Telecommunications executive Jeffrey P. Sudikoff and partner Joseph Cohen cleared a major hurdle toward salvaging their $60 million bid to buy a majority interest in the Kings from Bruce McNall by arranging for Bank of America to fund the deal temporarily, sources close to the talks said Sunday.
But the deal still isn't a sure thing. The main risk is that one of McNall's creditors could object to the new arrangement and seek to disrupt the transaction, possibly by trying to force McNall's financially strapped operations into involuntary bankruptcy proceedings, the sources said.
McNall has been trying to sell 65% of the Kings to Sudikoff and Cohen largely to shed his biggest financial burden--a $92 million loan with Bank of America. Sudikoff and Cohen had cleared nearly every hurdle by late last month, with the NHL's Board of Governors approving the sale.
Then a federal grand jury investigation whether McNall has falsified loan documents came to light. That made the two lenders Sudikoff and Cohen were counting on--insurance giants Cigna and Allstate--skittish. Bank of America has since emerged as the only hope for the two until the extent of McNall's legal and financial problems becomes more clear.
According to sources, the deal worked out with Bank of America over the weekend has Sudikoff and Cohen still paying $60 million. But the two are likely to eventually increase their stake in the team, possibly to as much as 75%. The remaining percentage McNall owns would be put into some form of trust, with cash to which he is entitled used to pay off his other creditors.
What makes the new deal different is that the amount of cash that would be distributed to McNall's creditors will be reduced, raising the risk that some of them may object to the arrangement and ultimately try to disrupt the deal.
Reached on Sunday, Sudikoff confirmed an agreement had been made with Bank of America and said he is trying to work out details with McNall, but declined further comment. A McNall spokesman declined comment. The spokesman did confirm McNall is in Switzerland in what he described as a long-planned business trip.
As previously reported, McNall's financial and legal problems have been growing during the last year. He is being sued by an increasing number of creditors, including European American Bank for $28.3 million. Twentieth Century Fox has a lien on his assets over a debt that stands at about $5 million and Republic Bank in Torrance has a court order requiring McNall to pay $2.1 million on a loan on which he defaulted.
A McNall lawyer last week confirmed the grand jury investigation to The Times, but added that McNall believes no action will be taken when it concludes.
Creditors say the sale to Sudikoff and Cohen is necessary if the Kings are to avoid bankruptcy. Sources have told The Times that Sudikoff has already spent more than $4 million covering the Kings' payroll.
Under the latest agreement, Bank of America will provide financing with the understanding that Sudikoff and Cohen will eventually seek to refinance the deal.
Sudikoff is the founder and chief executive of the Culver City-based IDB Communications, the fourth-largest provider of international long-distance service in the United States. Cohen is an IDB director.
Sudikoff traced his interest in a potential King deal back to last fall. He and Cohen had dinner at the Forum with McNall before the season opener against Vancouver on Oct. 6. Across the table from Sudikoff and Cohen was the rival camp from Sony. Sony had been talking about a King deal on and off since 1992.
McNall revived the Kings--essentially through the Wayne Gretzky acquisition--after he took majority control of the club in 1988, buying the remaining stake from Jerry Buss. Since McNall has had majority control, the Kings have won one regular-season divisional title and reached the Stanley Cup finals in June. It was the first time the team had advanced past the second round of the playoffs since entering the league in 1967.
There was a time when any sale of the Kings would have been unthinkable for McNall. Last season, during the Kings' run to the Stanley Cup finals, he said he would never consider selling the team.
Many questions remain after the Kings' most disappointing season in franchise history, in which they finished 16 points out of a playoff spot. There has been speculation the Kings' management team of president Roy Mlakar and General Manager Nick Beverley will not return next season.