Michael Jordan Bails Out a Billionaire

Peter Lauria The Daily Beast April 3, 2010

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Chris Keane / Reuters The nation’s first African-American billionaire, Robert Johnson, is enduring a cash crush so severe, reports Peter Lauria, that he had to hock his NBA franchise to Michael Jordan for a song.

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.

“He’s put up a lot of cash, and he’s nearly lost it all.”

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. Though reports said he initially wanted between $325 million and $350 million for the Bobcats, the NBA valued the deal at $275 million. But that includes the assumption of debt and other liabilities taken on by Jordan. His Airness only paid Johnson a fire-sale price of $25 million cash in the deal, these three sources say.

“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.”

“Bob is in a lot of businesses that require a lot of upfront capital expenditures, like hotels and gaming,” adds a financial world source close to Johnson, “so he needs to husband cash flow for the assets that are growing rather than the ones that are not.”

Johnson declined to comment for this story. A representative of The RLJ Companies, the umbrella organization that houses Johnson’s assets, declined comment “on the sale of the Bobcats or any financial matters involving The RLJ Companies or Mr. Johnson.”

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.

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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. There’s RLJ Equity Partners, a private-equity fund managed by The Carlyle Group; RLJ-McLarty-Landers Automotive Group, a network of car dealerships in Arkansas; Carribbean Cage, a video lottery terminal company; and Our Stories Film, a production studio launched in partnership with The Weinstein Company, to name a few.

As private entities, the financial performance of most of these businesses is hard to ascertain. There is, however, some public information through which performance can be gleaned. For instance, the RLJ-McLarty-Landers Automotive Group touts on its Web site that its estimated gross revenue for 2009 was $625 million, up from $400 million in 2008. What is doesn’t say is that the revenue gain was likely achieved through the purchase of 15 car dealerships last year, amid one of the worst consumer car buying years on record, and not through organic growth—meaning Johnson had to spend additional cash to grow revenue.

Carribbean Cage highlights the fact that it has licenses to install and operate its terminals in such places as Turks & Caicos, St. Kitts, Jamaica, and Barbados, among other exotic locales. Of course, Johnson had to first pay to obtain gaming licenses in those countries and now has to lay out cash to set up the terminals. He also sunk $8 million into the RLJ Kendeja Resort & Villas in Liberia that opened in June.

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.

There are two common threads that run through all of Johnson’s holdings: They are hard assets that aren’t easily convertible to cash, and they are asset plays, meaning they don’t throw off a lot of cash but tend to appreciate in value over time. Unfortunately for Johnson, the meltdown has crimped the values of real estate, and banking, gaming, and auto assets have gone down in value, taking his fortune down with them.

“He’s invested very poorly,” says his former colleague succinctly.

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.

“He destroyed value rather than creating it,” says a sports industry executive, who noted that arena naming rights could generate millions of dollars of revenue for a team.

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. “He’s put up a lot of cash,” sighs Johnson’s former colleague, “and he’s nearly lost it all.”

Plus: Check out more of the latest entertainment, fashion, and culture coverage on Sexy Beast—photos, videos, features, and Tweets.

Peter Lauria is senior correspondent covering business, media, and entertainment for The Daily Beast. He previously covered music, movies, television, cable, radio, and corporate media as a business reporter for The New York Post. His work has also appeared in Avenue, Blender, Black Men, and Media Magazine, and he’s appeared on CNBC, Bloomberg, BBC Radio, and Reuters TV.

For more of The Daily Beast, become a fan on Facebook and for more entertainment and fashion coverage follow Sexy Beast on Twitter.

For inquiries, please contact The Daily Beast at editorial@thedailybeast.com.

