Michael Jordan Bails Out a Billionaire

When the nation’s first African-American billionaire, Robert Johnson, bought the expansion Charlotte Bobcats NBA team in 2002, his highest-profile move was hiring the most famous athlete in the world, Michael Jordan, to run the team. In a twist thick with irony, the employee has now become the savior: Two weeks ago, Jordan bought the team for pennies on the dollar.

The sale underscores Johnson’s dire financial situation. Four sources with firsthand knowledge tell The Daily Beast that the 63-year-old founder of BET desperately needs cash. The Bobcats sale was precipitated by a need for liquidity to fund his other investment obligations and avoid becoming insolvent, according to business associates of Johnson’s and sources involved in the sale.

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Indeed, three sources specifically involved with the team sale said Johnson was eager to ink a deal before an upcoming interest payment on the team’s $40 million in bank debt, so he could save the cash, even though it was only for a few million dollars. That, combined with the deal’s terms, suggests that Johnson is dangerously close to being illiquid. {snip}

“If he didn’t get out now,” says a former colleague of Johnson’s who asked to remain anonymous because of their prior relationship, “he’d be [out of cash] soon.”

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Johnson founded BET in 1979 with $15,000 of his own money and a $500,000 loan from Liberty Media’s John Malone, building a programming powerhouse for the African-American community with a mix of rap music videos featuring scantily clad woman and socially conscious coverage of events like the Million Man March. He achieved billionaire status with the sale of BET to Viacom for $3 billion in 2000.

A year later Johnson hit the Forbes 400 “Richest Americans” list with a net worth of $1.3 billion. While he’s still on that list, Forbes estimates that the intervening nine years have slashed his net worth by a staggering 58 percent, to $550 million last year.

A large chunk of Johnson’s fortune, conservatively estimated at $400 million, was awarded to his ex-wife Sheila in their divorce (she went on to marry the judge who presided over the divorce). Another chunk is held in Viacom and CBS stock, the result of BET’s sale to Viacom and that company’s subsequent split from CBS. While those two stocks are up year-to-date, with CBS trading at around $14 per share and Viacom trading at roughly $35 per share, both are down significantly from their previous highs of more than $30 per share for CBS and $40 per share for Viacom in 2007, a drop that has also cut into Johnson’s net worth.

The rest of Johnson’s money is tied up in a byzantine network of companies, partnerships, and investment funds. {snip}

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One of Johnson’s most visible private holdings is Urban Bank Trust, an African-American-controlled banking and mortgage company. According to FDIC documents, Urban Bank Trust had net income of just under $8 million last year, but lost nearly $7 million in 2008.

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But far the biggest drain on Johnson’s finances was the Bobcats. “No one has ever lost money on an NBA franchise, and I don’t think anybody ever will,” Johnson told USA Today in 2006, echoing the asset play philosophy. Yet Johnson did: He sunk $300 million into obtaining the franchise rights for the team in 2002 and pledged to invest a further $30 million on top of that. Johnson bought the Bobcats with grand plans to revisit his cable success by launching a regional sports network with the team’s television broadcast rights. When that didn’t pan out, Johnson had to scramble to ink a distribution deal and, out of desperation, agreed to a lowball offer from Time Warner Cable that also gave away naming rights to the team’s arena, now known as the Time Warner Cable Arena.

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Under Johnson’s stewardship, the Bobcats are said to have lost between $20 million and $25 million per year, or around $200 million total, say three sources with knowledge of the team’s finances. {snip}