Baltimore Ravens owner Art Modell said yesterday he will try to sell a minority share of the franchise to erase some of the team's large debt and to facilitate estate planning.
Modell, 73, said he plans to contact an investment banking house soon to assist him in finding a buyer for his franchise, which is burdened by debt. He said he hopes to have the transaction completed within a year.
"We're going to try and restructure and bring in an outside investor," said Modell, who is the longest-serving owner in the NFL. "I need it for estate planning, which reduces tax exposure, and to reduce the team's debt. This is not a big deal. We're in fine shape."
Modell said the new investor would not be offered a controlling share of the franchise, but might be offered a right to buy control if the team were sold. Modell has said he wants to leave the team to his son, team president David Modell. The Baltimore Sun, which first reported Art Modell's intentions, also reported that Modell's wife, Patricia, is technically the controlling shareholder. Modell declined to address other aspects of the financial arrangement.
Modell owes Boston-based Fleet Bank about $185 million that he borrowed to finance the relocation of his team from Cleveland to Baltimore in 1996.
Bankers contacted yesterday said privately that Modell might have to pay as much as $25 million a year on such a loan.
In a telephone interview from his home, Modell said, "There's some technical difficulties with the loan," but added that, "We've never missed an interest payment or pay down in principal."
A banking expert, who asked not to be named, said large business loans often contain financial conditions, known as "covenants," that the customer must abide by. The most common covenant is that a borrower have cash flow in excess of needed debt service. If a person breaks one or more covenants, he or she might be in technical default on the loan without missing a payment.
The organization underwent a major financial restructuring two years ago, which required NFL approval.
Modell had struggled financially in Cleveland, ringing up as much as $21 million in losses his last two years there, spending $73 million to buy out his partners and another $12 million to break the lease at Cleveland Stadium. Modell also plans to dispute a $28 million relocation fee that he owes his fellow owners, according to the Sun.
"We're not at all worried, they've been timely in all their payments to the stadium authority," said Edward Cline, deputy director of the Maryland Stadium Authority. "They reimburse us regularly for the cost of stadium operations."
Modell's deal with the Maryland Stadium Authority gives him all the revenue from the $226 million, 68,000-seat PSINet Stadium, which was built at taxpayers' expense. The stadium is consistently sold out, and the NFL television revenue brings Modell about $60 million a year.
"The problem is not revenue, it's an expense issue," said one source familiar with Modell's situation. "He can't stop spending money."
Ravens spokesman Kevin Byrne said a tenfold increase in the size of signing bonuses over the past several years has added to the team's expenses.
"The contracts with players are shifting to signing bonuses . . . from one or two million before to about 10 million," Byrne said. "An influx of cash helps pay for that sort of thing."