Nutting Loan Details Revealed

Kovacevik's initial article contained this information:

The loan from the Nutting family, technically known as a convertible note, had a principal amount -- not disclosed -- that the family could have converted into cash but chose to convert into equity in the team. It is believed that Bob Nutting currently controls more than three-quarters of the team.

After five years, the interest due on that loan also could be converted into equity, but that would have resulted in diminished shares for the minority owners, and they balked. The vote of the ownership group -- with the Nuttings forced to recuse themselves -- was to convert the interest due for 2007 and 2008 into cash. The first payment, $4,563,000, was made Dec. 20, 2007. The second payment, $5,041,000, was made July 10, 2008.

Read more:


Since that article was written, there has been some speculation about the principal amount of that loan and details.  Fortunately, these details have been revealed:  Deadspin actually published the 2008 Financial Statement, here (beginning of relevant page):

(Fixed for correct link)

According to the 2008 Financial Statement (see above link), the Nuttings lent PBC $20,000,000 (not $25 million) in 2003, at an interest rate of 15%.  

Also according to the 2008 Financial Statement (see above link), the holders of the "Preferred LP Units" — i.e., the Nuttings — have all the rights under the agreement.  During the redemption period, a three-year period beginning in 2008 and ending in 2011, the holders of the Preferred LP Units may elect to receive the accrued interest and principal (called the Cumulative Preferred Conversion Amount) in either cash or Common LP stock.

According to the 2008 Financial Statement (on p. 28, see above link, click next page to read on), the holders "required" PBC to pay $9.6 million of the Cumulative Preferred Conversion Amount in cash. The holders "elected" to receive another $20,000,000 of that amount in Common LP stock. The holders "reserve all rights" with respect to the $10,400,000 balance of the Cumulative Preferred Conversion Amount — i.e., they haven’t decided yet whether to take that $10,400,000 in cash or equity.

The only obstacle to them exercising their rights however they want — in common stock (equity ownership) or cash — according to the financial statement, is the requirement that PBC’s "lenders" — not the limited partners, but the creditors, all of which are basically MLB itself — consent to cash payments. There does not appear to be any obstacle to the holders of the Preferred LP units taking the stock conversion.  Nowhere in the financial statement does it indicate that Common LP share-holders get a vote in the matter. 

On p. 27 (see above link), the document states, "The Preferred LP Units permit the holder to voluntarily convert part or all of its Preferred LP units into Common LP units."  Then, continuing on p. 27, the document provides: "To the extent permitted by PBP’s lenders, during the Redemption Period, each Preferred LP unit holder has the right to require PBP to redeem all or part of the Preferred LP units in an amount equal to the Preferred Conversion Amount as of the applicable redemption date."

In case you haven’t figured this out yet, the deal was for a cool doubling of $20,000,000 in five years -- which is almost exactly 15%, compounded annually.



This is a FanPost and does not necessarily reflect the views of the managing editor (Charlie) or SB Nation. FanPosts are written by Bucs Dugout readers.

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