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Will Chris Hansen screw Sacramento bondholders out of $77 million loan payoff?

If the sale of the Kings is consummated and the team moves to Seattle, there are concerns that Chris Hansen will default on the $64 million loan to the city and simply forfeit a stake in the team and Sleep Train Arena.

The Bee raises a prospect we last considered in 2011: if the Kings are moved out of town, will the new owners simply default on the $64 million loan brokered by the city in 1998? That loan has painfully weak collateral: a $25 million stake in the franchise (which at a $525 million valuation is a 4.7 percent stake) and Sleep Train Arena.

[UC Davis contracts law expert Thomas] Joo said the Kings could conceivably try to settle the loan by offering some cash and forfeiting the arena.

Assistant City Manager John Dangberg last week said he is confident the new team owners would pay off the balance of the loan in full. City officials have said they believe the NBA would not want the negative publicity of being accused of leaving the city in the lurch.

Here's the issue: when Hansen buys the Kings, he likely buys Sleep Train Arena. If not, Maloof Sports and Entertainment would still own Sleep Train Arena. Selling that after the Kings move to Seattle would be a very tricky proposition, particularly if Kevin Johnson begins work on a downtown arena quickly. It'd be of extremely low value. Certainly not worth $52 million (the difference between the $77 million payoff and a $25 million stake in the team).

If it comes to this, the only saving grace would be Hansen and Steve Ballmer's desire to not look like pirates (of which I'm skeptical) or the NBA's insistence that the Hansen-Ballmer group do the right thing.

Regardless, the lesson has been learned by the city. One of the sticking points in the Maloofs' ridiculous refusal to take the arena deal in 2012 was that the city demanded stronger collateral on the loan in question.

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