Aug 022009
 

Monday is going to be an interesting day in the Phoenix bankruptcy court room, and it could be a bad day for the Coyotes future in Phoenix.

Up for discussion is a motion filed by the NHL and the City of Glendale to postpone the auction for the sale of the Coyotes to parties interested in keeping the franchise in Phoenix until mid-September and thus cancel or delay until after the 2009-10 NHL season the auction to relocate the Coyotes. But there are a number of other issues that have arisen as well.

1. We have learned that neither the Jerry Reinsdorf or the Ice Edge Holdings bids for the franchise include any cash and will only assume debt. This is an issue because the court bidding procedure required a $10 million deposit be placed, something neither Reinsdorf or Ice Edge Holdings have done. This has prompted Moyes and Balsillie to put forth a motion calling for the cancellation of the August 5th auction stating that there are no qualified bids.

2. Within the Jerry Reinsdorf bid there are indication as to what arrangements have been discussed with the City of Glendale. Apparently what has been discussed is having the city set up a new taxing district around Jobing.com arena that could provide up to $23 million in new funds which presumable would get funneled into team coffers. There is also an out clause that if the team is losing money after 5 years Reinsdorf can get out of the lease and move the team.

3. But maybe the most significant development is we have learned that SOF Investments Ltd., the largest secured creditor and owed approximately $80 million, has come out in support of the Jim Balsillie offer for $212.5 million stating that that was the only bid that would repay them in full.

4. Also rejecting the Reinsdorf offer was AEG who has a contract to manage Jobing.com arena stating there is a dispute over how much money AEG is owed. As we know, a significant condition of the Reinsdorf offer is that they can renegotiate the terms of the contracts and debts with many of the creditors. The more they can’t come to an agreement with (and SOF and AEG are significant) the more difficulties the Judge will have in accepting the Reinsdorf offer (and presumable the Ice Edge offers are similar).

In short, what the Reinsdorf and Ice Holdings offers entail are just an assumption of restructured debt and contracts without any up front cash. At this point in time the largest secured creditor (SOF), the largest unsecured creditor (Moyes), and at least one contract holder (AEG) object to the offers. Plus, neither Reinsdorf or Ice Edge have come to a final agreement with the City of Glendale either. Right now, the Coyotes remaining in Phoenix might be a long shot at best. I look forward to hearing what Judge Baum has to say on all of this tomorrow but with everyone wanting Wednesday’s auction either delayed or canceled outright, the chances of getting a resolution to this mess on Wednesday seems somewhere between slim and none, and leaning towards none.

More details can be found here and here.

  4 Responses to “Coyotes staying in Phoenix not looking good.”

  1.  

    Hi David: I’ve only just discovered your site as a result of your “conversation” with Gerald Carpenter today on From The Rink. Good luck with that.

    I look forward to doing some reading of your “back issues” later today, but for the moment let me just say that I found this posting a good read, logical and reasoned.

    I think that Judge Baum will do what judges and lawyers generally, in my opinion and experience, do: he’ll find a way to side with what the establishment (NHL) wants.

    The legal justification will be lengthy and will illustrate one of my “Laws To Live Your Life By”: “A man (in this case, judge) he hears what he wants to hear and disregards the rest.” Wish that was original to me, but of course it’s not.

    (I’m always fascinated by how much legal types are forever crying “precendent” or “no precedent” to support or deny what they want or don’t want. How does a precendent come into being in the absence of a precedent? I mention this not because I’m rambling but because I’m sure there will be a lot of this today in Baum’s courtroom. There’s certainly been a precedent or two for that to happen in this hearing…).

    Hey, I could get Gerald Carpenter to comment on that — he’s a lawyer!

    Thanks for your insights.

    WD

  2.  

    Gerald has been here in the past and we have had a few discussions on the matter. He has some insight but he tends to belittle others who disagree which is unfortunate.

    As for what Judge Baum will do, he will do exactly what he has been doing. He’ll apply the rule of law when required but he’ll put off any decisions until he absolutely has to and that makes perfect sense. He may very well delay Wednesdays auction, but I have serious doubts he will delay the relocation auction. He has already heard the NHLs arguments that it is impossible to relocate a team so close to the start of the season and has squashed them. I think he wants this situation resolved by the end of September and the majority of creditors do as well.

    If Reinsdorf come up with a suitable arrangement with the city of Glendale and all the secured creditors then I suspect he will get the team. I have doubts that that will occur simply because I think if it were to happen it would have happened already but who knows. The same can be said for Ice Edge Holdings offer.

    If neither of those two come to fruition we’ll have a legal battle on our hands as to whether the NHL board of governors was justified in denying Balsillie’s ownership request.

  3.  

    On my way back to HA to read some of your archived posts, I came across this:

    http://www.phoenixnewtimes.com/2009-07-30/news/glendale-the-coyotes-and-the-john-kaites-connection/

    I have no idea as to the accuracy of this article, but if true it certainly offers a different perspective on this whole deal from what I had before. Perhaps you knew of it already.

    Don’t know if you’re interested in this type of thing but there it is, FYI.

    WD

  4.  

    David, that’s a nice article and kudos to William Daniels for the link to the Phoenix New Times. Shed’s a lot of light on why the league, Reinsdorf and the city are fighting so hard for facts to stay hidden.

    Once again, the potential for the NHL to be embarrassed is great because of a lack of diligence done. Forget about Balsillie now, this is yet another example of Bettman’s lack of suitability to be the caretaker of the NHL. He simply does not know how to admit a mistake.

    To me it’s not about Balsillie getting a team. It’s about how do you grow the game and unfortunately, it’s not working in Phoenix. A lot of mistakes have been made – by the owner(s), the league, the city.

    In the end, the real fans are hurt in all this – as are the many people owed money (including a number of small business’s who can’t afford to write off their losses).

    A complete debace.

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