May 062009
 

What happened to the Phoenix Coyote’s yesterday is what many people suspected may happen to them for a while. They went bankrupt. They went bankrupt despite the fact that over the past year Gary Bettman has continued to tell anyone who would listen that the NHL as a whole and its member teams are generally doing just fine, despite the economic down turn. Most people were smart enough to not listen to Gary Bettman.

What is interesting this time is that Jim Balsillie sat on the sidelines waiting for the moment for the Phoenix Coyote’s to declare bankruptcy. He has learned from past mistakes when he tried to purchase the Penguins and the Predators only to be foiled by Gary Bettman insisting that he cannot move those franchises. With the Coyote’s in bankruptcy court, the decision may not be completely in the NHL’s hands anymore as a judge will pretty much decide what happens to the Coyote’s and if the judge decides that the best way for the Coyote’s to repay its creditors is to sell the team to Balsillie and move it to Southern Ontario, the NHL may not have much say in the matter.
It should also be noted that the Coyote’s apparently filed for bankruptcy without notifying the league as noted in a statement released from the City of Glendale.

“The decision by the ownership of the Phoenix Coyotes to initiate bankruptcy proceedings without consultation or approval of the National Hockey League is an unfortunate turn of events for the NHL, the State of Arizona and the Coyotes’ loyal fans. Even as the propriety of this unprecedented action is being thoroughly investigated by the NHL, city officials are working diligently to ensure that the public’s interest is fully protected throughout this process.

Upon hearing of the news, the NHL immediately stepped in and took over control of the Coyotes removing owner Jerry Moyes ability to operate the club. The NHL is now operating the Phoenix Coyotes and the NHL’s Bill Daly issued a statement of on behalf of the NHL:

“We have just become aware of today’s Bankruptcy Court filing purportedly made on behalf of the Phoenix Coyotes. We are investigating the circumstances surrounding the petition, including the propriety of its filing. We have removed Jerry Moyes from all positions of authority to act for or on behalf of the Club. The League will appear and proceed before the Bankruptcy Court in the best interests of all of the Club’s constituencies, including its fans in Arizona and the League’s 29 other Member Clubs.”

It’ll be interesting to watch the league make its arguments in bankruptcy court because in theory bankruptcy court is about getting the best deal for the creditors of the Phoenix Coyotes, and not what is in the best interest of the club, the fans, or the leagues 29 other member clubs. The bankruptcy court judge is unlikely to listen to any arguments related to the best interest of the 29 other teams (other than in reference to any money the Coyotes may owe the league from money they were advanced) and certainly not in respect to the fans, except in consideration to any money they may have put down for 20010-11 season tickets (all dozen of them?).

This really was a devious plan that Balsillie and Moyes worked up. Moyes, unable to find anyone to pony up money to take the Coyotes off his hands and keep the Coyotes in Phoenix, knew that the best and easiest chance to sell the team for maximum return was to sell the team to Jim Balsillie. But Balsillie also knew from his Penguin and Predators experience that Bettman could force the sale of the team to another entity, even if the sale price was lower, as he did with both the Penguins and Predators. By taking the league to bankruptcy and then having Balsillie put in the offer they really are taking Gary Bettman out of the equation. I just can’t imagine the angst and anger that Bettman, Daly and the rest of the crew at NHL headquarters is feeling right now. The fate of the Phoenix Coyotes is no longer in the hands of Betman et al but rather in the hands of a bankruptcy court judge. It is quite likely that the only way they can block the sale of the team to Balsillie and have it moved to Southern Ontario is to find a better offer but one has to wonder how likely that is. Plus we know that the NHL Players Association is all for another team in Southern Ontario so they will likely side on behalf of Balsillie as well as might some of the richer clubs that have to pay into revenue sharing. This might be the first stage of Bettman losing complete control over the league.

If I were Bettman I would really do my hardest to embrace Balsillie because he isn’t going away. If somehow Bettman can resolve this Coyote situation, possibly with an owner interested in moving the team to Kansas City or Las Vegas or somewhere else, there are a number of other teams that Balsillie will target. The Florida Panthers, Tampa Bay Lightning, and Atlanta Thrashers are anything but strong organizations and the Nashville Predators have still not proven to be financially stable over the long haul.

  13 Responses to “Does Bettman still think Everything is A-OK?”

  1.  

    This is a fascinating move…as you point out, unless the NHL can find someone willing to buy the team for more than $212 million AND keep it in Phoenix, which is unlikely…the sale will go through…when filing for bankruptcy, they will look at the sale that will best represent the creditors.

    But, how can this NOT benefit the league. There is NO DOUBT (as someone that lives nearby) that Southern Ontario / Toronto market can handle a second hockey team. Saying they can’t is like saying Chicago shouldn’t have two baseball teams.

