Trustee for 7 percent of Sacramento Kings argues in bankruptcy court that limited partners of the team should have "right of first opportunity" or "right of first refusal."
Whether limited partners of the Sacramento Kings have a right of first refusal to match an offer from a Seattle group remained in question after a bankruptcy hearing in Sacramento on Thursday.
A trustee who holds a 7 percent share of the team and is in bankruptcy is arguing that the limited partners should have a “right of first opportunity” or “right of first refusal,” which could be a potential stumbling block in the sale of the team from the Maloof family to the Chris Hansen-led group that has an agreement to purchase the Kings.
“If there is no right of first refusal with the 7 percent, then the 7 percent is not a material roadblock to the Kings moving to Seattle,” said Michael McCann, a legal analyst for NBA TV. “The right of first refusal is everything.”
If it is determined that the limited partners do have a right of first refusal, they could potentially block the sale from the Maloofs to Hansen’s group.
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According to The Sacramento Bee, the trustee “is negotiating with the Maloof family to gain access to crucial documents regarding the Maloofs’ pending sale of the team to a group from Seattle” to more fully determine if there is a right of first refusal.
The Bee reported that Donald Fitzgerald, the attorney for trustee David Flemmer, said in U.S. Bankruptcy Court that he hopes to gain access to the details of the Seattle sale under a confidentiality agreement. The Bee further reported that if the two sides can’t work out their differences, Fitzgerald said Flemmer could seek a court order compelling the Maloofs to turn over their records.
McCann said he thinks the NBA would want the issue resolved before voting on whether to approve the sale to the Hansen group. The Bee reported that an NBA lawyer, Martin Zohn, said in court that the NBA Board of Governors is expected to vote on the sale at its annual spring meeting on April 19 in New York. That is also the same day that sale of the bankruptcy share is expected to happen. According to The Bee, Judge Christopher Klein denied a request to delay the sale of the 7 percent share (held by Bob Cook) by a month.
Hansen has agreed to buy 65 percent of the team for $340 million (based on a total valuation of $525). A $30 million nonrefundable deposit to the Maloofs is due by Friday. McCann said that deposit should act to further strengthen the legal binding of the agreement between the Maloofs and Hansen.
NBA bylaws require that the sale needs approval of 23 of the 30 owners. Relocation needs approval of a majority of the league’s owners.
Sacramento Mayor Kevin Johnson is attempting to assemble an ownership group to make its own bid to keep the team. It has been thought he could announce that group, as well as the details of a new arena in Sacramento, this week.
McCann said the latest developments make it harder to guess if the sale will be approved and if the Kings would relocate to Seattle for the 2013-14 season. The team is expected to apply for relocation by the NBA deadline of March 1.
“It’s still messy,” McCann said. “And I’m sure Mayor Johnson is going to do everything he can to pursue any potential avenue to keep the team in Sacramento. If he can get eight owners to say, ‘This isn’t the right move right now. Let’s wait,’ the team stays at least for a year.”
McCann, though, also noted that much remains unknown because the sale agreement has not been made public.
“The thing we know for sure is Chris Hansen made a substantial offer to gain control of the Kings, and at this point there is no reason to think there are any red flags with the offer,” he said. “That’s a big plus for Seattle that the one concrete piece of information that we have is that the bidders are wealthy without issues in their backgrounds that would cause red flags.”
Bob Condotta: 206-515-5699 or email@example.com.