AHL Franchise Shake-Up

The word out of Winnipeg is that the group that owns the Manitoba Moose has purchased the NHL's Atlanta Thrashers and will be moving the team to Winnipeg.

The Thrashers have long been one of the NHL's failing franchises, and they've been propped up by an ownership group that, along with owning the team, also owned the arena and were willing to keep them so as to keep the building occupied. But the losses have just been too much, and nobody in Georgia has expressed any interest in buying the team, thus the Winnipeg group has swept in and purchased the team.

The deal isn't official -- there's no announcement from the NHL yet -- but Gary Bettman will probably be banned from Canada should he attempt to stop this deal. It's also not sure when the team would actually move to Winnipeg, whether to start the upcoming 2011/2012 season or if they would hold off for the 2012/2013 season.

This does, of course, mean that the AHL could be down a franchise at some point, kind of like how the Edmonton Oilers held onto the ownership rights of their Edmonton AHL franchise but refused to actually put a team on the ice until placing their franchise in Oklahoma City this past season. So the Manitoba group could just not field a team, they could move the Moose to another city since they will still own the rights to the franchise, or they could sell the rights to another group.

The odds are the Moose will be relocating, it's just a question of when or where. And once that happens, we'll probably see more division and conference shake-ups.

UPDATE: Okay, according to True North, the group that is supposedly buying the Thrashers, this is not a done deal.

The Twits and the Phoenix Coyotes

I don't know how many of you are still following the Phoenix Coyotes saga, but just when things appear to be settled or calmed down, something really stupid happens and things are once again thrown into turmoil. Like Phoenix's white night, Jerry Reinsdorf, pulling his bid off of the table and dropping his quest to save the Coyotes for Phoenix.

But don't worry. The NHL has found a new owner. The NHL. That's right. The NHL is making a bid to purchase the team from bankruptcy, and get this, its offer is for even less money than what Reinsdorf was offering up. And from I've read, the NHL's plan is to purchase the team and then sell it to whoever will offer up cash for it -- and the team doesn't even have to stay in Phoenix.

And coming up next week, the Judge is supposed to decide if he will allow Jim Balsillie to bid on the team, or whether the NHL's vote finding him "not qualified" to be an owner will keep him from bidding on the team.

I no longer have any idea of what is going to happen here. But I'm pretty sure, after everything that's happened, that the NHL is being run by this group of twits.

Coyote Creditors Now Support Reinsdorf Bid

Last week, after the largest creditor of the Phoenix Coyotes backed Jim Balsillie's bid for the team as the only one that they would accept, I thought for sure the Coyotes would be no longer for Phoenix after this season. But today, that same creditor announced that it has reached a deal with Jerry Reinsdorf, so they are now willing to accept Reinsdorf should his bid be chosen by the judge -- I still don't understand this in that it still does not appear that Reinsdorf is parting with any cash, but if the creditor's happy, then the judge should be happy. (There's no word on how all of the creditors feel about this, but the Court cares more about the big guys than it does the little guys.)

Frankly, I now think this dooms Balsillie's bid. Sorry Canadians, but it's looking like a city that doesn't really seem to want the team is going to continue to have a team while a country that loves hockey continues to have an under-served market.

It still appears, however, that Reinsdorf has to work out a deal with Glendale over the use of the arena. And the auction for September 10 is open to any and all bidders, so it's still possible that another bidder could swoop in and making an even better bid which the judge would accept. I still think, from what I've read of Reinsdorf's bid, that the Coyotes are doomed to failure to Phoenix, but instead of ending it, the NHL is just going to stretch things out because of Bettman's hatred of Balsillie, and I'm surprised that Reinsdorf is willing to go along with this -- oh, wait, no I'm not as there appears to be a rather crooked political deal going on involving Reinsdorf.

Uh, Mr. Bettman, About That Whole Southern Strategy Thing

Here's a little something that I'm sure has Jim Balsillie all excited this morning. Because, just in case that whole Phoenix Coyotes thing fall apart, there now definitely appears to be another Southern NHL team in need of rescuing. This time, the franchise is the Tampa Bay Lightning.

