Three Banks Fail to Prevent McNall Sale of 72% of Kings

Bruce McNall’s era as sole owner of the Kings ended Monday as the financially ailing sports executive formally sold 72% of the franchise for $60 million to telecommunications executive Jeffrey P. Sudikoff and entertainment executive Joseph M. Cohen.

The sale came despite an unsuccessful eleventh-hour attempt by three of McNall’s creditors to have a U.S. Bankruptcy Court judge appoint a trustee to seize control of McNall’s assets.

“We’re very happy that it’s all done. It’s been an excruciating process,” Sudikoff said of the deal, which was first announced--tentatively--six months ago. McNall in a statement called it a “great day for all of us associated with the Kings.”

Several concerns of fans and Kings employees are expected to be addressed shortly, Cohen said, including making the payroll due Monday and offering refunds for season ticket-holders who bought playoff tickets.

McNall, who has been pressured by creditors in the past few months, arranged the sale as part of a plan to shed a $92 million loan with Bank of America. The bank will receive the entire $60 million in proceeds from the sale.

In addition, the bank receives a $12.5 million, 20-year note from Walt Disney Co. that is part of the compensation due the Kings for consenting to allow Disney’s Mighty Ducks of Anaheim franchise. It also receives half of McNall’s 20% interest in any new stadium that Sudikoff and Cohen want to build.

McNall’s partners and lawyers were emphatic in saying that McNall will stay active in the team as a minority partner and as president of the Kings, handling hockey-related decisions. One insider put his annual salary at about $600,000 with potential bonuses, although a source close to McNall disputed that figure.

But other sources note that McNall’s role probably will be greatly diminished by his growing financial and legal problems. As previously reported, a federal grand jury is investigating whether McNall falsified loan documents.

And three lenders--Credit Lyonnais, European American Bank and IBJ Schroder--are seeking in U.S. Bankruptcy Court to force McNall into personal bankruptcy proceedings and liquidate his assets. McNall must appear Monday at a hearing to answer questions about his finances. He also cannot move his assets and agreed not to leave the country before a May 27 hearing.

The sale came as the French bank Credit Lyonnais--which claims McNall owes it $121 million--filed papers accusing McNall of defrauding the bank through such actions as paying himself a dividend with money that should have repaid a loan, offering as collateral assets already pledged to another bank and pledging race horses that he didn’t own as collateral. A McNall lawyer said that “a large number” of the allegations are “materially false.”

Under the King deal, McNall--who retains 28% to be held in a partnership--also retains an option to buy back an additional 52% of the team in seven years. But most sources familiar with his financial condition are skeptical that he will ever be in a position to exercise the clause.

McNall, who first bought a minority stake in the team in 1986 from Jerry Buss, became the Kings’ sole owner in March of 1988 and began making changes in rapid fashion. Months later, he turned Southern California hockey into a hot ticket with the acquisition of Wayne Gretzky and two other players from the Edmonton Oilers in one of hockey’s biggest trade evers.