Friday, July 19, 2013

Washington Post Watch: What's the deal with Ted Leonsis?

There's a really interesting tidbit of news buried in Friday's Washington Post Sports section. It's only two paragraphs, at the bottom of page 2 in the digest section, but it raises some questions that I hope the Post will answer in a subsequent, more detailed piece. The two-paragraph brief (in the second section of the digest, under hockey) notes that the Washington Capitals ownership recently refinanced the team's debt. Here it is, in full:

Washington Capitals ownership recently refinanced the team’s debt with a $100 million loan led by Citigroup, according to people close to the team who requested anonymity because the organization’s policy is not to comment on finances. The move was in response to the maturation of another loan, which was used to help finance the 2010 purchase of the Washington Wizards and the portion of the Verizon Center that Ted Leonsis and his investment group did not own.
Forbes, which reported the refinancing, values the Capitals at $250 million, three times what Leonsis paid for the team in 1999. Leonsis owns the teams and building through Monumental Sports and Entertainment, a holding company that includes several local investors. One person with knowledge of the situation said the loan was oversubscribed, and that the proceeds will be reinvested in the holding company. 
This piece raises all sorts of questions that aren't answered, and that I imagine most Caps fans are wondering about. First, what does it mean for a team to take on more debt? Is that good for the team--giving it more money to work with--or bad? Second, Ted Leonsis has repeatedly said, as recently as early this year when the lockout ended, that he has never made a "penny of profit" from the Caps, and that the team, even selling out every game for the last four years, is still losing money. But not only was Leonsis able to refinance the loan on the Caps, but the loan was "oversubscribed," which means, according to the original Forbes piece, that more people wanted to buy the debt than there was debt available. Why exactly are so many people eager to get a piece of a loan on a business that allegedly doesn't generate a "penny of profit"? Is Ted not telling the truth, or is the fact that the Caps lose money every year irrelevant--considering that, according to Forbes, the value of the team has tripled in the last 14 years?

This brings up other questions about Leonsis and his ownership of the Caps and Wizards that the Post has either mostly ignored or, in the case of a story the Post actually broke, not done nearly the kind of follow-up reporting and analysis one would hope a top sports section would provide. There was Leonsis' involvement on the owners' negotiating committee during the NHL lockout last year. He was widely portrayed in the hockey media as somewhat of a hardliner on the lockout, but the Post wrote nothing about this until the lockout was over--when it merely quoted Leonsis as saying that he really didn't do much and he just wanted a good deal. Then there's the report that Leonsis and the Caps "failed to declare hockey related revenue." Once again, the first time the Post reported on this was Leonsis' denial that it happened after the lockout ended, and that was it. Was Leonsis telling the truth? Steve Whyo of the Washington Times did some investigating, and found out that actually, Leonsis' claim that the players union gave the thumbs up on the Caps' books was a lot more complicated than the Caps' owner had claimed. But the Post did no followup.

Finally, there's the odd and unfortunate incident earlier this year, when Leonsis claimed the Wizards' 1978 championship trophy was found in a closet when he took over the team--which turned out to be a story Leonsis apparently made up (apparently for the main purpose of making himself look good and former owner Abe Pollin, who died four years ago, look bad.) To its credit, after printing Leonsis' original story (even though anyone who had been to the Verizon Center and walked around a little bit had seen the trophy displayed there for years before Leonsis took over the Wizards), it then printed the story correcting the record. And then that was it. No further attempts to find out why Leonsis would make up such a story, and, even more surprising, none of the Post's columnists wrote anything about the matter--even just to ask questions about why a rich, successful owner of two local sports teams would invent a story that makes the guy he bought the teams from--a man who may not have been the greatest sports owner ever, but is widely agreed to be one of the most important and generous philanthropists in the history of the Washington D.C. area--look like someone who didn't care about his teams' greatest accomplishment.

For years, the Post used to have a full-time sports business reporter. A few years ago, when the Post, like most newspaper, had to cut back their staffs because of financial difficulties, they lost that beat at the sports section--the reporter who wrote the two paragraphs on the team's refinancing, Thomas Heath, used to have that sports beat but now is a full-time business reporter who occasionally does a foray into the Sports section if a big sports business story occurs. But Ted Leonsis is, after Dan Snyder, the second most important non-athlete on the Washington, D.C. sports scene.  The Post has done a pretty good job covering Dan Snyder. Isn't it reasonable to expect the Post to bring some real reporting and scrutiny to Ted Leonsis--whether what he's telling the public is true, and if it isn't, why not?


Anonymous Michelle said...

Great post.

7/23/13, 8:17 AM  

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