Coyotes, What Now?

Now that we have the first big court ruling and have heard lots of posturing, let’s take a look at where we really are and where this is likely to go.

The way I like to look at this is to cut through the spin from all sides and look at some realities. The biggest reality is that it does not appear that any purchaser will be willing to commit to running a team in Glendale for the long term. The NHL has been trying to find such a buyer for a long time, and the financials of the Coyotes show that this does not make sense with the present state of the Glendale arena lease.

Balsillie’s major play was to try and force a quick auction where he hoped to be the only bidder. His major concern was not a potential local purchaser since I don’t think such an animal exists in the desert. However, his proposed timing for the auction would have made it hard for another group to join the auction with a bid to move the team. Don’t get me wrong, there are many groups that would love to do just that, but not many of these groups would want to join an auction that the NHL is opposed to. Unlike Balsillie, other groups planning to move a hockey team into southern Ontario plan to do it through the front door and have no desire to antagonize Bettman with an end run for the Coyotes.

Balsillie’s other hope may have been to get the NHL to turn down his ownership request, or his relocation request, and open the door to anti-trust legislation. The NHL wisely did not bite on this, and the quick timing that Balsillie’s proposal put upon the judge forced him to do that work for the NHL by dismissing Balsillie’s initial motion. At this point Balsillie has not been rejected by the NHL and anti-trust is not an issue.

What Balsillie has gained is the fact that the judge now is running the bankruptcy and not the NHL. What Balsillie has lost is the sense of urgency since he stated that he needed his purchase to be completed by June 29 to enable the transfer to Hamilton by next season. This deadline will pass and that will enable the judge and the NHL to work in a more controlled manner towards a sale.

The NHL’s dilemma is that nobody will commit long term to Glendale, but it already knows that. What the NHL will look for is a deal (likely with Reinsdorf) where the purchaser buys the team and officially agrees to keep the team in Glendale. For that to happen, a modification will have to be made to the Glendale lease to make it acceptable to the new owner.

This brings up the next major issue since one important item that was not ruled on by the judge was the Coyote’s ongoing lease with the city of Glendale. The powers that be in Glendale must realize that the Coyotes can not survive in their current location without financial subsidies. While they may like to do this, the problem is they likely can not. Politically, the taxpayers of Glendale would likely not agree to a $14-20 million subsidy for the new owner and legally such a deal would probably violate the state’s gift laws which limit such subsidies.

If Glendale sticks to its guns, no buyer will be found and the team may well fold with Glendale getting nothing. The most likely solution is for Glendale to agree to an amendment of the lease that would let the new owner move the team with a penalty of say $30 million if certain attendance figures are not met during the next two years. The local politicians can then use that money to impress their taxpayers and help with their own re-election chances.

These negotiations are likely being carried out at this very moment and will be critical to the NHL’s hopes of announcing a purchaser who will “officially” keep the team in Glendale.

To find the biggest loser in this scenario we just have to look under the bus, because that would be where the NHL has thrown him. The loser here is the current owner, Jerry Moyes. The NHL has already stated that they will find a new owner that will satisfy all legitimate creditors. They may as well of said all creditors except Jerry Moyes. Some of the Balsillie money that would have gone to Moyes will instead be put aside for the future buyout of the Glendale lease and the overall purchase price will be less since Moyes will not be deemed to be a legitimate creditor. Balsillie’s lawyers have already jumped on this and are trying to alert other owners of struggling NHL teams that they could be the next ones to be thrown under the same bus when the time comes from them to sell their teams.

If it plays out this way, then the NHL will be able to go before the court with their approved purchaser. At that time Balsillie may well come back with his revised bid which will be for more money, but will have more uncertainty associated with it. At that point Balsillie’s lawyers will try to uncover the side deals that are in place and that could get quite nasty and embarrassing for the NHL and the new purchaser and anti-trust could become an issue. This potential threat could be what Balsillie needs to get back in the game for the Coyotes.

Maybe that is Balsillie’s Plan B.