Forbes on the Memphis Grizzlies' financial picture

Tom Van Riper of Forbes notices that Grizzlies' owner Michael Heisley has made most of his money as a flipper: He buys distressed assets and then, at the right moment, sells them for big profits.

Van Riper says Heisley evidently had similar designs with the Grizzlies, but has been unable to find the buyer who would make the whole project pay off. One financial maneuver stands out:

When the new arena went up in 2005 it brought in a naming rights contract with FedEx worth $90 million over 20 years. Heisley needed cash immediately, so he cut a deal to securitize that revenue into a bond. Bondholders would get a coupon of $4.5 million a year from FedEx and Heisley got a lump-sum payment of $60 million.

That was the first big mistake, says Grizzlies minority partner [G. Staley] Cates. Stripping out that asset has slashed "tens of million of dollars" from the team's value to a prospective buyer, he says. Marc Ganis, a consultant with SportsCorp Ltd. in Chicago, agrees. "He took the quick arena deal, part of a strategy to take as much cash out as possible and then sell, the hallmark of a flipper. Only no one wants to buy it."

Heisley defends the strategy, saying that securitizing the naming rights provided cash to improve the balance sheet and borrow money more cheaply. "Anyone who thinks I put that money in my pocket is crazy," he says.