Kings’ Crisis Shown to Be Worse Than Thought

The Kings’ persistent financial problems took a turn from bad to worse last spring, according to documents filed Friday in U.S. Bankruptcy Court in Los Angeles.

A glimpse into the struggles of the cash-starved team was offered in a motion filed by bankruptcy trustee R. Todd Neilson, seeking an emergency hearing for authority to approve $10 million in financing for the Kings. A hearing is scheduled Monday before Judge Lisa Hill Fenning.

The already shaky finances of the team had been propped up during the season by Laker owner Jerry Buss and the NHL but entered a new realm of chaos in the spring. Court documents, obtained by The Times, reveal that the bankruptcy trustee--who controls 28% of the team--obtained permission for the Kings to borrow $9 million from the NHL in April.

Then the Kings, however, were hit with two more problems. The loan never transpired because Bank of America--which holds a $50 million lien on the team’s assets--refused to subordinate its liens to the NHL. In May, the Kings missed the playoffs for the second consecutive season, losing millions of dollars in potential postseason revenue.

In court papers, Neilson’s attorney Leonard Gumport, said that Bank of America informed him in May that the Kings had defaulted on its loan from the bank.

These developments led to several additional concerns. King fans, owed about $1.5 million in all, have waited more than two months for their postseason refunds for playoff tickets. As previously reported, other areas of major concern are $1.9 million in overdue payroll taxes and $2 million in payments to Wayne Gretzky.

The proposed interim financing is coming from Bank of America and is guaranteed by an investment group headed by Philip F. Anschutz and Edward P. Roski Jr. In contrast to a previous proposed loan, this transaction does not include any issuance of stock. Previously, the trustee refused to consent to the financing, saying it would “chill bidding,” for the Kings.

In return for providing a loan guarantee, Anschutz and Roski will receive fees from LAK Acquisition Corp. of $1.575 million, plus legal fees and expenses not to exceed $250,000. Court papers state that the Kings will only use the financing for the payment of postseason playoff refunds to season ticket holders, payroll taxes and payroll, amounts owed to the NHL and Bank of America and other necessary debts.

All the while, there has been a serious mandate from the NHL to get the team sold as quickly as possible. The two most serious groups still appear to be Anschutz and Roski and an investment group headed by Buss. Sources say the team also could still slide into a bankruptcy proceeding--which has nearly happened on other occasions. One source refused to speculate on the odds of such an event when asked if it was remote.