I have been following many of the people in the Phoenix courtroom tweeting on all of the happenings of the ‘auction’ of the Phoenix Coyotes. So far there really hasn’t been anything close to resembling an auction. After initially reaffirming each sides bids, the Balsillie camp, the NHL, and the City of Glendale have been presenting their arguments about everything associated with the case, much of it we have already heard before either publicly or in earlier court filings. The only new and interesting item is the judges assertions that there is a possibility that no one will win the auction with the judge ruling that neither side has submitted qualified bids. Although this seems to many like an unlikely outcome, it appears that the judge really believes this is a possibility.
With regards to the NHL offer, he has concerns about how the NHL has specified who gets what and how they essentially have chosen to shut out Jerry Moyes from getting much of anything which, if I understand correctly, is not allowed. In bankruptcy the courts make the decision on who gets what and the bidder can’t pick and choose who is to be paid off and how much. He has asked the judge to clarify their bid and who gets what by the end of today and has said ‘he cannot choose a bid he does not understand’.
For Balsillie there are several issues. First, can/will the judge overrule the NHL board of governors vote against Balsillie as an acceptable owner. Second, if the judge does decide to overrule the NHL’s vote against Balsillie, is he able to force relocation upon the NHL. The Balsillie lawyers have argued that the bankruptcy code does give the judge the powers to do this while the NHL has argued that the only the right to play in Phoenix is up for sale, not the right to play anywhere else. The judge has apparently stated that there is no precedent in for relocation to be granted in a bankruptcy sale. Additionally, the judge has apparently stated that Balsillie’s September 21st deadline is unreasonable and his decision might not be completed by then.
This has me thinking that Balsillie really is going about this the wrong way and he should make a last minute adjustment to his bid and take relocation off the table. In fact, he should present a bid similar to that of the NHLs where he will accept playing in Glendale under the current lease agreement for one year just like the NHL but with no commitment to Phoenix/Glendale beyond the 2009-10 season (i.e. he can get out of the lease after the 2009-10 season). If he offered $175 million he could absorb $60 million in losses that the team might incur during the 2009-10 season and still be under the $242.5 million bid he submitted earlier this week. An offer such as this would only require the judge to overrule the NHL’s vote on Balsillie, which he may be more inclined to do than force relocation on the league as well, limit his commitment to Glendale to just the 2009-10 season. This would put Balsillie’s offer pretty much on par with the NHLs bid, except $35 million higher. This eliminates the need for the judge to force relocation on the league and in time for the 2009-10 season or to make a decision by September 21st, when Balsillie’s offer expires. It would make picking Balsillie’s offer much easier for the judge.
Then, once Balsillie has his team he can submit his relocation application to the NHL at which point the NHL will have to vote on it and only a majority vote is required. The NHL may attempt to block him again, but the situation will be different. He will already be an owner, he will have a team that is losing money and has for 14 years, he will not have an ongoing lease commitment (Bettman has used the phrase ‘NHL is not in the business of breaking leases’ as an argument for not giving up on Phoenix in the past). If any reasonable person applied the NHLs relocation rules fairly one would have to conclude the team is prime for relocation and Hamilton would be a prime location for a team (NHL has argued in these proceedings that a team in Hamilton could generate the 5th most revenue). The league might try to block him but then he could sue for anti-trust reasons and make the same arguments he is making now but his case would be even stronger.
Such a plan would be risky on the part of Balsillie as it would require him to spend a lot of money to purchase a team before knowing 100% if he can relocate, but it might have a higher likelihood of getting the outcome he desires. In any event, sometime before the end of the day we will get to hear the NHLs and Balsillie’s final bids and i will be interesting to see if either change their bids any.