August 25, 2009
Desperate times call for desperate measures, and it doesn't get more desperate for the NHL than entering a bid for one of its own franchises when its hand-selected puppet leaves the show.
Yes, indeed: The NHL is in the auction for the Phoenix Coyotes because the Jerry Reinsdorf group is out, unable to meet a court-mandated deadline to submit their bid. From a statement sent to the Chicago Tribune by Glendale Sports and Entertainment, whose principals are John Kaites, Jerry Reinsdorf and Tony Tavares:
"Despite the fact that we always thought that we were operating on an extremely aggressive timeline, we were able to accomplish a great deal in a very short time period. Our capital structure is negotiated, and we have negotiated acceptable deals with the secured creditors as well as a number of unsecured creditors. We have developed a solid business plan that would result in keeping the Coyotes in Glendale and in a relatively short period of time turning the team into a successful and viable NHL franchise.
"All of this was accomplished while the unwilling seller created an expensive litigious environment and pressed a public relations strategy that has had the effect of chilling the negotiations with the City.
"Despite arduous efforts by the City of Glendale's administration and ourselves, we have been unable to reach an acceptable lease deal for the operation of the team at the Jobing.Com Arena. Since we have not finalized this critical agreement within the mandated timeline we cannot submit a firm and binding offer to the Court."
So it's the NHL stepping up with a firm and binding offer for the franchise, although no terms have been disclosed publicly. How firm and binding it is in relation to the one Jim Balsillie has in play -- now with an expiration date -- will determine the fate of the Coyotes. Well, that and the endless appeals that mean at least one lame-duck season in the desert, we imagine.
Coming up, the NHL's statement on this stunning turn of events, along with pro-Phoenix and pro-Balsillie takes on the League's attempt to buy the ‘Yotes.
Here's the statement from Bill Daly, NHL deputy commissioner, on the League's decision to bid for Phoenix:
"Today, the League filed its own bid to purchase the Phoenix Coyotes' franchise out of bankruptcy in an effort to maximize the likelihood that the Club ultimately will be sold to an acceptable purchaser who is committed to operating the franchise in Glendale.
"We remain supportive of the other efforts that have been and are being made to purchase and operate the Coyotes in Glendale, and we will continue to do everything we can to assist interested groups in those efforts leading up to the scheduled sale hearing on September 10, 2009 and thereafter, if the NHL is the winning bidder.
"We believe this step was necessary at this time in order to best preserve and maximize the value of the Club asset for benefit of the Club's creditors and for the community of Glendale.
"The bankruptcy petition and subsequent events have been incredibly damaging to the Club's business, and the sooner the Club can be extricated from the bankruptcy process, the sooner Club personnel can begin to restore the team's vitality and local fan base.
"In the event the League's bid proceeds forward and ultimately is the one approved by the Court, we intend to conduct an orderly sale process to a third party buyer outside of bankruptcy.
"It continues to be our intention and hope to conclude satisfactory agreements with existing Club business partners that will allow the Coyotes to be owned and operated on a viable basis in Glendale for many years to come."
Boil that down to one word, folks: creditors. As Bruce Arthur of the National Post points out, that's the end game:
Through all of this, the Balsillie camp kept repeating one thing: Let the best bid win. The whole point of dragging this team into bankruptcy court was that nobody would be stupid enough to want to own and operate it in Glendale, where the losses over the last three years were in the neighbourhood of US$60-million. And so when it came to satisfying the club's many creditors, Balsillie's bid of US$212.5-million was by far the best bid.
And after all the bluster and the blather and the bull, this is what it has come to. Nobody wants to own this mess where it is, Mr. Balsillie still has the best bid, and someone has to top it. If Mr. Balsillie bids US$212.5-million, the National Hockey League has to come up with US$213-million.
Well, it's not quite that simple. There are still the penalties for leaving Glendale. There's still the fact that Balsillie needs the court to overrule the NHL's bylaws and processes for approving ownership, because he's been rejected. And we might as well start theorizing about doomsday, desperation scenarios the NHL could unleash should Balsillie win the day; has anyone ruled out the possibility he takes over a franchise that the NHL simply contracts after next season? (Total, utter speculation; the ravings of a conspiracy theorist, really.)
All that said: Greg Esposito of Fanster thinks the NHL made a shrewd, potentially franchise-saving move for the Coyotes. From Fanster:
Even though the idea of professional sports league having to purchase one of it's own franchises, in an effort to determine where the team plays seems out of the ordinary, it truly is a shrewd business move.
If the NHL's undetermined bid amount can satisfy all creditors, most likely with the exception of Moyes, and involve actual assets, unlike current bids wanting to keep the team in Glendale, the league may be able to keep the team out of the hands of the relocation minded Balsillie. By providing a reasonable bid that honors all major creditors, the NHL gives judge Redfield T. Baum an easy way to escape legal scrutiny by fulfilling his duty as a bankruptcy judge and still keeping the team in the Valley. If the NHL is awarded the franchise, they can then in turn sell it to whomever they choose.
Again, that's simplistic. No one's buying this team without concessions from Glendale, which obviously didn't come quickly enough for Renisdorf. No one is buying this team until the majority of the toxic debt is drained. And, quite frankly, no one is buying this team without some sort of safety net out clause to relocate it at some point down the line if fortunes don't change.
This is public relations torment for the NHL. Not only is it in the fight without a surrogate like Reinsdorf, but now it's fighting to save the team that no one wanted. Even if the Coyotes don't end up with Balsillie, how exactly does one sell fans on a team that is in the midst of an "orderly sale process to a third party buyer outside of bankruptcy" when no buyer could be found over the last several months?
UPDATE: Good stuff from Tyler from NHL Digest on how this move was a long-time coming. Taking a step back from this thing for a moment, it really is hard to believe it's happening: A professional sports league is trying to win an auction for one of its own properties, while trying to keep an individual it's already rejected as a franchisee from buying into the business.