|
By John Goff
This is not exactly what the National Hockey League needs right now. Smack in the middle of peak publicity season--the Stanley Cup playoffs--the league finds itself embroiled in what effectively amounts to a hostile takeover bid for one of its franchises.
Jim Balsillie, the rich, brash--and often controversial--owner of BlackBerry maker Research In Motion, is attempting to purchase the struggling Phoenix Coyotes franchise for $212 million. Balsillie, a hockey nut with an estimated fortune of $1.9 billion, wants to move the team to southern Ontario.
You’d think Balsillie would have had enough of the NHL, having been rebuffed by the league in two previous bids to acquire hockey clubs (the Pittsburg Penguins in 2006 and the Nashville Predators a year later). Those failed acquisitions led to much speculation in the media that NHL Commissioner Gary Bettman would rather have his toenails removed with needle-nose pliers than sit in the same room with Balsillie.
But Balsillie didn’t get to where he is today--Waterloo, Ontario--by taking no for an answer. In an off-ice power play, the BlackBerry boss agreed to buy the ailing Phoenix franchise in what looks a lot like a pre-packaged bankruptcy deal. Coyotes owner--and trucking company big wheel--Jerry Moyes, filed to place the team under bankruptcy protection on Tuesday.
The Chapter 11 filing apparently caught the league and Bettman by surprise. Lawyers for the NHL are due in court today and will argue that Moyes had no right to place the team into bankruptcy or agree to sell the club.
In a panel discussion yesterday, Bettman did acknowledge the financial woes at the Phoenix franchise, noting that "the Coyotes have had some economic issues during this year…”
Some is right. The league reportedly had to advance the Coyotes cash this year to keep the team afloat. Indeed, the Coyotes—formerly the Winnipeg Jets--have not turned a profit since the club set up shop in the Arizona desert in 1996. In 2007-08, the ‘Yotes generated about $57 million in revenues and still managed to lose nearly $22 million. They year before, Phoenix lost $30 million.
“The League has been working with Mr. Moyes, who's having his own financial issues, to keep the club current in its obligations," Bettman granted.
But the NHL commissioner also sounded off about Balsillie. "This is not about whether or not we want a franchise in southern Ontario and whether or not Mr. Balsillie would make a suitable owner that the (NHL) owners would approve," explained Bettman. "This is about the League rules and the enforceability of our rules, whether or not Mr. Moyes even had the authority to file a bankruptcy petition is something we're going to get into.”
Balsillie is banking on it. By providing the Coyotes with $17 million in debtor-in-possession financing, he apparently has vaulted himself to the front of a line of secured creditors that includes the NHL. And even if the bankruptcy judge affirms the NHL’s right to veto a sale under normal operating conditions, he may very well rule that such power does not apply in bankruptcy court.
Certainly, the job of a bankruptcy court judge is to protect the interests of the creditors. And if a sale to Balsillie will net the most cash for those creditors--and really, who else is going to bid $212 million for this money-losing franchise?--then the judge may well side with Moyes.
What’s more, filing for bankruptcy protection could help Moyes--and by extension, Balsillie--get out from the Coyotes’ agreement with its landlord, the City of Glendale. The city built a multipurpose arena for the team, now called Jobing.com Arena, which opened in 2003. The city financed the $180 million construction project with $30 million in general obligation bonds and $150 million in excise tax revenues.
To protect its investment, Glendale inserted a clause in its contract with the Coyotes requiring the club to pay a whopping $750 million penalty if it skipped out on the 30-year lease. But under Chapter 11 laws, those damages would be capped to one year’s rent or 15% of the rent over a three-year period. According to a published account written by news anchorman Brahm Resnik of local station KPNX, that tab would work out to about $500,000.
Clearly, the RIM co-CEO has done his due diligence. Then again, Bettman appears ready to drop the gloves on this one. As commissioner of a league that’s rebounded quite nicely from the ugly player lockout of 2004 and 2005, he is no doubt determined to preserve the power of the board of governors.
“The league does not like to be strong-armed,” conceded National Hockey League Players’ Association president Paul Kelly. “And [it] believes it has a number of legal and technical maneuvers it can take to forcefully block anybody who tries to enter the ownership group.”
Only registered users can write comments.
Please login or register. |
