A look back at how Mario Lemieux took ownership of the Pittsburgh Penguins.
On Jun. 24, 1999, Fifteen years after being drafted by the Pittsburgh Penguins, Mario Lemieux became the team’s owner and the first player turned owner in a major professional sport.
The Pittsburgh Penguins were operating under federal bankruptcy protection and were the first major US sports team in 25 years to do so, coincidentally that last team was also the Penguins in 1974.
Lemieux’s bid to rescue the Penguins was essentially the last play in the book to save the team after the NHL threatened to move or fold the club if a deal was not reached in the court.
The NHL endorsed Lemieux’s deal but a couple of other creditors (SMG and Fox Sports) could have derailed the plan in court.
With the Penguins roughly $100 million in debt, Lemieux was the largest creditor and was owed roughly $32 million from salary deferments.
Note: This is just a quick recap of the events surrounding the sale to Lemieux and does not represent the full scope of the goings-on.
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Out of Control
The predicament Pittsburgh found themselves in 1998 began in 1991 when Howard Baldwin took over ownership of the team.
The Previous owner Edward DeBartolo Sr. estimated that he lost $25 million in building the team, and the Penguins climbing into the upper echelon of NHL clubs with back-to-back Stanley Cup victories, salaries weren’t far behind, including the $42 million deal in 1992 that Lemieux signed.
Years of ballooning salaries and a foggy lease situation at Pittsburgh’s Civic Arena, brought the Penguins to their knees in Oct. 1998, which lead to the bankruptcy declaration.
Quite a Markup
The SMG group located in Philidelphia leased the arena from the Public Auditorium Authority (PAA) for $350, 000 a year, then SMG subleased the arena back to the Penguins for a cool $6 million a year, which was the most expensive lease deal in the NHL.
The SMG group gave Baldwin a $24 million payment which was re-negotiated four times and compounded Pittsburgh’s problems.
Bankruptcy Court Judge Bernard Markovitz determined the $24 million acted more like a loan than a lease agreement.
The ruling cleared the path for Lemieux’s deal (although a new lease agreement would need to be negotiated), as Fox Sports recanted any objection they had to the transaction, following the court proceedings.
Lemieux’s proposal would see him convert $20 million (of $32 million owed) into an ownership stake, take a $5 million payment and forgive $7.5 million of the money that was owed to him.
Lemieux would also inject the team with $50 million ($38 million had already been raised by the deal closed) to clear up debts and provide some financial stability.
With the deal in place, one of Lemieux’s first orders of business was to bolster season ticket sales that had eroded since Lemieux retired in 1997.
His plan was simple, lower ticket prices and raise the team’s internal salary cap.
The team also signed a broadcasting deal with Fox Sports Pittsburgh that paid the team $9 million per year for TV rights. The future was looking rather bright in Pittsburgh.
With the current value of the Pittsburgh Penguins sitting at around $665 Million, it is safe to say Lemieux’s “investment” is going to pay off – big time.