    In fact, the team that this move could most likely impact negatively is my Buffalo Sabres. If Balsillie moves the team to Hamilton, which is less than an hour from Buffalo, it will definitely take away some of the current fans in HSBC arena. But, the thing is, the prices is Buffalo will still likely be lower than that in Hamilton, as Balsillie will most likely be looking to Toronto as a comparible ticket pricing target. So, not only will fans continue to come to Buffalo as a cheap alternative, their would likely be another “cross-town rival” to push ticket sales.

    But here’s the most likely scenario…some sort of compensation would be given to Toronto and Buffalo for the proximity move. If Buffalo owner Tom Golisano were offered a one-time $25 compensation, or even soemthing like $5 million a year for the next 5 years, don’t you think he would take it?

    The question would be, how will the NHL restructure their divisions? Can’t keep the Hamilton “Rust-dogs” in the Pacific Division, can they? They would probably leave the team in the “West” at first, but wouldn’t you want them playing Toronto, Montreal and Ottawa more often?

  2.  

    The problem for Bettman and his cartel of smaller market mostly US based owners he brought into the league is three fold.

    1. Bettman doesn’t like Balsillie and his strong arm tactics and another strong non-supportive owners could hurt Bettman’s power base.

    2. More teams in high revenue areas will drive up league revenues, which on the surface might be a good thing, but in reality just makes the small market teams in Florida, Atlanta, Tampa, Nashville, and other locations less viable because the salary cap will go up. Moving Phoenix to Hamilton might drive the salary cap, and floor, up $1 million just because of how much more revenue the team in Hamilton will generate.

    3. Part of what Bettman has used to keep his cartel of small market owners on his side even while they were losing money is the potential for expansion dollars down the road and/or the ability for those teams to sell their franchises at a profit. The southern Ontario market could/would have generated a huge expansion fee that would line the pockets of the existing owners. If a team moves to Southern Ontario the league loses that potential revenue which could be more than the $212.5 million Balsillie is offering for the Phoenix team.

    As for realignment, who knows what will happen. For all we know Atlanta, Florida or Tampa could be this summer and moved to Kansas City. But barring that you may see a 16/14 split like they do in MLB.

  3.  

    It is getting more interesting. Bob MacKenzie of TSN is now reporting (http://tsn.ca/columnists/bob_mckenzie/?id=277696) that Bettman working on the finishing touches to sell the Coyotes to Chicago Cubs owner Jerry Reinsdorf, presumably for less than what Balsillie was willing to pay. So current owner Jerry Moyes, wanting to get the most out of the sale as he could, decided that he wanted to take Balsillie up on his offer but could only do so if he filed for bankruptcy.

    A similar situation happened in Nashville but former Nashville owner accepted less money and followed Bettman’s leadship because he, Craig Leipold, was given the rights to purchase the Minnesota Wild, which he did shortly after the sale of the Predators took place. Unfortunately for Bettman, Moyes didn’t have any interest in owning another NHL franchise (and couldn’t afford to if he did) so he was only interested in the best deal possible.

  4.  

    The real losers here are the actual hockey fans of the Pheonix Coyotes. While I am all for moving a team that doesn’t seem viable…we DID go through a similar situation in Buffalo where the owner went bankrupt (and to jail) and the NHL came in and held up the franchise until a buyer could be found. There was a period of time where losing the Sabres seemed a real possibility. (Pre-lock out, the Sabres were playing to a half-full arena, too.) That said, there is a bigger fan-base here in a city of 1/8 the size.

    Dave, your point is excellent in that the current owners make more money if they expand…but would they give Balsillie an expansion team anyways? It does seem he is doing all he can to piss off the league.

    But truthfully, which is better…15 successful franchises buoying 15 small market ones, or 20 successful teams supporting 10? In the end, it’s all about the fans…if after 12 years, nothing you do is getting fans in the building.

    (In your list of failing teams…don’t forget the Islanders…there’s a recent article on ESPN that Wang is regretful he bought the team, and wants out, even if it means moving the franchise.)

    Even contraction is not bad for revenue of the other teams…a higher % of teams make the playoffs each year – allowing you to spread “success” i.e. the playoffs…deeper across your league. I remember as a kid there were 21 teams, and 16 made the playoffs each year…it was hard not to be successful!

  5.  

    The owners may not give Balsillie an expansion franchise, but they would get a big dollar offer. Last week they talked to a group looking to bring a second team to Toronto (placed in Vaughan 427/7 area).

    Buffalo, Ottawa and Pittsburgh I think all went through bankruptcies but back then none of them were receiving revenue sharing money (I guess Ottawa got some of the Canadian assistance plan because of the low dollar) and there wasn’t a salary cap either. Since then the whole economic landscape of the NHL has changed largely in favour of a team like Phoenix and they still couldn’t come close to making money. Maybe Bettman can find an owner to keep the team in Phoenix for a few more years but the team simply cannot and will not go from losing $30 million to breaking even let alone making a profit. Coyotes tickets are dirt cheap and they still couldn’t draw fans. It is a failure as an NHL market and I can only assume that anyone buying the team has their sights on moving the franchise at some point, if not immediately. Might Reinsdorf be interested in moving a second team to Chicago? Or maybe taking it to Kansas City? That is the only way you can envision turning a profit on purchasing the team.

