Live&DieBillsFootball Posted April 6, 2006 Share Posted April 6, 2006 One of the reasons that Ralph is sounding the alarm about the long-term viability of the Bills is probably due to the debt load of the next owner. Ralph is feeling the squeeze from the new CBA but it is nothing compared to the squeeze that a new owner will feel. Ralph turned his $25,000 investment into the current value of approx. $700 million. No new owner is going to come in and pay cash for the franchise. Any new owner will be taking on a massive debt load putting them in the same position as Snyder or Jones. Just for example, the interest on a $700 million @ 6% is $42 million per year. That's without repaying any principal. The new CBA gives the players 59.5% of total revenues of the league. For the Bills this percentage will run much higher since they do not have the extra revenues that the big market teams have. The Bills can't sell luxury boxes for $200,000 per year or some of the other profit maximizing moves that the big market teams can make. The Bills don't currently pay any rent for the Ralph and the county picks up a lot of the additional costs of maintenance and security. The Bills also keep all of the parking revenue, concession revenue, etc. What is left for the taxpayers to give? Cash to subsidize operating expenses? Good luck on that one. Ralph's biggest worry is who is going to come up with the $700 million if there is no chance that any new owner can cover the debt service and make a profit. This will greatly reduce what a new "Buffalo" owner would be able to pay for the team. In other words a new owner in Buffalo would want to pay substantially less for the team than an new owner planning to move the team to a big market. How much would Ralph like to keep the Bills in Buffalo? Enough to take $200 million less for the team to allow it to stay in Buffalo? That's a scary thought. Link to comment Share on other sites More sharing options...
RayFinkle Posted April 6, 2006 Share Posted April 6, 2006 Just curious where you got your 700 million figure. Link to comment Share on other sites More sharing options...
Dan Gross Posted April 6, 2006 Share Posted April 6, 2006 Just curious where you got your 700 million figure. 653831[/snapback] Linky Thingy So that over-abundant $36M in operating income isn't enough? Link to comment Share on other sites More sharing options...
RayFinkle Posted April 6, 2006 Share Posted April 6, 2006 Linky Thingy So that over-abundant $36M in operating income isn't enough? 653842[/snapback] Cool link. Thanks. Link to comment Share on other sites More sharing options...
todd Posted April 6, 2006 Share Posted April 6, 2006 Good points, but there are so many ways to work around all of those issues it isn't a big deal. For example, Golisano could buy a minority share of the team now, and buy the rest when Ralph dies. No problem. Link to comment Share on other sites More sharing options...
apuszczalowski Posted April 6, 2006 Share Posted April 6, 2006 All true, but the new owner will also probably raise the ticket prices and everything else at the Ralph to bring in the extra revenue. Lots of people bash Ralph for being cheap, but maybe they should look at themselves first. You call the owner cheap, yet this cheap owner sells tickets far below the average other team in the league and keeps everything else at the stadium relatively cheap (compared to every other team in the league) Sure Ralph could probably make some more money and bring in more revenue by raising ticket prices and charging more for other things around the stadium but he hasn't. I remember seeing some people here compliaining cause the price of tickets are going up something like $5 this year. Golisano may become the next owner (in part of a team or sole owner) but don't expect the prices to stay at the level of one of the lowest in the league. He is a buisnessman who is going to treat the running of this team like a buisness and is going to do whatever he can to break even each year. Link to comment Share on other sites More sharing options...
richNjoisy Posted April 6, 2006 Share Posted April 6, 2006 Good points, but there are so many ways to work around all of those issues it isn't a big deal.For example, Golisano could buy a minority share of the team now, and buy the rest when Ralph dies. No problem. 653855[/snapback] My plan exactly this is why I keep buying lottery tickets. Megabucks is ay $162 mill right now. Could buy me a small piece of Da Bilz Link to comment Share on other sites More sharing options...
vinuch Posted April 6, 2006 Share Posted April 6, 2006 Hey he turn the Sabres around to make a profit without really raising ticket prices I believe, why could he do it with the Bills. It looks like he knows how to turn a profit without affectign the fans. Get'r done Golisano Link to comment Share on other sites More sharing options...
apuszczalowski Posted April 6, 2006 Share Posted April 6, 2006 True, he did it by imposing a team salary cap. Could you imagine this board if Golisano said he will only allow the Bills to spend $80 million next year? Link to comment Share on other sites More sharing options...
RochBillsFan Posted April 6, 2006 Share Posted April 6, 2006 Wrong approach. He has 3-4 years (maybe) to position for the acquisition. Golisano is worth $1.2B, he also used to making much more than 6% on his money and he would probably enter into this as the majority partner of a consortium of upstate investors. So....in actuality, he could buy the Bills completely right now and eliminate half of his net worth, or he can wait and take partners and continue to accumulate value on his money in preparation. In short...when Ralph is ready, he'll be ready. Link to comment Share on other sites More sharing options...
stuckincincy Posted April 6, 2006 Share Posted April 6, 2006 My plan exactly this is why I keep buying lottery tickets. Megabucks is ay $162 mill right now. Could buy me a small piece of Da Bilz 653860[/snapback] I like to take those prize numbers, make some wild assumptions, and arrive at a daily after-tax take... $162,000,000 X 0.27 (lump sum value - 40% fed/state tax) = $43,740,000...in your pocket. And then, I assume a paltry 5% earnings on that, and tax that at 40% too: $43,740,000 X 0.025 = $1,093,500 per year, divided by 365 days = $2,995 per day, forever, without touching the principal. Link to comment Share on other sites More sharing options...
