July 1, 2010

Mark Brunell Bankruptcy Perspective

This week, one of the real-life stories that tend to invade our sports consciousness more and more often happened to one of our recent own, former Redskins QB Mark Brunell.

I have been pleasantly surprised at the level of understanding many I have talked to have for the man—but cynicism is still the order of the day for many pro football fans, perhaps nowhere more so than among Redskins fans.

For those interested in looking just a tad deeper, below are some observations and notes you may not know about what the filing means, and how it may affect Brunell's short-term financial life.

Here is the AP story itself, as printed in the Wall Street Journal, with my comments interlineated:

Personal guarantees of numerous business loans contributed to National Football League quarterback Mark Brunell’s Chapter 11 filing.

The former Jacksonville Jaguars star filed for bankruptcy protection in the city where he played for nine seasons on Friday. In court papers, he listed $5.5 million in assets and debts of $24.7 million
$21.15 million of that debt amount is unsecured debt, including the personally guaranteed loans. The remaining $3.58 million is various mortgages secured by his residence, three additional investment properties and two car loans.

Of the $21.15 million in unsecured debt, $21.04 million (or approximately 99.5%) is the personal business-related guarantees. Which means that about $107,000 (or 0.5%) of the overall unsecured debt represents other kinds of personal consumer debt such as credit cards, repair/construction loans, etc.

Looking at those numbers in context of Brunell's overall financial picture outside of the real estate investment loans, I believe it's fair to suggest that had it not been for the crash, Brunell would almost certainly have worked out his finances in some other venue than the highly public, highly misunderstood bankruptcy arena.

Among Brunell’s largest debts is a more than $5 million guarantee of a loan to JWB Owner LLC and more than $4 million in personal loan guarantees to his defunct Champion LLC business. Both companies were involved in real-estate investments.

Brunell and his wife also owe nearly $2.9 million on their home in Ponte Vedra Beach, Fla.

While Brunell earned more than $50 million in his NFL career, including $1.6 million for throwing 30 passes for the New Orleans Saints last year, a string of failed real-estate investments caused the three-time Pro Bowler’s financial woes.

Brunell filed for Chapter 11 protection, meaning he intends to craft a plan to repay his creditors. It’s not clear if he intends to sell off any of his assets as part of that plan, but he did list some of his most valuable possessions in court papers
Bankruptcy law requires debtors under any chapter to list all of their assets, and all of their debts. Failure to do so can result not only in the dismissal of their case and/or denial of a discharge, but criminal prosecution.

Bad news. Don't hide [stuff] from The Man.

The story goes on to list some personal items because it is both accessible and of prurient interest, and that is of course what sells newspapers, but does little to advance the story:

Among those were his Super Bowl ring won in February, rings from his three appearances in the Rose Bowl as a member of the Washington Huskies and his National Championship ring.

Brunell also listed a small collection of guns, including a 12-gauge Remington shotgun and a Winchester 45, and three vehicles, the most valuable of which is a 2008 Ford F-250 pickup truck.

Brunell and his wife each listed a $5,000 monthly salary from Mark Brunell Enterprises Inc. as their primary source of income. The company operates youth football camps. Brunell, 39, is not currently on an NFL roster.

Among the quarterback’s monthly expenses are a $5,627 monthly mortgage payment, $1,292 in food expenses for his family of six and a tithe to his church that “will vary as it is 10% of gross income.”
Based on what we can tell from what has been reported, barring any serious unreported complications—fraudulently obtained loans, for instance—or bad lawyering, looks to me as if Mark Brunell and family are going to come of this just fine.

Theirs is a reorganization under chapter 11, not a liquidation under chapter 7. The distinction is considerable, and worth a quick perusal if for no other reason than intellectual curiosity.

Grossly oversimplifying ... Brunell is protecting his family's personal assets from lawsuits and/or collection efforts against him personally in his role as guarantor of multiple business loans. He will file a plan of reorganization under chapter 11 that will propose to pay off some percentage of the undisputed personally guaranteed loans.

Creditors will then have the right to vote whether or not to accept the plan. If it is accepted, or confirmed, it will effectively discharge those debts as structured pre-bankrupcty, and he will be able to pay off the proposed restructured/reduced loans over the course of the plan.

