The Sacramento City Council found out seven years after the deal was done that the former city treasurer had made a change in the terms of a $73 million loan to the Kings that enabled the Kings to get a new NBA backed loan. The terms resulted in Sacramento’s loan being put second in line to the NBA’s loan and with an additional $5 million being added to Sacramento’s ownership in the Kings for doing this according to a Sacramento Bee article.
The city treasurer at the time, Tom Friery considered it a no brainer and never brought it up before the city council but the current city treasurer was told by the city attorney the council should have made the decision.
The problem I see is that Sacramento’s loan of $68 million is guaranteed by the $25 million investment in the Sacramento Kings. But the remainder of the loan is guaranteed by the value of the Arco Arena which was 47 million, but the Kings have recently requested the value of the Arco and land be changed to a more accurate figure of $23.7 million.
So Sacramento seems to have a risk of at least $19 million, if the NBA is not already first in line for the Arco Arena and surrounding land. I don’t know of too many accountants that will recommend taking second in line to be repaid with that kind of risk and reward. Or that would consider the deal so minor as to not report it to those responsible for repaying it.
The owners of the Kings, the Maloofs, have recently sold the liquor distributorship started by their father to concentrate on the Sacramento Kings, the Palms in Las Vegas and other ventures including the Maloof Money Cup.
But, the Sacramento Kings have been doing poorly for years after overpricing the market, and the economy in Sacramento will be bad for years to come. Las Vegas and the Palms have been having major problems the last few years and that may not change anytime soon.
Maybe they should have kept the cash cow liquor distributorship. What could have prompted them to sell?