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Sacramento Kings file $8.3 million claim against Power Balance in bankruptcy court

Published: Saturday, Feb. 18, 2012 - 12:00 am | Page 1A
Last Modified: Sunday, Feb. 19, 2012 - 2:04 pm

The Sacramento Kings stand to lose $8.3 million if their fragile sponsorship with troubled wristband maker Power Balance falls apart.

The team filed a claim in U.S. Bankruptcy Court for $8.3 million – the unpaid amount left on the naming rights deal that turned Arco Arena into Power Balance Pavilion last year. The court filing in Santa Ana is the first time financial terms of the contract have been made public.

While the contract was supposed to run through 2016, the relationship was left in limbo after Power Balance filed for Chapter 11 bankruptcy protection last fall.

The Kings say they are still talking to the company that bought Power Balance out of bankruptcy about salvaging the relationship. But the court filing raises the possibility of the team severing its ties.

Not only would the Kings' owners be out millions, they would have to spend money erasing all traces of Power Balance from the arena.

"The Kings estimate that removing (Power Balance's) logo from the arena building and practice facility, various locations within the arena, and other locations such as programs, stationery and merchandise will cost approximately $200,000," the team's attorney Robert Trodella said in the court filing.

Power Balance's woes represent another setback for the Kings' owners, the Maloofs, who are struggling to improve revenue and have threatened to leave town if they can't get a new arena built here. The team's player payroll is the lowest in the NBA for the second straight year.

Losing Power Balance as an arena naming-rights sponsor could create more hardships. Sports business experts say it would be difficult to find a new sponsor in a tough economic climate, particularly for a small-market arena that's probably on its last legs.

Kings officials and the NBA have declared the arena unfit. Sacramento officials are rushing to beat an NBA-imposed March 1 deadline to complete a financing package on a new downtown arena.

Power Balance filed for Chapter 11 after getting buried by demands for restitution from consumers saying they had been deceived about the supposed health benefits of the company's silicone wristbands.

The company was then purchased for around $7 million by Hanyang LLC, a Southern California company with ties to Power Balance's main supplier and biggest creditor. Hanyang scrapped the Kings contract, a legal move under bankruptcy law. But the new owner has been talking to the Maloof family about a new contract.

"We're still in talks with Power Balance about trying to keep that relationship alive," team spokesman Chris Clark said Friday. "We're hopeful that the relationship can be saved."

Power Balance declined to comment.

Court records show Power Balance's new owner also walked away from endorsement deals with Kings star Tyreke Evans and other athletes.

From the start, experts warned that it was risky for the Kings to choose Power Balance as the firm to replace Arco, whose name had been on the Kings' building for 25 years. Although Power Balance wristbands had become popular with the sports-celebrity crowd – with endorsements from Kobe Bryant and others – the company was already getting hit with consumer lawsuits when the deal was signed.

Those warnings were borne out when the company filed for bankruptcy protection.

For the Kings' owners, however, the deal figured to be a lot more lucrative than the Arco contract, which paid an estimated $750,000 a year.

The Maloofs' court claim says Power Balance was to pay $975,000 the first year, $1.53 million the second, $1.9 million the third, $2.25 million the fourth and $2.35 million in year five.

So far, however, the Kings have collected just $700,000 of the first year's amount, the court filing said.

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Read more articles by Dale Kasler

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