Wednesday, July 15, 2009

As the Coyotes Turn

Before I delve into this blog, I will freely admit to all of you that I really do not know how to feel about this situation. There have been so many twists and turns to this drama that it’s starting to look more like a season of “Dallas” or “As the World Turns” or something. I am hoping that by the time I conclude this blog, I will have a better grasp of my feelings toward the sale and potential move of the Phoenix Coyotes franchise.

First, let’s run down what has happened since Jerry Moyes took over the team from former owner Steve Ellman. Moyes was originally a minority partner in the Coyotes. Ellman was the driving force behind the construction of Jobin.com Arena in Glendale and thus the lease that the team has with the city of Glendale. In 2005, Ellman sold his interest in the Coyotes to Moyes. Since Moyes has run the Coyotes, the franchise has lost more than $30 million each season.

At the beginning of this season the NHL stepped in and gave cash advances on league revenues in order to provide the team with the capital to continue operations. This is where it really starts to get sticky. At the point that the league stepped in to provide assistance to the troubled franchise, the NHL believed it had assumed operational control of the franchise. They allowed the existing management to apparently run the day-to-day operations but had already begun the search for investors or for new ownership entirely in order to keep the franchise in Phoenix.

Also during this time, Moyes began entertaining offers to sell the franchise after attempts to lure investors and badly needed cash to fund the team failed. On May 5th the Coyotes holding company, Dewey Ranch Hockey LLC, petitioned for Chapter 11 Bankruptcy Protection. In a statement, Moyes announced he had reached an agreement to sell the Coyotes to Research in Motion co-CEO and NHL villain Jim Balsillie for $212.5 million. As with his previous attempts to buy an NHL franchise, it was Balsillie’s intention to move the Coyotes to Canada, specifically Hamilton, Ontario.

Almost simultaneously, the NHL was negotiating the sale of the Coyotes to Jerry Reinsdorf, owner of MLB’s Chicago White Sox and the NBA’s Chicago Bulls, for an estimated $148 million. While being blindsided both by the Coyotes bankruptcy petition and with the agreement to sell the team to Balsillie, the NHL contended that since they had assumed operational control over the team that Moyes did not have the authority to either petition for bankruptcy or sell the team. However, it was now too late; the fate of the Coyotes franchise rested with a bankruptcy court judge. Now the lawyers for all sides can file motions and counter-motions and tie this up for who knows how long.

Originally, Balsillie made his offer contingent on moving the team to Hamilton. Once it became clear that wouldn’t happen, at least not for this upcoming season, Balsillie backed off and said that he would keep the team in Glendale for this season only if the NHL would cover all losses incurred this season. But he set a deadline for the decision to be made or he would pull his offer. The Bankruptcy Judge, Redfield Baum, was not going to be rushed into making a decision before he was good and ready and informed Balsillie of that.

The NHL has since claimed that there are additional parties interested in submitting bids to buy the team. Judge Baum says he has no patience for “interested parties”, only those that put in a bid to buy the team. Lawyers for the City of Glendale have filed “Rule 2004 Motions” in order to get depositions from Moyes and minority partner and Coyotes Head Coach Wayne Gretzky. Gretzky filed countermotions in order to protect his personal tax statements and gained a small victory when Baum ruled in his favor. Moyes has also file Rule 2004 Motions to attempt to depose Reinsdorf among others; a move the NHL claims is being made to stifle Reinsdorf’s attempt to buy the team.

Baum has signed an order setting up a process in which to collect bids to buy the team. The first date of importance is August 5th. This is the date set by Baum in which any party interested in buying the franchise and keeping it in Glendale has to submit their bid to do so. If Judge Baum decides that none of the bids is acceptable then the court will accept bids from parties looking to move the team from Glendale up until September 10th.

Further complicating matters is that anyone looking to move the team would have to pay a “relocation fee.” There is no set amount dictated in writing for a “relocation fee”. The amount could hinge on whether or not the team is moved into the “territory” of an existing franchise. For example, if Balsillie or anyone else successfully purchased the team and wanted to move it to Hamilton, the NHL could charge an amount of money to be distributed to the Toronto Maple Leafs and the Buffalo Sabres as Hamilton technically resides within their territorial rights. Basically the NHL could muck up the sale and move by charging an exorbitant relocation fee.

I hope you’ve all been able to keep up with this; it hasn’t been easy to keep it straight to write it up. Now here’s what I think will happen. The NHL will succeed at making it so difficult for anyone to move the team that the only viable option will be for the team to be sold to someone who will keep the team local. The NHL feels that the Coyotes have been mismanaged thus resulting in the substantial losses incurred by Coyotes ownership. Some potential bidders agree so the NHL will find someone to offer enough money to satisfy the franchise’s creditors and thus be able to remain in Glendale.

The NHL will also intervene on the behalf of the new ownership to renegotiate the arena lease with the city of Glendale. By all accounts, the lease is among the worst in all of professional sports. If I’ve read correctly, the city keeps most of the revenue generated from parking, advertising and concessions. This puts a real dent in the revenue that the team can generate.

Now what would I like to happen? I really do want to see another team or two in Canada. I miss the old Hartford Whalers (I know, not a Canadian team but still), the Winnipeg Jets and the Quebec Nordiques. I think that with the revenue sharing in place and the salary cap that a couple of cities in Canada can support an NHL franchise. I personally don’t have any ties to the Phoenix market though I can imagine how I would feel if our local team was threatening to be moved.

The real losers in all of this drama are the Phoenix Coyotes players and staff, the fans of the Coyotes and the fans of a new Hamilton team. They are all being held hostage until a resolution is reached. Whatever happens there are going to be some unhappy people at the conclusion of this drama and for that I feel bad. I just hope that a resolution is made quickly and the “losers” in this story are able to move on to whatever lies next for them.

One last thing before I sign off; Rangers fans and fans of hockey period, I am doing a Rangers oriented “mail bag” on this site. However, if you feel like asking a question about any team or commenting about anything NHL please feel free to email me at gkmkiller@cox.net I will publish the best questions, the smartest comments and my responses on the site every week. If your email doesn’t make it onto the site then rest assured I will respond to you via email anyway.

Thanks,

Glen Miller

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