According to the St. Petersburgh Times, the NHL has issued an ultimatum to the Lightning ownership: "The NHL apparently has decided the Lightning's ownership situation is unsustainable and set up a process in which squabbling co-owners Len Barrie and Oren Koules can buy each other out." There is apparently a 60-day window in place for Barrie to buy Koules, and if he fails to so do, then Koules has 60-days to buy out Barrie. But along with buying the other out, Barrie or Koules must also prove that he can handle the substantial debt obligations to the previous owner, Palace Sports & Entertainment. Should neither be able to do that then it is possible the NHL will be charged with finding a new owner -- and we all know how good the NHL has done with finding a new owner for Phoenix.

So once again, Mr. Bettman, how is that whole strategy of moving away from Canada and into the South working out for the NHL?

[Addendum] The Phoenix Coyotes Are Dead, Almost, Just Give It A Minute

Ding dong. The witch is dead. Maybe. Almost. We'll know more next month. But in a ruling that perhaps surprised only the NHL, the Phoenix bankruptcy judge overhearing the Phoenix Coyotes bankruptcy today announced that the Jerry Reinsdorf no-money bid, the mythical-yet-to-be-submitted bid from Ice Edge Holdings, and the $212.5 million bid of Jim Balsillie will all be considered by the bankruptcy court in an auction on September 10.

Originally, there were to be two auctions regarding the Coyotes -- a keep the team in Phoenix auction which was supposed to have been done today, and the September 10 open to relocation auction if the original auction was deemed to be unsatisfactory. But Jerry Reinsdorf's bid has proven to be a bit inadequate, and he's still attempting to negotiate with the city of Glendale, AZ over the use of the Coyotes arena, so he and the NHL requested a delay so as to work on the bid. The judge granted that delay, with the result being that all bids will be considered on the same day.

This is bad news for Phoenix, Reinsdorf, and the NHL seeing as how the judge and the leading creditor have both stated that they prefer Balsillie's bid, seeing as how actual money is involved and the creditors are paid off. But in even worse news for Phoenix, Reinsdorf, and the NHL, the judge also stated that the auction is "open to any and all bidders including, but not limited to P.S.E. [Balsillie]."

What that, in effect, means is that the everybody is welcome to bid on the team, and there has been speculation that once the team was open to relocation more bidders might leap in. So it's possible, seeing that this team can now be moved and is not stuck with having to stay in Phoenix, that other parties are going to submit bids to purchase the team and move it, and the NHL has virtually no way to prevent this unless they find a way to get Reinsdorf to offer up at least as much cash as Balsillie.

There is also going to be a court hearing next Tuesday so as to address the fact that the NHL last week rejected Balsillie's bid. My thinking is that the judge will hear the NHL out, tell them to shut up, and get on with the real work. Considering some of the owners they have let into the league, like "Boots" Del Biaggio for example -- it's funny to listen to Minnesota Wild owner Craig Leipold go on about Balsillie being a liar when you consider that Leipold thought Del Biaggio was an honest guy -- I don't think the judge is going to be too sympathetic to the NHL's concerns. Especially since the judge's concern is getting the money back to the creditors, not helping Gary Bettman dig himself out of this grave he's buried himself in.

So the future of the Coyotes in Phoenix is dead. Almost. Not quite. But in a minute. They'll be stone dead soon. It won't be long.



ADDENDUM:

I want to be clearer about something: with the bidding process thrown open to anybody who wants to buy the club and move it, I wouldn't be shocked or surprised if someone makes a bid that surpasses that of Balsillie's and ends up with the team.

Porking the Chops

While we've been understandably paying more attention to the happenings in Minnesota (and Houston) -- and me with Phoenix -- there have been some more strange things going on up in Des Moines with the non-existent Chops.

As you might remember, Anaheim suddenly ended its affiliation with the Chops, and it came out that the owners of the Chops had failed to make agreed affiliation payments to the Ducks. It also came out that the owners of the Chops used the franchise as a collateral for a loan in 2008, which is a violation of AHL rules.

And this week, the owners informed Des Moines officials that they want to sell the AHL franchise -- possibly to Dallas -- move the team out of Des Moines, then replace the team with a CHL franchise. Des Moines officials (and the people who operate the arena) aren't too thrilled by this plan, and for now, they plan to hold the team owners to a contract signed two years ago which locks the owners into a 10-year non-relocation agreement forbidding the team from moving during the terms of the lease. If the team were to move, then the county would be entitled to liquidated damages, which are currently listed at about $12.5 million.

