New Toronto NHL team facing $1.2 billion expansion fee?

When the National Hockey League stops its charade about not even having considered expansion, and gets around to actually expanding, there’s going to be at least one Canadian market putting up an obscene amount of money for the rights to a franchise.

Maybe it’s Quebec City, which will have an arena. Maybe it’s Toronto, which could maybe possibly share an arena with the Maple Leafs.

It’s assumed that owners of the latter expansion team would have to ante up more than the former. It’s a guaranteed profit machine, but the chance to own it involves a massive franchise fee, some of it to satiate the city’s incumbent team.

How much would a Toronto NHL expansion franchise cost?

Rick Westhead of TSN spoke with some investment bankers who advise NHL teams. Two of them believed the bidding for the team would be south of $1 billion. Three of them felt the eventual fee could go as high as $1.2 billion.

Or slightly more than the gross domestic product of Grenada.

We know what you’re thinking: Not everyone is Terry Pegula and just has $1.2 billion sitting in an old mason jar on top of the fridge. (I mean, traditionally, my family stashed its $1.2 billion under the mattress for safe keeping.)

So where would the money come from?

According to Westhead, this is how you fund at $1.2 billion NHL franchise purchase:

- $600 million of your own personal equity (The NHL only allows you to finance half your purchase.)

- $100 million can come from a new low-interest league credit line with Bank of America and Citibank. Servicing that debt will cost about $2 million a year.

- $500 million can come from borrowing from a bank or other lender. Current rates are about six per cent, meaning interest costs would be roughly $30 million a year.

All of this would seem like a risky investment were it not for the fact that a Toronto team could probably have its initial ante paid off by Year 3.

Although that might depend on how many people buy their jerseys. Knowing the market, might we suggest something black and silver with Wendel Clark’s face as the logo?