Part I: Bankruptcy Court Yet to Rule on Phoenix Coyotes Case

bankruptcy

By Dan Canavan

We have been closely monitoring the hearing taking place this afternoon in the Phoenix Coyotes bankruptcy proceedings.  As set forth in this post, the purpose of the hearing is to determine if the team is portable.  This issue will ultimately determine the value of the franchise and the fate of the Coyotes Hockey, LLC, bankruptcy estate.

Our initial thoughts on today’s proceedings will be divided into two blog posts.  Here’s Part I:

The Bankruptcy Court Agrees That an NHL Franchise in Hamilton Would be Valuable

CBC’s Tom Harrington was present in the courthouse in Phoenix and kept a running blog of the proceedings).  Judging from his reports, it appears that the NHL has agreed in principal that a franchise in Hamilton/Southern Ontario would be extremely valuable.  But the potential for an expansion fee presents a $100 million obstacle for an existing team to move there.  The NHL views the Hamilton market as a “league opportunity,” or put more simply, a potential untapped revenue stream.  In fact, it has been rumored that the league would be looking for at least a $100 million relocation fee to move the Coyotes to Hamilton to compensate the league for the loss of an expansion fee.  Although this fee is likely more designed as deterrent than compensation, the $100 million price tag is not excessive when compared to the expansion fees collected by the four major league sports since 1990.

How Many Legitimate Offers Have Been Made to Buy the Coyotes?

One question that was not fully answered during the hearing, is whether the NHL really has four legitimate offers to purchase the franchise as was widely reported over the weekend.  Regardless, if these parties are truly interested in owning and operating the franchise in Phoenix, the dollar figure of these bids would be expected to be far less than the reported $212.5 million promised by Jim Balsillie. The NHL is also contesting the true value of Balsillie’s offer, citing that its real value if far less than the reported $212.5 million.

Although it is unclear how these issue were raised during the hearing, it appears that Balsillie has made the only firm offer to purchase the franchise.  To be certain, the NHL’s attempt to exclude the largest and only offer to purchase the team won the ire of Bankruptcy Judge Redfield T. Baum.  Judge Baum also called out the NHL for not following its own rules and bylaws regarding the transfer and/or relocation of a franchise, citing that the NHL ignored the January 1st deadline to relocate a franchise when the Nordiques left Quebec for Colorado in 1995. Balsillie’s legal team argued that its ownership group, the Copps Coliseum and the Southern Ontario market meet the criteria for relocating the team.  Connecticut Sports Law has recently obtained a copy of the NHL Constitution and Bylaws. Stay tuned for future ctsportslaw.com analysis of the NHL’s relocation guidelines and what may be in store for hockey fans in “[a]t least eight of the NHL’s 30 franchises [that] are thought to be suffering significant annual losses.”

dan_canavan1Dan Canavan, Connecticut Sports Law’s resident hockey expert, is an attorney at Updike, Kelly & Spellacy in Hartford, Connecticut and fan of the former Hartford Whalers. He has appeared as a guest with regard to the NHL and the Phoenix Coyotes bankruptcy proceedings on CBC Radio’s World Report. Dan can be contacted at dcanavan@uks.com or 860-548-2672.

Comments

  1. The main issue with the Coyotes in Phoenix is that the ice they play on melts to fast here in the desert heat. Any chance they would consider moving to the MLL? And why does their coach make more money per year than any of the players? Maybe if they stop paying Gretzky 7+ million per year (to coach them into last place), cut out health insurance benefits, and sell beer until the end of the 3rd period… instant profitability

    As a hockey fan I hate to see them go but as a realist there is no other option.

    Go Penguins!

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  1. […] Part I: Bankruptcy Court Yet to Rule on Phoenix Coyotes Case […]

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