A dispute over who will control King President Bruce McNall's assets--including his remaining 28% interest in the hockey team--has been resolved, with McNall agreeing to turn over clear control to a court-appointed bankruptcy trustee.
Although the dispute largely involved technical legal issues in McNall's personal bankruptcy case, the agreement is important in that it gives trustee R. Todd Neilson clear authority to sell McNall's interest in the Kings at some point.
No sale is planned, and Neilson has agreed to abide by NHL rules requiring league approval if he chooses to sell the stake.
The agreement also specifically states that Neilson is not waiving his right to potentially challenge McNall's sale of 72% of the Kings in May to telecommunications executives Jeffrey P. Sudikoff and Joseph M. Cohen. Sources, however, indicate that such a challenge is unlikely and that Neilson is simply preserving his rights.
Control over McNall's assets had been clouded by the formation of a so-called "creditors trust" set up by his lawyers in May to pay creditors with proceeds generated by his assets. The trust was a complicated vehicle that contained liens and claims formerly held by Bank of America, which as McNall's chief bank once held claims and liens on virtually all of his assets.
The trust, which will be dissolved, was established just before the financially ailing sports executive entered personal bankruptcy proceedings on May 27, but after three of his creditors filed papers to force him into proceedings.
Neilson and his associates objected to the trust as improper, arguing that it allowed McNall to effectively continue to control his assets rather than place them under the authority of an independent trustee as called for in bankruptcy cases. Marcy Tiffany, head of the U.S. Trustee's Office in the Los Angeles area, also objected and took a hard line on the issue.
As a result, details of the settlement, which needs bankruptcy court approval, were worked out during the past few days by Neilson and his associates along with lawyers at Levene and Eisenberg, which is handing McNall's bankruptcy case. Both McNall lawyer Richard Wynne and trustee lawyer Leonard Gumport on Wednesday hailed the agreement, saying they hope both sides will cooperate in reorganizing McNall's finances and paying his creditors.
In a statement, McNall said that spending hundreds of thousands of dollars in legal fees fighting over the issue "would not be in the best interest of my creditors or the bankruptcy estate."
McNall, who became sole owner of the Kings in 1988, sold a majority of the team to Sudikoff and Cohen for $60 million largely to rid himself of debts owed Bank of America. As previously reported, McNall has agreed to plead guilty to four criminal counts stemming from a federal investigation into McNall's banking practices and the falsification of certain loan documents.