Utah Jazz Owner Banks On His Team Larry Miller Uses Organization As Collateral For Bond Sales

Utah Jazz owner Larry Miller needed money to retire some old debts, so he put basketball superstar Karl Malone and his 11 teammates up as collateral to back the sale of bonds.

Miller’s company scored some of the lowest corporate financing rates in years by selling $55 million worth of bonds this week backed by equity in his popular team.

Malone, the forward who has made the Jazz a dominant force in the National Basketball Association during the 1990s, probably would get the assist for attracting investors in the bonds.

Using the team as a selling point for the bonds “gives us more of a feeling of permanence,” said Bob Hyde, chief financial officer for the Jazz.

The funds went to refinance debt that Miller borrowed to build the 21,000 seat Delta Center, a palace-like arena that he built for his team in 1991 to replace the cramped 12,000-seat Salt Palace.

When Miller sought funds for a new stadium four years ago, terms provided by lenders weren’t as attractive as they are now.

Larry Miller Arena Corp. formed a joint venture with the Japanese conglomerate Sumitomo Corp., which put up capital and hired another Japanese company, Obiyashi Corp. to help build the arena. Miller’s company had to sell short-term floating-rate debt for funding.

Back then, investors may have been wary that the smallest market in the NBA might not have the fans needed to pack the Jazz’s new digs.

Since the Delta Center’s opening, an average of 19,000 fans have come to see the performances of Utah’s only major professional sports team.

So, this time around, investment bankers at Morgan Stanley & Co. had little difficulty raising cash for the players in purple, green and gold.

Miller’s voluble support for the team suggests he’ll remain owner until long after the debt is paid off in about 16 years.

The millionaire car salesman seems to tend to his team more than anything else. If Miller isn’t peppering his team at practice or in the locker room, he can be found sitting court-side, ranting at the referees, his coach and the occasional visiting fan.

Miller bought the Jazz in 1985 and built the $65 million Delta Center in 1991.

His company’s sale of $55 million in bonds to investors in a private sale, of which $1 million went to Morgan Stanley, was slated to pay off shorter-term debt on the arena that was callable in 1997, Hyde said.

Miller is borrowing now to take advantage of the lowest borrowing rates in about two years. Like many companies, Miller’s firm is refinancing short-term debt with long-term debt while the difference in the rate companies have to pay on short- and long-term debt isn’t that great. The yield on the 30-year U.S. Treasury bond, for example, at 6.09 percent, is less than a percentage point higher than the yield on the two-year Treasury note, at 5.36 percent.

Terms of the Jazz’ bond sale weren’t yet available, Hyde said.

Among basketball teams, the practice of giving liens to bondholders is fairly common, an NBA spokesman said. The NBA approves every sale, but the spokesman declined to describe the NBA’s terms or name the teams that have sold them.