NHL Likely to Take Over Phoenix Coyotes

Coyotes1On Tuesday,  August 25, 2009, the Reinsdorf group announced that it has withdrawn its bid to purchase the Phoenix Coyotes at the upcoming September 10th bankruptcy court auction.  

Reinsdorf’s $150 million bid now appears to reflect more NHL maneuvering to keep the Coyotes in Glendale (and away from Balsillie), than an actual arms-length transaction.  The purported “bid” included no upfront transfer of capital.  In fact, it was basically an agreement for Reinsdorf to assume a large portion of the Club’s debt (but not all of it), in exchange for a very favorable lease, which included yearly cash payments by the City of Glendale to the new ownership group. Despite the use of taxpayer money to fund the team, the bid reportedly contained no long-term assurance that the team would not relocate.  Reinsdorf’s bid was widely criticized after his negotiations with Glendale were leaked during the bankruptcy proceedings.

Without Reinsdorf, the NHL is facing its own worst nightmare –  that Balsillie will be the only suitor left standing.  Thus, the NHL is expected to file an application to purchase the Coyotes outright.  Despite that there are no interested parties willing to keep the team in Arizona, the NHL continues to maintain that the team can be profitable in its present location.  Since all else has failed, it appears that the NHL will now have to finance tdream of hockey in the desert itself.

Although the NHL’s bid has been viewed as a desperate attempt to prevent Balsillie from relocating the team out of Arizona, purchasing the Club outright may be the best thing for the NHL in the short term.  The NHL could purchase the Club and unload it to Reinsdorf at a later date.  Using the NHL as a straw man will allow the club to emerge from Bankruptcy “free and clear” of certain creditors. Such an approach will likely increase the value of the Club, and allow Reinsdorf to continue to negotiate with the City of Glendale outside the very public and very transparent nature of the Bankruptcy proceedings.  In the alternative, the NHL will be free to transfer the team to any other willing purchaser that it deems acceptable.

By taking control of the Coyotes, the NHL would take control over any relocation opportunities that it maybe willing to entertain.  Judge Baum will likely be more inclined to award the team to the NHL and avoid the sticky issues of relocation and the unanimous refusal by Board of Governor to approval Balsillie as an owner.  Plus, the NHL presumably has more buying power than Balsillie, which will be more appealing to Judge Baum as he works to protect creditors.  Short term league ownership worked reasonably well for MLB and the Washington Nationals.  Look for the NHL to finally take charge of this situation and become the new owner of your Phoenix Coyotes.

dan_canavan1Dan Canavan is an attorney at Updike, Kelly & Spellacy in Hartford, Connecticut.  He has appeared as an on-air guest with regard to the NHL and the Phoenix Coyotes bankruptcy proceedings on CBC Radio’s World Report.  His analysis and commentary have also been published in various media outlets including The National Post, faceoff.com, as well as the Sports Litigation Alert , a leading sports industry publication which is circulated throughout the United States.  Dan can be contacted at dcanavan@uks.com or 860-548-2672.


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