Sep 112009
 

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.

  4 Responses to “Balsillie's quest for the Coyotes…”

  1.  

    I agree, JB completely dropped the ball on this one. He should have bought the team, without the intention on moving it for at least this season.

    Usually, in every lease, there is some provision that if a team does not hit a threshold of season ticket sales and corporate sponsorships, the lease could be broken by either side.

    In that rate, he could have gone the Karmonos way and sabotaged the team’s ticket sales and sponsorships, thus making it easier to move.

    JB’s biggest problem is, the second he buys the team, he wants to move them to Hamilton. The idea should be to buy the team, make the renovations on Copps, then move the team.

  2.  

    I don’t believe that the Coyotes-Glendale lease has such a clause, or at least I have never heard it having such a clause. The Lease is the whole reason this went to bankruptcy. Balsillie needed to get out of it before he was able to relocate the team. It is also the reason why Reinsdorf and Ice Edge backed out. They didn’t want the lease and couldn’t get the city to renegotiate. The City of Glendale believes the lease is unbreakable which is interesting because the NHL is asking the judge to allow them to break it next summer if they can’t find a suitable owner to keep the team in Phoenix.

    I think the least of JB’s problems is the relocation issue because the NHL has conceded that the team may need to relocate anyway and has conceded that Hamilton would be a great hockey market (their witnesses indicated it could be a top 5 revenue team). Whether Balsillie just upped and moved the team without the NHLs permission or applied for relocation to the league and had it over turned and he fought it in court, I think there is a good chance courts would be on his side.

    The tougher issue is getting the team free of the lease through this auction against the will of the NHL BoG vote and the transfer issue right now just unnecessarily complicates it making it an even more difficult decision for the judge.

  3.  

    [...] Hockey Analysis:  Balsillie’s quest for the Coyotes.  Looks like the Panthers are available….. [...]

  4.  

    That would be the first of it’s kind because usually arenas put those leases in to protect themselves from losing money.

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