Is Eugene Melnyk broke?

I don’t mean Soup Kitchen Broke or Pay Day Loan Broke. More in the area of Billionaire Broke as in, can he still play in the billionaires’ league of professional sports ownership where millionaires no longer need apply.

Distroscale

Melnyk’s financial status has been the subject of great debate for years now, but has really heated up with the collapse of the LeBreton bid and a flurry of lawsuits: a $700-million claim by Melnyk and a $1-billion countersuit by his onetime development partner, John Ruddy and Trinity Developments.

Photo by Adrian Wyld / THE CANADIAN PRESS

Among other things, Ruddy’s lawsuit claims Melnyk hasn’t paid his fair share of the bills since launching the plan to develop LeBreton two years ago. According to Ruddy, Melnyk has pretty much conceded he doesn’t have the cash to carry his end of the partnership.

“(Melnyk’s) strained financial circumstances underlie this litigation,” Ruddy alleges in his suit. “This best explains its strategic attack on Trinity. It has admitted lacking the cash to contribute to its joint venture obligations.”

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So, is it true? Is Melnyk really forced into a corner by his own financial circumstances?

Certainly the team’s financial status is the subject of considerable debate these days, whether in business circles or among fans who seem to spend less time speculating on whether the Senators can make the playoffs than whether Melnyk will remain the team’s owner.

Suffice to say that, on the surface, the team itself is not profitable and pays the bills, in part, through a recurring series of loans.

A local blog (fanalytics.hockey) digs deep into publicly available information on the finances of the team and comes up with some tough conclusions about its longterm viability.

It shows the team is heavily financed with attendance down last year and no playoff revenues to soften the burden. Even a $16-million injection of cash thanks to expansion fees paid by the new Las Vegas franchise doesn’t fully offset a big overall drop in revenues last year over the season before. And this season is shaping up to be even worse.

Some hockey types have claimed this is what lies behind the team’s efforts to trade Erik Karlsson and slash payroll under the guise of a rebuild of the team’s on-ice product.

Add to these some of Melnyk’s off-ice business moves, such as getting out of the horse-race business a few years ago — he used to own 500 thoroughbreds — or even closing the popular Bert’s Bar in Barbados.

This picture of an owner scrambling to finance his team to pay his hockey bills while unable to carry his end of a multi-billion-dollar LeBreton project stands in sharp contrast to widely reported public estimates of Melnyk’s actual net worth.

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Canadian Business Magazine recently estimates his wealth at $1.15 billion, making him the 92nd richest Canadian. Business Insider ranks him the 19th wealthiest NHL owner, ahead of Washington Capitals owner Ted Leonsis and behind New York Rangers owner James Dolan. You don’t hear them singing the blues.

Photo by Jean Levac / Postmedia

OK, Melnyk doesn’t play in the same league, financially, as owners from most other Canadian franchises, such as Toronto, Montreal, Vancouver or Edmonton, and that’s a little scary given the new financial pressures on Canadian teams from a drop in the Canadian dollar. But he holds his own in terms of overall net worth.

So, why all this doom and gloom about imminent financial collapse of the franchise or a forced sale by Melnyk to keep the wolves from the door? It’s all quite ridiculous.

What seems to be lost in the rush to write Melnyk’s financial obituary is that the team’s overall value is growing – fast – despite its current fiscal woes.

Forbes Magazine recently estimated the franchise’s value at $435 million, nearly double that of just six years ago thanks to a surge in expansion fees and TV revenues, making the Senators a smart long-term financial investment.

Apparently, Melnyk is doing very well in his other business ventures too and, like many businessmen, has chosen not to cross-pollinate the balance sheets of his various business interests. Which means he does have other financial resources available if he needed it.

Meanwhile, even if Melnyk loses money operationally running the team, his balance sheet continues to improve nicely.

As long as that continues, I suspect Melnyk doesn’t lose much sleep over balancing the books at the Canadian Tire Centre.

Maybe we we should believe him when he insists he isn’t going anywhere.

Gibbons is former Publisher and CEO of the Ottawa Sun. H e can be heard weekdays 1-3 pm on 1310 NEWS.