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So "Bobby" only knows how to exploit Black people? I would would also like to clarify to the writer and others outside the Pan-African movement that "BET" was never known or was a channel that represented African peoples interest. The programming on "BET" (demeaning) would have been see as what it was more often if it was not "owned" at the time by a person who calls himself Black but by his actions show himself as an Uncle Tom. Hey, Bobby you were popular during this lifetime but you will always be know as a inbred mutant albinos best friend in history. Doubt you will ever go broke but it says alot about you that your only success was at building a garbage tv network that demeaned African people. You will always be a loser in African peoples eyes. We need more Marcus Garvey's in the African American community

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 4:04 am, Apr 1, 2010 case1234

The Johnsons are NOT respected by much of the VOTING black community and even despised by many. Yet both dems (the Clintons) and GOP (VA Gov) pols seek their support and endorsement as if it carries weight in the Black comm. It doesn't. For many AA, support from the Johnsons is a reason to question a candidate. -- truth is they made there money by exploiting black people, particularly young black women (booty videos etc).

Flag It | Permalink | Reply 9:12 am, Apr 1, 2010 xsm941f

I second all you said Horakhty although the Marcus Garvey reference was a little out there. Tom...a mean....Bob Johnson jumped the shark with that cocaine reference and shuck and jive affect during the Democratic primary. After 10 years of butts, Ho's and loads of gold teeth, pants on the ground losers, Karma's a bitch.

Flag It | Permalink | Reply 9:17 pm, Apr 1, 2010 anghiari

First...stop asking for another Marcus Garvey...he was a man FOR THAT TIME IN HISTORY...Robert Johnson is just another bottom feeder robber baron...rip off artist...clearly the American dream has room for scu,mbags...he did one decent thing..he made a black woman a millionaire...that can be all bad. This is nitwit, who choose Hillary and actually talked about Obama being incompetent...heheheheheheheheheheheheh

Flag It | Permalink | Reply 8:44 pm, Apr 2, 2010 leftylew

Aw sweet poetic justice!! I can still see Bobby's image in my mind as he sat snuggled under Hilary Clinton, making cocaine jokes about candidate Barack Obama! He just knew he had picked a winner! Now it looks like everybody's boat is rising except Bobby's - his appears to be sinking! I couldn't happen to a better "Tommie!"

Flag It | Permalink | Reply 8:49 am, Apr 1, 2010 reader3

I would like to apply for the job of proof reader for The Daily Beast. The tease for this report, " Jordan Bails Out On A Billionaire" is quite different from the actual title, "Jordan Bails Out A Billionaire". The opposite actually! You guys are getting worse rather than better.

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 9:40 am, Apr 1, 2010 Cyclysm

Agreed. Though I did like the bit of reporting that mentioned how his ex-wife took most of the money, ad then married the presiding judge. That has to be illegal, and if it's not then it should be.

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 10:05 am, Apr 1, 2010 anghiari

Not if the two had never met prior to the court case...

Flag It | Permalink 8:46 pm, Apr 2, 2010 Pupster

Hope Robert and Sheila Johnson go broke!!

Flag It | Permalink | Reply 10:01 am, Apr 1, 2010 MadCharles

I thought the black man in America didn't have any opportunity.

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 10:18 am, Apr 1, 2010 anghiari

problem is Robbie doesn't know he's black and shelia said he wasn't much of a man.

Flag It | Permalink | Reply 8:47 pm, Apr 2, 2010 Jimbo123

Who cares? Black, White, Pink, Blue, billionaires are a breed apart, nothing in common with any of us. So sad, he only has millions now.

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 11:59 am, Apr 1, 2010 MadCharles

Jimbo123, They start out as you. They didn't end up like you because they had meaning.

Flag It | Permalink | Reply 10:18 pm, Apr 1, 2010 Chicago48

That's mean -- why Sheila? I doubt she will as fast as he will.

Flag It | Permalink | Reply 12:41 pm, Apr 1, 2010 wareagle82

well, one more opportunity for Jordan to prove he was much better on the court than off it. The list of star players who have succeeded in any other aspect of their sport is extremely small. Jerry West comes to mind; that's about it. Jordan already mucked up the Wizards in his first turn as exec.