    The NHL really needs to contract. They could possibly make 28 teams work to some extent but 26 might be better. But start off by moving Phoenix to Southern Ontario moving another team to St. Louis and folding two or four of Atlanta, Florida, Tampa, Nashville and the Islanders.

    The players won’t like contraction because it means fewer jobs but if they can be appeased by a new franchise in Southern Ontario they might be able to accept it. It would mean higher salaries for the players to have jobs.

    Yes, I forgot about the Islanders. They are a mess of a franchise but I think they could make a go of it if they ever got good again. They have just been such a mess off the ice both in terms of management decisions (Milbury ruined that franchise with his horrific trades) and they don’t have a very good arena to play in. With a new arena and a star player or two they should be able to be a quality franchise again. Chicago turned their franchise around, so could they.

  6.  

    I like the less teams idea. I know Bettman hates it, but having a dispersal draft of Coyotes, Thrashers, Islanders and Panthers would help EVERYONE, with the exception of the few fans of those teams. The talent pool would not be stretched thin like it is now, more teams would make or be close to making the playoffs each year and the viable teams would not have to “waste” money holding up other franchises. Depending on who folds some teams may have to switch conferences (like the Leafs) and that may not be very popular.With better players comes better hockey and more people may even end up watching on TV in the US.
    But Gary would rather have hockey in Vegas and Kansas City than do that. His head is so far up his own rear end it’s ridiculous.

  7.  

    I think this comes down to one issue. The bankruopt estate of the Phoenix Coyotes will pursue the best offer. If Balsillie’s offer is the highest, and the NHL refuses to grant the transfer, then the estate can probably sue for damages.

    Moyes will win, the NHL pays him, Reinsdorf end ups with the Coyotes for next to nothing and Balsillie now has grounds for an anti-trust lawsuit against the NHL.

    Ownership acceptance is 3/4 approval of the Board of Govenors, franchise transfer is a simple majority. It is likely the Balsillie has courted the support of several owners before embarking on this journey. I don’t think the Count will get the rubber stamp of refusal from the BOG as easily the previous torpedo jobs on Balsillie

  8.  

    I get the feeling the NHL will try to get the bankruptcy ruling throw out, saying that the “owner” didn’t have the right to file for bankruptcy because the NHL was actually supporting the team at this point. I know this makes NO real world sense, but with the right laywers and judge they could still succeed.

    I admit that moving a franchise should be a LAST resort, but I also feel that if an area really has the ability to sustain a franchise, it will get one back. (See Minnesota, Denver (Colorado), and Atlanta, who all lost franchises, but had enough support to get new ones. Also the Golden State Seals I think were originally in San Jose, but I could be wrong there.)

  9.  

    [...] the team control at this point.  You can read HA’s David Johnson’s thoughts and quotes here as [...]

  10.  

    The Seals started in Oakland, then became the California Golden Seals

  11.  

    I may be way off on this one, but might the judge consider the fact that the owners of the league unanimously approved Balsillie as an appropriate owner when he first tried to buy the Penguins, or is this completely apples and oranges?

    Also, Mr. Johnson, any predictions/odds of this smart plan succeeding? (I realize we are in uncharted waters in terms of all professional sports here).

    And, wouldn’t the league saying (finally) that they may look at expansion in the next five years in SW Ontario calm this whole situation down, or would Southern Americans be that put off by a team from a lesser known Canadian city?

    Thank you for the great stuff.
    DJC

  12.  

    I am no lawyer but yes, I suspect a judge, would evaluate the quality of a new owner in determining what decision to make. This is bankruptcy for the purpose of restructuring to make the business viable long term so I would assume the judge would need to do at least a basic assessment of whether a new owner would be able to operate the team long term. I could go in and offer $225 million for the franchise but the judge would probably realize that I would not be able to pony up that kind of money and so he wouldn’t accept that offer. But Balsillie, having already been approved by the owners, can only help his case.

    But the main issue here is whether the judge sees the Phoenix Coyotes as an an NHL franchise in Phoenix or just an NHL franchise which is capable of moving, and if it is the latter, then do existing NHL franchises have territorial rights limiting where a new owner could move his team.

    The NHL cannot right now announce that they have a plan to expand to southern Ontario because if they did so they would effectively tell the judge that they have no issue with a team in Southern Ontario so the territorial rights issue will be something they won’t be able to argue in court.

    I am going to write another post on how I see this case unfolding so stay tuned.

  13.  

    [...] for the Coyotes. What came next almost made my jaw drop. Ron MacLean then went on to quote frommy article that I wrote a couple days ago. Very [...]

Sorry, the comment form is closed at this time.