Dallas Stars Sale & Bankruptcy: Details On The Purchase Plan & Bankruptcy Proceedings

Yesterday the Dallas Stars kicked off the final steps in completing the sale of the franchise when they filed for bankruptcy in Delaware. As we've stated for a while now, these bankruptcy proceedings are needed and have been planned far in advance in order to assure that all creditors are satisfied as part of the plan. Now that the filings are complete, we've been able to spend nearly every waking hour since yesterday afternoon going through these documents and determining just how much we didn't know.

In all, there aren't many surprises. We've known that Tom Gaglardi was the "Stalking Horse", a bid used to kick off the bankruptcy proceedings and expedite the sale. In short, once the bankruptcy proceedings are complete and there are no other qualified bids made, then Gaglardi will purchase the team in accordance the specifics procedures spelled out the purchase agreement.

Also, and this is explicitly stated in several places in the document, the purpose of this sale is to ensure the Dallas Stars stay in Dallas and that Tom Gaglardi is committed to this as well. It's in a legal document now.

The "Stalking Horse Purchase Agreement" and the bankruptcy filings of the team are all tied together. The documents explicitly state that the purpose of filing for bankruptcy was to facilitate the sale of the team to Gaglardi, as well as to open up the sale to any potential parties who could make a qualified bid on the team. If more than one bid is made, then the sale goes to auction -- whoever wins the auction will then purchase the team.

After the jump, we've broken down these documents as best as we can to include as much of the pertinent information as we can find. There are many, many documents to go through with lots of details -- but I believe I've done the best I can at breaking it all down and providing it as simply as I can.

Right now, here is the proposed timetable -- although this is all subject to court approval.

Hearing to consider bidding procedures -- September 22
Qualified Bid deadline -- October 22
Objection deadline -- October 25
Reply date (if any) - October 31
Auction date -- November 21
Combined hearing -- November 23

If you have any questions, do not hesitate to ask. Lots of legal information after the jump....

** The plan breaks down the timeline of the proceedings, saying that after discussion with the NHL and the debtor's senior secured lenders, the team finalized a purchase agreement with "Dallas Sports & Entertainment, LP, which is listed as the "Stalking Horse Asset Purchase Agreement".  

This provides for the sale of all assets to the Stalking Horse under the prepackaged plan and is only subject to higher and better offers in a bidding process -- subject to NHL approval of the bid and bidder.

** The Dallas Stars as a company are broken down into four groups: Dallas Stars, L.P. (a limited partnership out of Delaware), Dallas Arena LLC, Dallas Stars U.S. Holdings Comp. and StarCenters LLC. All are debtors as part of the bankruptcy filing.

** The filings provide a summary of the Prepackaged Plan, which details everything that we've been reporting on for the past year. The plan provides for the sale of all of the assets of the debtors which includes:

- The hockey team which is a part of the National Hockey League; the Dallas Stars.
- The interests in four ice arenas and related assets in the Dallas-Fort Worth area.
- Ownership interests by Dallas Arena, tied to two other companies, which own and lease the American Airlines    Center.

**The plan specifically states that that the purpose of the sale is "to allow for a transition in ownership of the NHL Stars, while ensuring that the team continues to play professional ice hockey at the AAC in Dallas.

** At the same time that a Chapter 11 filing was made, a motion was filed seeking approval of the Stalking Horse Asset Purchase Agreement, as well as approval of bidding procedures and the scheduling of all hearings.

** As expected, as part of this bidding procedures the team will market the Purchased Assets for any potential purchasers that meet all requirements of the court and have prior approval of the NHL.  If any potential purchaser  submits a bid that is higher or better than the Stalking Horse bid, an auction will be held if more than one qualified bid is made. 

** If Tom Gaglardi is outbid and does not purchase the team, he will receive $4 million as part of a "break up fee". This is what provided an obligation for Gaglardi to become the Stalking Horse Bid, since he'll receive payment should he be outbid.

** Here is where it gets tricky. For any interested party to make a qualified bid against Gaglardi and the Stalking Horse Purchase Agreement, they must meet these requirements:

- The bid must be at least $10 million greater than the total value of the Stalking Horse Asset Purchase Agreement.

- The bid must be made by an "Acceptable Potential Bidder", which means that they've met the approval of the NHL and have proven that they have the financial capability and corporate authority to make such a bid on the team.

- There is no "break-up fee" for qualified bidders. Only Gaglardi gets that honor.

- All bids must be made prior to the deadline and there must be more than one qualified bid for the sale to go to auction.

- If the sale does go to auction, each bid must be at least $5 million more than the bid proceeding it.

** Here are the most substantial unsecured claims against the Dallas Stars:

** There are all 15 players still owed money as part of "deferred signing bonuses": 

- John Klingberg
- Patrick Nemeth
- Brenden Dillon
- Tomas Vincour
- Scott Glennie
- Jack Campbell
- Tyler Beskorowany
- Philip Larsen
- Matt Fraser
- Mikhail Stefanovich
- Ondrej Roman
- Luke Gazdic
- Mathieu Tousignant
- Jace Coyle
- Hubert Labrie

** Finally, here's the details on the Stalking Horse Asset Purchase Agreement proposed b Tom Gaglardi:

- The sale makes note that the acquisition includes 50% interest in the American Airlines Center, and that Gaglardi is committed to keeping the Stars in Dallas.

- Negotiations between the Debtors (Dallas Stars) and Gaglardi concluded on September 1.

- The sale includes the Dallas Stars team, all assets and interests associated with the Dr Pepper StarCenters and the sublease of the AAC. 

- The sale price includes full payment of the loan to the NHL, of at least $50 million in cash, payment in cash to pay expenses and fees relaing to the sale process, incurring debt in an aggregate principle amount not to exceed $100 million for partial satisfaction of the major secured claim, as well as the assumption of certain assumed liabilities.

- Gaglardi was required to place $15 million of the purchase price in escrow prior to the filing.

*****

The sale price is listed at just over $266 million several times in the documents, but the details of the purchase agreement by Tom Gaglardi only spells out around $150 million or so. I'm guessing that the rest is made up of assumed debt associated with the creditors, as well as the value of the 50% share of the AAC. 

Gaglardi's bid to purchase the Dallas Stars is substantial and is one that has been preapproved by all of the lenders. He's paying off a substantial debt to the NHL immediately after the sale is complete and is taking on a good amount (66%) of the debt associated with the senior lenders, in this case likely to be Monarch. 

It's going to be hard for any potential party to outbid Gaglardi and they've set up this Stalking Horse agreement in such a way to make it hard for another bidder to not only make a serious push to outbid Gaglardi, but to satisfy all of the requirements of the prepackaged plan to be an Acceptable Potential Bid.