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 2:14 pm, Apr 1, 2010 xsm941f

Dave Bing (Hall of Fame) has owned a successful steel company for years and is now mayor of Detroit. Earvin "Magic" Johnson owns a diverse portfolio of successful businesses ( movie theaters, retail malls, Starbucks, etc).Bob Lanier is a successful businessman. There are plenty of others. Do some research.

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 9:23 pm, Apr 1, 2010 shag11

There are many more that have done well for themselves. Willie Davis (Rams) has one of the biggest beer distributorships in the nation. Mel Farr (UCLA, Lions) owns many care dealerships in Michigan. I could go on and on. There are just a number of guys that have gone on to do well for themselves. Certainly not enough, but lot have.

Flag It | Permalink 7:51 pm, Apr 2, 2010 anghiari

Please...how long has Jordan been retired and he can still pull up $25 million when he needs it...he's dong something right.

Flag It | Permalink | Reply 8:49 pm, Apr 2, 2010 Servant2All

I'm just glad Sheila got a large chunk of Johnson's fortune - and that the judge stuck him and is now with her. Hope he takes even more of the Johnson fortune when he divorces her. This is what white America needs to understand about the feelings most blacks have for the Johnsons. It's about the same ambivalence felt when a drug dealer makes it big, flips his money into something legit, and becomes "accepted" by the rich and famous. A part of you may cheer his accomplishment, but there is ALWAYS the part that remembers the carnage of his assent.

Flag It

“He’s invested very poorly,” says his former colleague succinctly.

“He destroyed value rather than creating it,” says a sports industry executive, who noted that arena naming rights could generate millions of dollars of revenue for a team.

Plus: Check out more of the latest entertainment, fashion, and culture coverage on Sexy Beast—photos, videos, features, and Tweets.

For more of The Daily Beast, become a fan on Facebook and for more entertainment and fashion coverage follow Sexy Beast on Twitter.

For inquiries, please contact The Daily Beast at editorial@thedailybeast.com.

Agreed. Though I did like the bit of reporting that mentioned how his ex-wife took most of the money, ad then married the presiding judge. That has to be illegal, and if it's not then it should be.

Not if the two had never met prior to the court case...

Hope Robert and Sheila Johnson go broke!!

I thought the black man in America didn't have any opportunity.

problem is Robbie doesn't know he's black and shelia said he wasn't much of a man.

Who cares? Black, White, Pink, Blue, billionaires are a breed apart, nothing in common with any of us. So sad, he only has millions now.

Jimbo123, They start out as you. They didn't end up like you because they had meaning.

That's mean -- why Sheila? I doubt she will as fast as he will.

Please...how long has Jordan been retired and he can still pull up $25 million when he needs it...he's dong something right.

Um, given the state of the NBA selling this team for $275 million is far from "pennies on the dollar". MJ has his work cut out for him.

Sounds like Michael knew how to take care of his millions. =Maybe we should listen to him--instead of "The Money Honey" or that carnival barker, Cramer--about what to do with our investment portfolio, what's left of it!

Not only is a spell check needed, but so is a fact check! BET rarely showed any programming that served to inform or educate. The usual rump-shaking videos were broadcast throughout the day of the Million Man March, which I watched on C-SPAN. Sheila Johnson did not marry the judge that presided over her divorce. She married the judge who substituted for the presiding judge the day the final decree was entered, a man whom she had known in her 20s when they were both members of the Negro Ensemble Theater company. Since he was only presiding over the entering of final decree there was no conflict. (That information was easily found out, it was mentioned in their wedding announcement in the New York Times.) As for Bob, I think that he is reaping what he sowed. It is telling that the former Mrs. Johnson has devoted lots of her wealth and time to philanthropic work, one major initiative is focused on the economic empowerment of women in the developing world. My guess is that we will not read about her being on the brink of insolvency.

Why are you people surprised..the daily beast knows nothing about black folks, the black community or how black folks feel about Robert Johnson.?I will bet you Tina has had dinner with Robert Johnson...so in her book, he represents black folks..hahahahahahaha

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Michael Jordan Bails Out a Billionaire

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