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September 10, 2009

Coyotes judge: Bailiff, kick these two nuts in the butt

Okay, the Phoenix Coyotes saga officially has more preposterous twists than Melrose Place. The latest came at today's bankruptcy court hearing — originally scheduled to be the date of the actual auction of the team, but who knows when that will happen now — when Judge Redfield Baum said he might just not award the team to either bidder:

The league said it would look for a buyer to keep the team in Glendale, but if one can't be found, they'd consider moving it.
Either way, "it will necessitate the rejection of the lease," said lawyer Jordan Krupp.
"You're all forgetting there's a third option here," said Baum.
"No sale."

And that's right, "either bidder" — did I neglect to mention that Ice Edge Holdings, the group that wanted to have the Coyotes play some home games in such far-flung places as Saskatoon or Halifax, pulled its bid at the last minute on Tuesday night, saying it couldn't come to an agreement with Glendale on a new arena lease?

That leaves only two bidders: Jim Balsillie, who the NHL has declared will join their exclusive club when Arizona freezes over; and the NHL, whose bid Baum raked over the coals today:

Early in the day, the judge got tough with the NHL, wanting it to clarify who gets what in its $140 million bid. He said it didn't seem fair that Jerry Moyes would get very little in the NHL bid, wondering why the league was treating him so differently from other creditors.
"I can't approve a bid I don't understand," said Baum.

With options like these, you sort of understand why Baum might be threatening to take the franchise and go home. Tomorrow, both Balsillie and NHL commissioner Gary Bettman are expected to testify; if the courtroom is still standing afterwards, Baum has promised to issue a ruling "certainly before the start of the season" on October 1.


What Happens if the NHL Wins & Jerry Moyes is a Creditor in Judge Baum�s ruling?

Apart from the scenarios of "no sale" which Judge Baum has said is possible or a victory by PSE that Baum knows will trigger more lawsuits, is a 3rd result which the NHL & those supporting their bid have incorrectly brushed off.

Judge Baum has clearly shown that his opinion trends to making sure ALL creditors are satisfied. Presently only the PSE bid addresses this & the others ignore it at their peril. If it is Baum�s opinion that Moyes & to a lesser extent Gretzky must be satisfied then Dell, Glendale & all of the other creditors will be paid much less.

The NHL as a secure creditor will be paid 1st, but they will inherit the crippling lease that Jerry Moyes would be freed of. The rest of the creditors would then be treated equally & would have to split the remaining pot of money. A pot of money that is not merely evaporating but boiling away at an ever-increasing rate. Add $60 million this year in losses & you have a very small pot of money indeed.

I'll bet Michael Dell didn't consider that scenario when he backed the conditional offer of the NHL. The NHL BOG certainly didn't expect to be stuck with a 26-year 'ironclad' lease. The 100+ suppliers & contractors for the team surely expected to be 'paid in full'. These all have a good chance of being extremely disappointed now should the NHL succeed in blocking the PSE bid.

If the NHL succeeds they will have little chance of selling the team to anyone with such a crippling lease. The city of Glendale is powerless to change the terms of the lease since the Goldwater Group will fight anything it considers to be a gift. We know this to be a truth in this equation because despite the time allotted, both the Reinsdorf & Ice Edge groups could not come to a deal in restructuring the lease.

The City of Glendale negotiators know that by playing their version of �rope a dope� a good chance exists for the winner to be tied to the present lease., especially if the NHL is that winner. Any winning bid that intends to play 1 day in Glendale would be tied to that lease unless the Judge deems an intended relocation sale (PSE) is preferable & time must be allowed for that transfer to take place.

In other words, he can temporarily assign the lease in order to complete the sale. Under no other conditions of bankruptcy law can the lease be modified. Glendale knows that if the NHL tries to fold the franchise they will face opposition from the NHLPA that since its last contract has the right to block a team folding. They also know that if the team folds it would be an admission of complete failure in the �sunbelt experiment�.

This is why Glendale has stalled any renegotiation of the lease. It is the best way to play their limited cards under most circumstances. The only other consideration they have is that PSE might win the auction, which has become a very large possibility. In that circumstance they could receive as little as $7 million, a risk they are apparently willing to take even in the face of a $40 - $50 million offer to buy out the lease.

This offer now having been rejected by Glendale should be pulled from the bid by PSE & added to the main bid. It is of no value anymore & quite possibly a detriment to the bid being successful. While it was an offer designed to show good faith on the part of PSE, the lack of good faith by Glendale in not endorsing it, makes it an anchor that should be cut loose. Glendale has already made their decision & should no longer be allowed this safety net.

No matter what happens in this auction the NHL will be �paid in full� & no doubt shall feign sadness at the creditors losses but the crocodile tears they shed today will be long gone tomorrow. If the NHL wins, Gary Bettman, smug in the knowledge that he played his cards well, will be able to say it wasn�t HIS decision to settle the debts in this manner. This despite the fact that it was his persuasion that caused these creditors to ignore their own best interests & support his bid.

Posted by Patrick Romanoski on September 11, 2009 10:29 AM

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