FanPost

Players or the Owners?

Hey guys.  Let me begin by confessing ignorance to the state of finances in the NBA.  This post has more to do with posing questions then providing a point of view.

First, the owners claim that 22 teams are losing money.  The players do not think that interest payments should count as a loss in these calculations.  While at first glance, this may seem unreasonable on the part of the players, when you do a little digging into the notion of a leveraged buyout, it makes a bit of sense.  In essence, an investment company will purchase an asset while putting up little in the way of down payments, but gaining loans with the asset itself as the collateral.  As a result, the company takes on a tremendous debt burden.  To see just how dangerous this can be, one need look no further than Sam Zell's notorious takeover of the Tribune Co..  Another, incredibly perverse example of this sort of financial transaction is the case of the Simmons Corporation, whose fortunes were examined in the following, excellent NYtimes article.

http://www.nytimes.com/2009/10/05/business/economy/05simmons.html

My question is this: Is the debt burden claimed by the owners an example of the normal cost of doing business, or is it the consequence of one of these perverse, modern financial manipulations such as the leveraged buyout?  Are the owners putting little or no money down and then expecting the players to shoulder the incredible debt burden imposed by these financial manipulations?  Are the players expected to compensate for poor management and bad business practices?  This is my suspicion but I do not have the information.  Any recommendations where this may be found?  What are your thoughts on this subject?

FanPosts are user-created posts from the BlogABull community, and are to be treated as the opinions and views of that particular user, not that of the blogger or blog community as a whole.

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