With competent lawyering (and/or perhaps an investor drawn to his potential as a celebrity "turning it around" endorsement riding in on a white horse) Brunell could end up being able to dismiss the case before a plan is confirmed, or more realistically, fulfill his confirmed plan as approved or even early.

The end result would be getting out from underneath the millions in personal guarantees in a matter of months, and availing himself of the fresh start envisioned by Congress in enacting our nation's bankruptcy laws.

If the Brunell's lose their residence, it will more likely be by choice than as a direct result of their bankruptcy. While the mortgage is in excess of $5,000/mo., their income appears more than adequate to meet that obligation.

He and his wife each draw $5,000/mo. from his corporation in salary. They are highly employable, meaning future additional income levels are almost sure to rise, not fall. Brunell could conceivably sign another NFL contract. And if not, given he is currently out of the league I believe he is already receiving his NFL pension, which will run well into six figures per year.

Even figuring in a realistic plan payment under chapter 11, it seems unlikely he would not be able to meet a $5,000/mo. mortgage without too much belt tightening.

Yes, it is sad when bad things happen to good people.  And worse when it has to happen so publicly.  But he is not alone. You might be surprised at the number of celebrities—athletes, actors, musicians, TV personalities, you name it—who end up filing bankruptcy to protect personal assets, often against personally guaranteed investment loans like in Brunell's case.  Others file for any variety of reasons ... it seems misfortune befalls also those considered wealthy, blessed or just plain lucky.  

Not to embarrass anyone or make value judgments but illustrate the point, here is a by-no-means-exclusive list of other celebrity bankruptcies:

Rembrandt Haremenszoon Van Rijn, 1606-1669, famous Dutch painter
Phineas Taylor Barnum, 1810-1891, the greatest American showman
Mark Twain, 1835-1910, pre-eminent American author
Mathew Brady, 1823-1896, distinguished Civil War photographer
Henry John Heinz, 1844-1919, condiment manufacturer
Oscar Wilde, 1854-1900, acclaimed poet and author
Milton Snavely Hershey, 1857-1945, founder of Hershey's chocolate
Henry Ford, 1863-1947, automobile manufacturer
Mickey Rooney, 1920- , movie actor
Debbie Reynolds, 1932- , movie actress
Johnny Unitas, 1933-2002, legendary Hall of Fame football quarterback
Jerry Lee Lewis, 1935- , famous Rock n' Roll star
Burt Reynolds, 1936- , movie actor
Sherman Hemsley, 1938- , TV actor who played George Jefferson
Marjorie Margolies Mezvinsky, 1942- , former member U.S. House of Representatives
Wayne Newton, 1942- , Las Vegas entertainer
Kim Basinger, 1953- , actress
MC Hammer (Stanley Burrell) 1962- , musician and entertainer
Walt Disney, 1901-1966, cartoon creator
Larry King, 1933- , talk show host
Donald Trump, 1946- , businessman
Mike Tyson, 1965- , professional fighter
Sammy Kershaw, 1958- , country music singer
Stephen Andrew Baldwin, 1966-, actor
Jose Conseco, 1964-, baseball player
Vince Neil (Wharton), 1961-, singer

Chances are, given Mark Brunell's youth (39), education, marketability, personable nature, etc., says here unless he has been playing fast and loose he will come out of this public embarrassment in a year or two and barely miss a financial beat.  He may well even be able to rework his mortgage and keep the house at a lower payment than he's making now.

Is that fair?

Congress says yes, if he plays by the rules.

Is it "right?"

That's for each of us do decide for ourselves. If I may be so bold, however, do bear in mind that the laws that might cause you outrage when someone else uses them are the same ones you, through some unforseen future misfortune, may find yourself having to turn to yourself.

Perhaps it is best not to judge Mark Brunell too harshly. The real estate crash hurt a lot of people, some dishonest but a great many not.

Nor is it necessary, in my humble opinion, to extend him too much sympathy--upon knowledge and information, there were no firearms put to his head to sign all those personal guarantees.

But my guess is Brunell isn't looking for sympathy anyway, just to be left to live his private life again in private.

Which is what I plan to do starting right ... now.

1 comment:

Unknown said...

God bless people! The church loan in USA products are served by many lenders but it's effective when the lender is right for the specific problem.