Fan in Chicago Posted April 6, 2006 Share Posted April 6, 2006 One of the reasons that Ralph is sounding the alarm about the long-term viability of the Bills is probably due to the debt load of the next owner. 653805[/snapback] Couple of things on corporate finance. First of all, taking on debt is not entirely a bad thing as the interest is tax deductible. The problem is how much debt. Start up companies can take on no debt as they have no tangible assets. For the Bills, the stadium can be considered a tangible asset and hence he can take some level of debt (if company goes under, can liquidiate this asset and re-pay the senior holders). Secondly, interest is one of the items subtracted to get net income so the $36 million number, if true, is fairly healthy. Not sure how much debt RW has taken on, if any. Link to comment Share on other sites More sharing options...
stuckincincy Posted April 6, 2006 Share Posted April 6, 2006 Couple of things on corporate finance. First of all, taking on debt is not entirely a bad thing as the interest is tax deductible. The problem is how much debt. Start up companies can take on no debt as they have no tangible assets. For the Bills, the stadium can be considered a tangible asset and hence he can take some level of debt (if company goes under, can liquidiate this asset and re-pay the senior holders). Secondly, interest is one of the items subtracted to get net income so the $36 million number, if true, is fairly healthy. Not sure how much debt RW has taken on, if any. 653959[/snapback] I wasn't aware that the Bills owned the Stadium... Link to comment Share on other sites More sharing options...
apuszczalowski Posted April 6, 2006 Share Posted April 6, 2006 They don't Link to comment Share on other sites More sharing options...
Fan in Chicago Posted April 6, 2006 Share Posted April 6, 2006 They don't 653976[/snapback] Thanx for pointing it out - I was not aware of the stadium ownership. In which case, the original point may be correct in that any new owner needs to be able to finance this deal from a combination of his own money and debt. Not having the stadium essentially means that the amount of debt that could be borrowed is less (not technically but for sound financial reasons). Whether the Bills as an organization can be considered a fairly liquid asset, I don't know. Perhaps yes, because we need to make a basic assumption that the Bills will not go away from the NFL. Hence, if the new owner were to get rid of it, he would get a fair amount of his/her money back. The point of all this rambling is that the new owner must first figure out if the Bills make financial sense, if he/she can do a good job owning and managing it. If the answer is yes, how to finance the deal is a secondary matter. In any M&A, the first question is strategy and second is finance. Link to comment Share on other sites More sharing options...
Fan in Chicago Posted April 6, 2006 Share Posted April 6, 2006 So....in actuality, he could buy the Bills completely right now and eliminate half of his net worth, or he can wait and take partners and continue to accumulate value on his money in preparation. 653884[/snapback] hang on there - how does buying the Bills cut his net worth to half ? Net worth is a sum of all assets owned. He would be trading his cash (or debt) for the Bills asset. If done correctly, his net worth would stay same or go up. Link to comment Share on other sites More sharing options...
apuszczalowski Posted April 6, 2006 Share Posted April 6, 2006 How much of Golisano's $1.2B is tied up into other assets? I really doubt that that is the amount he has sitting in his bank account. He could also do what he did with the sabres and buy the stadium along with the team. (I do believe he owns the HSBC now) I don't see any one person in the area buying the entire team, I think it will be a team of investors (like Kelly, and maybe someone from other local compan's)being led by a majority owner (being Golisano) Link to comment Share on other sites More sharing options...
Fan in San Diego Posted April 6, 2006 Share Posted April 6, 2006 A marketing tip. If you can't sell the luxury boxes for 200K then lower the price to 100K or 75K or whatever until they sell. Link to comment Share on other sites More sharing options...
Live&DieBillsFootball Posted April 6, 2006 Author Share Posted April 6, 2006 Hey he turn the Sabres around to make a profit without really raising ticket prices I believe, why could he do it with the Bills. It looks like he knows how to turn a profit without affectign the fans. Get'r done Golisano 653866[/snapback] Several things have made the Sabres profitable. First, Golisano purchased the team at a good price. The team was bankrupt and several potential owners had already gone by the wayside. A looming labor problem also helped increase risk and keep the price down. The NFL, however, is riding high and team values have continued to rise. 700 million for the Bills is a lot of money. Second, ticket sales were low and many freebies were used to pump up the attendance. The variable pricing policy has helped to fill the seats, increase ticket revenue and has been a great marketing move. In contrast, the Bills have been selling out almost all of their games for the past few seasons. More revenue can only come form higher ticket prices, higher parking rates, etc. Bills tickets are one of the lowest in the NFL and I'm sure that Bills fans would still attend if prices went up moderately. Link to comment Share on other sites More sharing options...
Like A Mofo Posted April 6, 2006 Share Posted April 6, 2006 My plan exactly this is why I keep buying lottery tickets. Megabucks is ay $162 mill right now. Could buy me a small piece of Da Bilz 653860[/snapback] Hey Rich if you win and buy a small piece of the Bills, can you get me a job with the Bills? Something with a "Vice President" title to it! Link to comment Share on other sites More sharing options...
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