Bankruptcy Lessons from the Stanley Cup Champions
June 15th, 2009 by A Licensed Insolvency Trustee
On June 12, 2009 the Pittsburgh Penguins won the Stanley Cup. What does that have to do with bankruptcy in Canada?
The story begins in November, 1988 when the hockey team filed for Chapter 11 bankruptcy protection in the United States, which is similar to what we call a proposal here in Canada. Their star player, Mario Lemieux, who at that time was retired, was owed millions of dollars, so he agreed to convert his debt into an ownership interest in the team. In a move that stunned the hockey world, Lemieux ended his retirement and in December 2000 returned to play for the team, becoming the first player/owner in NHL history. His presence helped the team advance far into the playoffs.
Unfortunately Lemieux’s talents were not enough, and Pittsburgh had the worst record in the league in 2002, and they stayed at the bottom of the league for years. A losing record, an old arena, and a small hockey market made it difficult for the Penguins to survive. The future looked bleak, and it appeared that the team may leave Pittsburgh forever.
But being the worst team in the league does have one big advantage: you get a high pick in the annual draft of new players, and in 2004 they drafted Evegeni Malkin, and in 2005 they drafted Sidney Crosby. Many hockey experts believe that Malkin and Crosby are two of the best players in the league. The 2004-2005 season was cancelled due to a salary dispute in the NHL, and when play resumed for the 2005-2006 season small market teams like Pittsburgh were able to keep their salary costs under control, which allowed them to be competitive with the other teams.
It was the perfect storm: two great players, and lower costs, allowed Pittsburgh to compete, and they made the Stanley Cup finals in 2008, and won the cup in 2009.
Did anyone predict they would win the Stanley Cup when they declared bankruptcy in 1988? When they were at the bottom of the league in 2002 did anyone predict great future accomplishments?
No. It was not a pretty picture back then.
Fortunately for the fans in Pittsburgh, the team did not give up. They cut their salary costs by bringing in good young players, and they used their poor showing to draft great players, and today they are Stanley Cup champions.
Every day I meet with people who are on the verge of bankruptcy. They have no hope. They can’t pay their bills, and in many cases their job prospects look bleak. They are like the Pittsburgh Penguins of 1988 or 2002. But like Pittsburgh, their situation is not as hopeless as it may appear. There is hope.
The solution if you are in financial trouble is to do like the Penguins did: cut your expenses. Pittsburgh brought in young players; for you it may be moving to a less expensive house, or getting a cheaper car, or taking public transit, or reducing your cable or cellphone costs.
Then, deal with your debt. You may do what Pittsburgh did and make a proposal to your creditors where you repay a portion of your debts and they forgive the rest, or you may need to declare bankruptcy to get a fresh start. Either way, there is hope. Your financial situation may look bleak, but as the Penguins have proven, you can go from the bottom of the league to the top in a short period of time. To find out more, take a minute and fill out our Online Bankruptcy Evaluation Form, and a trustee from your area will arrange a no-charge initial consultation to answer all of your questions, and help you get a fresh start, just like the Stanley Cup champion Pittsburgh Penguins.