Super Bowl. Frustrated with progress toward getting a renovation of Cleveland Stadium and carrying $64 million in debt, Modell moved the team to Baltimore in 1996.

The publicly funded stadium at Camden Yards has greatly improved revenues for the team, but the costs of the move also boosted expenses. Modell was forced to pay $12 million to settle a breach-of-lease lawsuit by Cleveland, $73 million to buy out two part-owners of the team and a $29 million relocation fee imposed by the NFL.

Sales of $60 million in seat licenses in Baltimore covered some of these costs. And the league has agreed to stretch out the $29 million relocation payments, with interest. To cover the other costs, Modell restructured his loans with a $185 million package of debt -- then a record for an NFL franchise.

The team remains profitable and has not missed payments to banks. But, earlier this year, its ratio of debt to operating profit fell below the benchmark lenders imposed in 1997, and two of them demanded repayment.

Pub Date: 9/08/99

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