Sep 232009
 

In an interesting and unexpected development today Jim Balsillie has made a slight adjustment to his offer to purchase the Coyotes and move them to Hamilton. The new offer includes giving the city a non-refundable $25 million payment if Balsillie won the auction and the second payment of $25 million when the team relocates. In short, if Balsillie won the auction but it was overturned during an appeal process then the City of Glendale would get to keep the initial $25 million. Not to shabby of a deal really.

But the offer gets even better for Glendale. If Balsillie wins the auction the City of Glendale (and the NHL) will still have until the end of this year to find a buyer willing to keep the team in Glendale so long as the prospective owners are willing to pay at least $140 million plus additional debt (the amount required to pay off all the secured creditors). Additionally Balsillie’s is willing to let the team play in Glendale through the end of the 2009-10 season though there may be a window open to relocate the team to Hamilton during the Olympic break.

In essence the new Balsillie offer is giving Glendale pretty much everything that the NHL is giving Glendale plus the potential for an additional $50 million in lease buyout costs which the NHL is not offering Glendale. The only other difference is the cost required for a new buyer looking to purchase the team and keep it in Glendale. If the NHL won the auction they would have the option to choose to sell it to a prospective owner for something less than the $140 million plus additional debt if the NHL chooses to absorb the additional losses. Depending on whether the NHL is willing to lose money on the transaction that may or may not be a significant difference but this latest offer has to be quite interesting to the City of Glendale and may decide to support the Balsillie bid. That would be a coup for Balsillie as Glendale and the NHL have seemingly been in lockstep all through the bankruptcy process.

The big loser in all of this is Jerry Moyes. It was apparent that the Balsillie camp fought hard through the summer to get the deal finalized before the 2009-10 season which would have maximized the return to Jerry Moyes. With the start of the NHL season only a week or so away Balsillie has decided that trying to force a resolution before the start of the season was not possible and rather than risk having his bid tossed out completely he would reduce what would go to Jerry Moyes and set aim on having the team start play in Hamilton for the 2010-11 season. I am sure Jerry Moyes was aware that Balsillie was going to make these changes to his bid and this is what prompted Moyes to make a last ditch effort to come to a quick resolution by asking the judge to force mediation on the NHL. It might be a $50 million dollar difference for him in having the closing delayed until a later date.

In essence what these changes accomplish is it makes the Balsillie bid much more on par with the NHL bid with respect to time lines (removes NHL’s challenge that relocation for 2009-10 season not possible) as well as leaving open the possibility of finding an owner interested in keeping the franchise in Glendale. What this does is remove and question marks as to whether Balsillie’s offer is better, from a financial or structural point of view, than the NHLs. With these changes the only thing left for Judge Baum to decide is whether legally he can over rule the NHL board of governors decision to disapprove Balsillie as a prospective NHL owner and in turn allow Balsillie to relocate the Coyotes to Hamilton. That is still a very large hurdle for Balsillie to overcome, but these changes give Judge Baum all the time he needs to explore those questions fully. It would not shock me if a ruling is still weeks away.

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