Bettman's Slippery Slope

I think Bettman took a major hit this week when Judge Baum ruled that Jim Balsillie can take part in the September 10 auction for the Phoenix Coyotes. Bettman still has a couple of cards to play but Balsillie has progressed much further then he ever thought possible.

The major advantage that Balsillie had was that this sale was put in the hands of the judge and he rejected the NHL’s initial request to invalidate the bankruptcy. That forced Bettman to play his game in public and it also called his bluff on there being four potential purchasers interested in keeping the Coyotes in Phoenix.

The judge has tried to respect the NHL’s desire to keep the team in Phoenix and the Glendale lease. His ruling was to hold an auction for only those interested in keeping the team in Glendale first, and only if that failed would he permit an auction for those wishing to relocate the team.

What possibly surprised Bettman was that no suitable bid came forward to keep the team in Phoenix by the deadline for that auction. The Reinsdorf bid was basically a no cash offer that did not pay off the major creditors and required concessions and an out clause from Glendale that they can not give. As a result the major creditor, SOF Investments, did not back that bid and all parties requested that the first auction be delayed.

At the same time Bettman had the NHL’s board reject Balsillie’s application to be an owner. With that rejection he sought to have the judge remove Balsillie from any auction and even suggested that no second auction was necessary since there were no longer any qualified buyers for a relocation auction. The judge didn’t exactly go along with this idea and he has now consolidated both auctions into one and has specifically permitted Balsillie to participate. One of the reasons he agreed to Balsillie taking part in that auction is that the major creditor has stated that at present Balsillie’s bid is their preferred choice.

If the bids stand as they are today the judge may well have to select Balsillie’s bid since it is the only one that will pay off the major creditors. I can not see how Bettman or the NHL will let it get to that point. At that point the NHL could not block Balsillie without entering into a long and costly legal battle during which time they would likely have to fund the team. Getting into that fight would not be smart for the NHL since Balsillie would have nothing to lose while the NHL would have everything to lose.

What would not surprise me is to see a new relocation bid enter the auction for either Kansas City or Las Vegas at the last minute. Such a bid may even involve Reinsdorf as an owner. The NHL would pre-approve the owner of the new bid in the same manner as it already approved Reinsdorf. If this new bid was close to Balsillie’s it would likely be accepted by the judge since it would provide less uncertainty for the creditors. Bettman would be able to duck responsibility for abandoning Phoenix since it would be the judge, not the NHL, that selected the bid.

The hearings next Tuesday will be interesting to see what issues the judge wants resolved prior to the September auction. My guess is that one item will be an agreement on a relocation fee. That requirement would scare the heck out of the NHL and may force Bettman to start looking for that second relocation bid, or to look at a way to make a deal with Balsillie.

This situation is far from over and gives us something to watch during the dog days of August.