If the disputed $2 billion sale of professional basketball's Los Angeles Clippers is not completed, it could force team owner Donald Sterling to sell off some of his real estate assets to pay back debt, the executive who manages his holdings told a court on Monday.
Darren Schield, the chief financial officer of Sterling's Beverly Hills Properties, testified that Sterling's attempts to block the NBA-record sale his estranged wife brokered would open the door for banks to call the real estate billionaire's $480 million in liabilities.
"We would have to start selling our real estate,'' Schield said in Los Angeles Superior Court, adding that Sterling owns about $2.5 billion in property. "We'd have no choice.''
Schield was called to testify by lawyers for Sterling's wife, Shelly Sterling, who has asked a probate court to confirm her as having the authority to sell the Clippers to former Microsoft CEO Steve Ballmer.
Schield is a witness to Shelly Sterling's claim the deal must be completed even against her husband's wishes so debt can be paid off.
Schield testified that he warned Sterling against revoking the family trust that owns the Clippers and other holdings as a maneuver to block the sale because it would allow banks to call its loans.
"I told him this revocation would open up Pandora's Box and there would be severe consequences for us,'' Schield said.
Bank of America told Sterling's company it plans to issue a notice of default on the $350 million Sterling owes the lender after he moved last month to revoke trust, said Adam Streisand, the attorney for Ballmer.
In April, the NBA banned 80-year-old Sterling for life after racist remarks he made in private were recorded and made public. Sponsors cut ties with the team that Sterling has owned for 33 years and players considered a boycott amid general public outrage.
Sterling, who physicians say has early Alzheimer's disease and cannot handle his business affairs, contends that his wife and her lawyers misled him into submitting to the medical examinations that handed her control of the franchise.
Judge Michael Levanas will decide whether Shelly Sterling, 79, complied with the terms of the trust in ousting her husband and if the sale can go forward after Sterling revoked the trust.
Under cross-examination by Sterling's attorney Maxwell Blecher, Schield said that if Bank of America would foreclose, no other big banks would lend to the company and its current below-market interest rate would likely go up.
Schield also cast doubt on Blecher's suggestion that Sterling could raise enough cash to pay back the loans by issuing public stock.
"There's huge reputational issues,'' Schield said. "I don't think anyone would want to go into partnership with us right now.''
Former Time Warner Inc CEO and current Clippers interim CEO Richard Parsons is expected to testify on Tuesday as is Shelly Sterling.
— By Reuters