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Sports financing could tighten with CIT bankruptcy

in.reuters.com

Sports financing could tighten with CIT bankruptcy

CHICAGO  –  Sports markets already losing business due to the tight credit markets and weak economy could get worse if embattled U.S. lender CIT Group Inc files for bankruptcy, analysts and sports bankers said on Thursday.

Shares of CIT, which lends to hundreds of thousands of small and medium-sized firms including sports teams, plunged more than 74 percent due to investor fears of a failure after the company said last-ditch bailout talks with U.S. Treasury officials had ended.

CNBC television, citing a source close to the company, said CIT, which has about $75 billion in assets, is now pursuing a plan that is likely to include a Chapter 11 bankruptcy filing on Friday.

While CIT’s sports advisory and finance group is only a small part of the company’s portfolio, it has arranged financing for a number of hockey, basketball and soccer teams in the United States, Canada and England.

While CIT is not considered a major player in the sports finance market, its potential exit would worsen an already tight credit market, especially for teams in the National Hockey League, analysts and bankers said.

“It’s going to hurt at the edges and it’s indicative of how little capital will be available for sports owners, especially if they want to do any kind of refinancing or take on additional debt,” said Robert Boland, professor of sports management at New York University.

“The pool of sports financing has collapsed over the last few years,” he added.

Officials with CIT as well as within its sports advisory group could not be reached to comment.

Among the teams to which CIT has loaned money or arranged financing over the last few years are the Edmonton Oilers, Ottawa Senators, New Jersey Devils, Nashville Predators and

Dallas Stars of the NHL, as well as the National Basketball Association’s New Jersey Nets and Manchester United of soccer’s English Premier League.

Spokesmen for the Senators and the Predators declined to comment, while officials with the other teams could not be reached.

NHL officials also declined to comment on CIT, but Commissioner Gary Bettman said on Wednesday that the North American sports league is weathering the recession fairly well.

He cited record attendance and revenue, higher TV ratings and continued strong corporate sponsor support.

TROUBLES BETWEEN THE PIPES

Bankers wonder whether CIT is backing the almost $575 million bid by the Molson family to buy the Montreal Canadiens from George Gillett.

A spokesman for Gillett and the storied NHL team declined to comment on the pending deal and its structure, while a spokesman for the Molson family said only that the deal is expected to close by the end of the summer.

CIT’s troubles are not welcome for the NHL as the bank was one of the few still providing cash for the league, several analysts and bankers said.

“Whenever you take a player out, whether they’re a lead or a syndicate financial source, these days there are very few substitutes,” said Marc Ganis, president of Chicago consulting firm Sportscorp Ltd.

“It’s really an odd situation for (the NHL) because in many cases the league is as strong as it’s ever been, but there are a number of very distressed franchises and there isn’t a great

pot of gold at the end of the rainbow,” he added.

In May, the NHL’s Phoenix Coyotes filed for bankruptcy, while the month before creditors declared Texas billionaire Tom Hicks’ sports group, which owns the Stars and the Texas Rangers baseball team, in default on $525 million in loans.

Last year, CIT helped finance half of a Canadian businessman’s $200 million purchase of the Edmonton Oilers, while the year before it arranged $130 million in loans to allow the Ottawa Senators to refinance their debt.

One sports banker, who asked not to be identified because he works closely with sports teams, said a possible CIT exit “will put yet another dent in sports financing liquidity if it happens.”

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Hulkenberg replaces Sutil at Force India

Nico Hulkenberg is determined to make the most of his second chance in Formula One after being given one of Force India’s two race seats for 2012.

The 25-year-old will replace fellow German driver Adrian Sutil, who departs after six years at the UK-based team.

Hulkenberg was Force India’s reserve driver this year behind Sutil and Scottish rookie Paul di Resta, who will retain his seat after finishing 13th overall with 27 points in his debut season.

“It wasn’t easy to watch from the sidelines this season, but I did my best to help the team and show what I was capable of,” said Hulkenberg, who was released by Williams in 2010 despite earning his maiden pole position in his rookie season.
I’m extremely motivated for 2012 and would like to thank everyone for believing in me and giving me this chance. I’m keen to get down to work over the winter to develop our new car and help the team build on this year’s achievements. The first test in Jerez can’t come soon enough.”

The 28-year-old Sutil’s future is uncertain despite finishing ninth overall with 42 points. The only teams with seats available are Williams and HRT.

“Our new line-up means we say ‘goodbye’ to Adrian Sutil, who has been with the team since we entered the sport,” said Force India boss Vijay Mallya.

“He has been an integral part of our success over the past four seasons and we wish him well for the future.”

Di Resta hopes to build on his promising first season.

“I’m really excited about 2012 and there is a real sense of belief that we can continue to push the top teams and take another step forward,” the 25-year-old said.

“I’d also like to thank the team for all their hard work this year and for all the support they’ve given me. I’ll take some time out over the next few weeks to recharge my batteries and hopefully come back even stronger in 2012.”

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