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Bankruptcy

Sacramento Kings File Claim Against Sponsor Power Balance

The following article was written by Cyle Kiger.

Late 2011, Power Balance, a California wristband company and owner of the naming rights to the Sacramento Kings arena, filed for Chapter 11 bankruptcy.   The Kings have recently filed a claim for $8.3 million against Power Balance.

Chapter 11 bankruptcy is the type of most bankruptcy cases.  It allows the debtor to attempt to restructure its business.  If the business’ debt exceeds its assets, Power Balance’s creditors will be left with ownership of the reformed company.

Power Balance wrist bands are sported by some of the best athletes in the nation; Kobe Bryant is one of the them.  The company filed for bankruptcy after losing a class action suit that was settled for $57.4 million; the suit was on behalf of customers who charged Power Balance with false advertising.  The consumers are to receive $30 for their purchase of the wristband plus $5 for shipping and handling.  In November, a spokesman for the Kings said that they expected to continue a productive partnership in the future.

Continuing the partnership is still on the Kings’ minds after filing the $8.3 million claim.  The contract was supposed to run through 2016 for $9 million, but the recent claim raises the chances of the two cutting ties. However, Chris Clark says the Kings are hopeful that the relationship can be saved.  So far, Power Balance paid the Kings $700,000 of the $975,000 owed to the team in the first year of the contract.  Removing Power Balance’s logo and advertising is another hurdle that the Kings must now deal with.  They estimate that removing the logo from various places will cost around $200,000.

To an already struggling team, the loss of Power Balance brings more hardship to the Sacramento Kings.  It’s a small market team that will struggle to find another solid sponsor.  Powerbalance Pavilion is a run-down arena (25 years old), and the team taking to the hardwood is in last place with a record of 10-21.

Power Balance was purchased for around $7 million by Hanyang, LLC, Power Band’s largest creditor and main supplier.  The new owner is discussing with the Maloof family(owners of the Sacramento Kings) the possibility of a new contract for naming rights.  Power Balance’s new owner also cut ties with Tyreke Evans and others for the time being.