Lemieux To Take Over Penguins

Smoke rises above Ramadi's soccer stadium after U.S. forces called in a laser guided airstrike, in Ramadi, 70 miles west of Baghdad, Jan. 30, 2006.
AP

The Penguins will stay in Pittsburgh under the ownership of former star Mario Lemieux in a plan approved today by a U.S. bankruptcy judge.

The NHL had threatened to sell or fold the franchise if Judge Bernard Markovitz had not supported the plan. The decision makes Lemieux the first pro sports player to acquire a controlling stake in a franchise he once played for.

Lemieux's plan calls for converting $20 million of the $32.5 million the team owes him for his years as its star into an ownership stake in the team. He will get a $5 million payment and forgive the other $7.5 million. Lemieux also said he would have $50 million in new money to operate the team and satisfy some debts.

"He did so much for the city and without him, hockey wouldn't be in Pittsburgh," Penguins captain Jaromir Jagr said. "I think the city and all the people in Pittsburgh owe him a lot."

Lemieux would be the managing director, overseeing the franchise and sitting on the NHL Board of Governors but leaving day-to-day operations to management. He is expected to retain highly regarded general manager Craig Patrick and coach Kevin Constantine.

The judge said he was reserving judgment for now on whether Philadelphia-based SMG Inc. would continue as the team's landlord at the Civic Arena.

Lemieux's plan calls for removing SMG, which leases the Civic Arena from the Public Auditorium Authority for $350,000 a year, and subleases it to the Penguins for more than $6 million a year.

Lemieux argues the lease terms could make it impossible for the team to dig out of its financial troubles.

Markovitz said the two sides should continue negotiating and try to work out a new lease agreement.

The Lemieux saga began in October, when the Penguins became the first franchise in a quarter-century in any of the four major American pro sports leagues to file for federal bankruptcy protection. They also were the last team do so in 1974.

The Penguins' financial problems began not long after former Hartford Whalers owner Howard Baldwin bought the team in 1991 from Edward J. DeBartolo Sr., whose family also owns the San Francisco 49ers. DeBartolo estimated he lost $25 million building the team's 1991 Stanley Cup winners.

Short of cash, Baldwin relied upon a $24 million payment from the arena's management company, then known as Spectacor and now called SMG, to complete the sale.

It was this $24 million, which apparently was written into the sales agreement as a lease to satisfy NHL requirements, that would later come back to haunt the franchise.

The Penguins won consecutive Stanley Cups in 1991 and 1992 and the Presidents' Trophy in 1993. But there was trouble ahead as Baldwin lavished millions on players such as Lemieux, who signed a $42 million deal in October 1992; Kevin Stevens, Ron Francis and Tom Barrasso.

To pay the big contracts and keep the team competitive, Baldwin leveraged early every source of revenue. He reworked the lease with SMG several times and obtained upfront money from TV rights holder Fox Sports Pittsburgh, then called Prime Sports Pittsburgh, after losing a reported $20 million during the lengthy NHL lockout in 1994-95. He also sold off the team's merchandising rights.

Baldwin began easing himself out of the ownership picture after bringing in multimillionaire Boston businessman Roger Marino in February 1997. Marino pumped about $40 million into the team, keeping it afloat financially but alienating civic leaders, SMG, Lemieux and fans with a shoot-from-the-hip style.

Marino angered the city by signing a 10-year lease extension in exchange for nearly $12 million in arena improvements, only to secretly open relocation talks with several other cities.

Lemieux sued after Marino stopped payment on his renegotiated contract, which called for Lemieux to be paid even if he chose to quit early. He did just that in the 1996-97 season. Lemieux's $27.5 million in unpaid wages made him, by far, the team's largest unprotected creditor.

Lemieux began to quickly line up investors who kicked in an estimated $60 million. Marino agreed to pay Lemieux about $5 million to settle the dispute over back pay and also joined what became known as Team Lemieux.

The NHL, fearful Thursday's hearing would come and go without a settlement, also filed a reorganization plan calling for the team to be sold and relocated or, as a last resort, to be folded and its players disbursed throughout the league.

But NHL commissioner Gary Bettman repeatedly spoke in favor of Lemieux's plan, emphasizing the league plan was not to oppose Lemieux's, but to protect the NHL in the event of a last-minute breakdown in the Lemieux plan. NHL lawyers even sat in on the Lemieux negotiations with the creditors, SMG and TV rights holder Fox Sports Pittsburgh.

Lemieux's effort got a boost when Markovitz earlier this month threw out the Civic Arena lease, which was draining the Penguins of $6 million a year to play in the league's oldest building. He also ruled that SMG's deal with Baldwin was a loan rather than a lease, meaning Lemieux could free himself of all financial obligations to SMG simply by paying off the loan.

On Tuesday, Fox Sports Net Pittsburgh also agreed on a renegotiated TV deal worth about $10 million a year to the Penguins. Under the deal, Fox Sports pulled out of a reorganization plan it had filed with SMG, leaving creditors to choose between either the Lemieux plan or the NHL backup plan.

Negotiations went down to the wire Wednesday night as Lemieux tried to forge an agreement with SMG that would keep the Penguins in the Civic Arena until a new arena can be built, possibly by 2003.

The Lemieux group sought the deal in part to prevent costly and lengthy litigation with SMG.

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