Capital Call

I'll put this up front. Last summer I thought that when John McCaw sold his Conucks hockey team for 200 million that he would turn right around and buy into the Sonics. I still believe that. I dont' have any information, no news story, no connection, just a feeling.

"Sharing the burden
By Percy Allen
Seattle Times staff reporter
Wally Walker, Sonics president and CEO, confirmed yesterday that the franchise has issued a mandatory capital call to its shareholders to raise funds that would cover operating losses for this season projected by the team at $15 million.
Walker declined to comment in detail on the agreement, nor would he specify how much money the team hopes to generate. However, two sources with knowledge of the process said the Sonics expect to raise about $17 million.
In an e-mail last week to members of The Basketball Club of Seattle LLC, a group of local private investors who purchased the Sonics and the WNBA's Seattle Storm in April 2001 for $200 million, Walker notified them of their financial commitment. The Times obtained a copy of the original contract, which states: "The Subscription of Agreements signed by each unit holder has a 10 percent mandatory capital call feature, which, if needed, would be required of all owners."
Shareholders have until early March to raise the funds and Walker confirmed that partners who do not meet capital calls face dilution of their ownership stakes. Sources have indicated that a major local investor has inquired about purchasing a significant stake in the Sonics and that an announcement is forthcoming.
Walker, however, denied rumors and reports that the team is for sale, but said individual owners can do whatever they want with their shares.
Before the season, Howard Schultz, the Sonics majority owner and chairman of The Basketball Club of Seattle, refuted claims that he was seeking to sell his share in the team, which is believed to be about 42 percent.
"I'm not selling the team," Schultz said on Oct. 4. "I have no intention of selling the team. I'm excited about the season. Excited about the direction we're going. ...
"I learned a long time ago at Starbucks when there was a lot of cynicism and concern about whether or not we could build a national company around coffee and a lot of people doubted that. What we demonstrated was that through hard work, passion, commitment and perseverance and surrounding yourself with great people that you can succeed."
Schultz's declaration preceded revelations the team is $78 million in debt and has lost $50 million in the past five years.
On Tuesday, in a speech sponsored by the Puget Sound Business Journal, Walker confirmed reports of the losses and reiterated his stance that the team's financial woes cannot be reversed by the team's surprising 33-13 record. Despite a $53 million payroll that is the 10th-lowest in the NBA, according to Sonics officials, even if the team sells every seat for every game this season it team would generate $32 million, which would be $6 million below the NBA average.
Walker has said the Sonics are losing money because of their lease agreement that requires them to give the city of Seattle a large share of revenue from suites, parking and KeyBank naming rights to pay off the $74.5 million in debt used to finance the arena's 1995-96 renovation.
At this time, the Sonics have no plans to use the funds generated from the capital call to help finance proposed renovations to KeyArena.

Percy Allen: 206-464-2278 or pallen@seattletimes.com
Copyright © 2005 The Seattle Times Company"

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