Coyotes Auction, Clearer or Muddier?

Not much happening in the world of sports during August so we’ve been following the Coyotes sale a bit closer the last few days.

Things did get interesting Friday when leaked confidential information provided us with insight into the concessions that Reinsdorf is looking to get from Glendale. The first part of the concessions is the desire to create a special tax zone around the arena which will hopefully bring in $23 million per year in additional revenue for the Coyotes. This revenue would be generated by a special 11% sales tax in the area which would go to the Coyotes. One of the first objections to this proposal came from the owners of the Phoenix Cardinals NFL team since their stadium is in that area as well and their fans would be hit by the tax when they go for pre or post game meals. It appears that the strategy of an additional tax on the public is way for Glendale to get around directly subsidizing the Coyotes. With the economic climate in Phoenix you have to wonder what effect an additional 11% tax would have on the businesses in the area. In addition there has been some talk that Glendale may have to makeup any shortfalls in this additional revenue if the sales taxes fall short.

The other part of the Reinsdorf bid is that he is asking for an out clause should the Coyotes not be profitable after five years. The reported request is that if the Coyotes are not profitable after that time, then Glendale would subsidize up to $15 million per year of losses, or permit the team to be sold and moved. The idea of subsidizing future losses will not be an easy sell to the taxpayers so the out clause may well have to be moved up to a shorter period of time.

The other big difficulty with the Reinsdorf bid is that he is not offering cash to the creditors, but instead is only willing to assume and restructure the debt. The largest creditor, SOF Investments (owned by Michael Dell), stated that they are only interested in being paid out in full and oppose the Reinsdorf bid as it is currently structured.

The NHL is now making noises that Reinsdorf may be frustrated in the process and may pull out due to the obstacles of Moyes and Balsillie. Glendale is also positioning the leak of this confidential information as potentially causing Reinsdorf to pull out. To me it appears that Reinsdorf may pull out because the creditors won’t accept his no cash bid and the Glendale concessions that he was looking for are not attainable. Glendale may well realize this and are now setting up Moyes for a damages law suit due to the leak of information.

The Ice Edge boys are still plugging along, but there approach makes no sense to me. Gretzky being a cornerstone of their bid and their interest in giving him a longer term coaching contract makes no sense. They also state that they are not looking for an out clause in the Glendale lease and again that does not suggest a well thought out plan.

Despite the NHL voting Balsillie down as a potential owner, the judge referred to Balsillie’s bid as the “highest and best” bid he has seen so far. On Wednesday the judge is supposed to rule on what will happen with a relocation auction, or if he will combine both auctions into one.
Right now the “keep the team in Phoenix bids” are not looking strong so it may be time for Bettman to get additional relocation bids in place to compete with Balsillie. We should know more about how the judge views Balsillie’s status in these proceedings in a couple of days.