Brass, brains and Biovail

We forget how unlikely and utterly precarious this once was, our long love affair with the Ottawa Senators.

BY MARK SUTCLIFFE

We forget how unlikely and utterly precarious this once was, our long love affair with the Ottawa Senators.

Today’s Senators are celebrating their 20th season in the National Hockey League, financially stable and looking back on many successful years. Hockey is booming in Canada and the migration pattern of struggling NHL teams is north, not south. Notwithstanding the team’s current rebuilding project, the future for professional hockey in Ottawa remains bright.

But not so long ago, to dream of two decades and beyond would have been folly. Indeed, all of this very easily might never have been.

If National Hockey League owners hadn’t been so greedy in 1990, they would have chosen different markets for expansion. But only two bids – Ottawa and Tampa Bay – agreed to pay a whopping $50-million U.S. fee without any conditions or deferred payments, so they – and not more favoured bids from cities including Hamilton and St. Petersburg – were awarded franchises.

It turns out neither ownership group actually had the cash – eventually each would face bankruptcy – nor did they meet many of the other criteria the league had set out. But that didn’t matter to the NHL in 1990.

League officials apparently didn’t bother to do more than the most of cursory of background checks. The owners were happy simply to be splitting up $100 million. Audaciously, Bruce Firestone, not yet 40 years old, played a weak hand and, shockingly, the NHL never called his bluff. Thus the Senators were born.

It never should have happened. And yet somehow it all worked out. Among North American markets, Ottawa barely warranted a franchise when it was awarded, and the Senators suffered through considerable growing pains on the ice and extraordinary obstacles to get a $190-million arena built, including a hostile provincial government.

But as the city flourished and grew, thanks in part to a high-tech boom, it soon demonstrated that it could support the Senators, even as ticket prices rose to match skyrocketing player salaries. And within a decade the team became a proud and professionally run franchise competing for the Stanley Cup.

That the Senators survived and eventually thrived after their wobbly inception is due mostly to the leadership and financial wizardry of Rod Bryden. Bryden assumed control of the operation from Firestone before the Senators had even taken the ice in their first game. Over the next decade, he steered the Senators and the new arena through the challenges of multiple rounds of financing, mounting operating and debt-servicing costs and an anemic Canadian dollar.

Bryden stabilized and professionalized the operation by bringing in experienced hockey executives. And the Senators began to perform well, starting a streak of 11 consecutive seasons in the playoffs.

But when he tried to obtain favourable tax treatment on a refinancing plan that would, once and for all, retire the Senators debt, he was rejected by the federal government. The next domino fell when one of the hockey team’s biggest creditors, Covanta Energy, was petitioned into bankruptcy protection in 2002. That set off a chain of events that cost Bryden the team.

When the Senators missed payroll in January 2003, there were persistent rumours that the franchise was destined for Portland or another U.S. destination. But such a move was actually unlikely.

By then the team’s only issue was its debt, not its operations. Whoever bought the Senators out of bankruptcy would be claiming one of the best performing teams in the league and a first-class arena in a stable and prosperous hockey market. The Canadian dollar was rising and a new collective bargaining agreement would soon be negotiated, one that owners were confident would bring salaries under control.

Eugene Melynk rescued the team from insolvency but got a pretty good bargain in the process. He bought the team and the arena at a discount — less than $130 million, according to media reports of the day — and proceeded debt-free just as the maturing Senators approached their peak.

With deep pockets filled by his success with the pharmaceutical company Biovail, Melnyk was able to promise fans something they had never experienced before: stability. No more would the business operations of the Senators dominate the front pages. No longer would fans be asked to prove they wanted the franchise by purchasing tickets, a hallmark of the Bryden era.

Not everything has fallen perfectly into place. Since a spectacular run to the Stanley Cup final in 2007, the team hasn’t won another playoff series, missing the playoffs altogether twice. There have been coaching changes and significant player moves. But any discussion about the future of the team is now, as it should be, about hockey and not business.

So much so that it’s easy to forget how improbably the story began and how tenuous was the grip on a franchise the city grew to love and identify with.

Today, as the Senators begin their 20th season, Melnyk presides over one of the league’s stronger and more stable franchises, valued at almost $200 million by Forbes magazine. He and the legions of Senators fans owe a debt of gratitude to the brass of Bruce Firestone and the brains of Rod Bryden. Without either, there would be no anniversary season to celebrate.

Mark Sutcliffe writes about the business of sports for the Citizen

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