I'm interested in seeing how this plays out as, it's possible, the AHL could be locked into 28 teams for awhile because of this. This ownership group has burned through two NHL teams in two years, and with the financial shenanigans involving them and the Ducks, I can see other NHL teams being a little hesitant to get into business with them. And I can see the AHL being hesitant to continue doing business with these guys, though, since the guys own one of the 30 AHL franchises, there's not much the AHL can do about it. And with Tom Hicks' financial problems, you've got to wonder if he would be willing eat the $12.5 million in liquidated damages along with the cost of purchasing the team.

But frankly, I've got no idea of what's going to happen with this team. That's the hockey business though, I guess. Fun isn't it.

And The Coyotes Stay in Phoenix...For Now

The bankruptcy judge in Phoenix ruled late on Monday night that the June 29, 2009 deadline set by Jim Balsillie for the transfer of ownership of the Phoenix Coyotes to him did not allow enough time for the court to handle all of the complex issues that needed to be settled in the case, so the judge rejected the proposed sale of the franchise from current owner Jerry Moyes to Balsillie.

It is late, I've been sick, and I don't see much else out there on this yet, so it's hard for me to provide much analysis on the basis of an Associated Press article. But the one thing that I found interesting was this: the judge didn't care about the argument from the NHL (supported by all of the other major professional leagues) that its own internal rules were paramount above all else, and that allowing this sale to Balsillie would set the stage for mass franchise relocations across the country. The AP quotes the judge as saying that "Financially challenged sports teams have the same rights and obligations as any business" when it comes to bankruptcy.

From reading that statement (and the entire article), I get the feeling that the only thing that kept the Coyotes from relocating to Hamilton was timing in that the judge did not feel he had enough time to get all of the matters settled -- primarily the problems with the 30-year arena lease -- in the time desired by Balsillie.

It should get fun as the onus is now on Gary Bettman and the league to put up or shut up. I'm going to have to see some more in-depth stuff tomorrow, but the team is still in bankruptcy, and that means the judge is still in control of everything, and there is a plan from the NHL that if an auction that would keep the team in Phoenix does not come in at a price that would set the creditors whole, then the NHL will hold a second auction that would allow relocation. So I don't see that judge letting Gary Bettman get by with a sweetheart deal to one of his buddies.

And The Phoenix Coyotes...Oh, To Hell With It, There's Still No Ruling

And the soap opera that is the Phoenix Coyotes will continue just a little while longer. The bankruptcy court judge -- who had earlier said he would hold a hearing regarding the possible relocation fee that Jim Balsillie would pay to move the club to Hamilton -- issued a statement yesterday that he will not hold a hearing regarding the relocation fee and will instead issue one ruling on all matters that were heard by the court earlier this week.

There are two possible explanations for this: one, the judge has decided that the team can't move without NHL approval, so the relocation fee issue is moot; or, two, the judge did a little research and discovered that relocation (or indemnification) fees are not allowed under U.S. law -- for which Balsillie would owe a big debt of gratitude to one Al Davis. And indeed, looking at past NHL relocations, it has been determined that all indemnification fees paid were voluntary. And also of importance, the last time a NHL team invaded the territory of another NHL team, an indemnification fee was not paid.

The NHL expanded in 1993, and one site of the expansion was a place called Anaheim which was part of the territory of the Los Angeles Kings. The Walt Disney Company paid $50 million for the rights to the expansion franchise, and Michael Eisner, the man who was running Disney, refused to pay an indemnification to Bruce McNall, the owner of the Kings. To make up for this, the NHL gave McNall half of the $50 million expansion fee. And McNall has confirmed that this is what happened.

All of this would play into Balsillie's contention that he is not legally obligated to pay a territorial rights or indemnification fee. And all thanks to the NHL's own ineptitude.

The NHL is now claiming that, if Balsillie's court bid fails, that it will hold an auction to be supervised by the bankruptcy court for the franchise. Only qualified bidders will be allowed, and to be a qualified bidder, the bidder must agree to keeping the team in Phoenix. A $10 million deposit deposit and bids must be submitted to the court by August 10, with the auction on September 10, and the bids must be in $2 million increments.

The NHL has declared that $120 million will cover most of the team's creditors. But if the NHL does not get a bid that good to keep the team in Phoenix, it will hold a second auction for the purpose of relocating the team, and they will allow Balsillie to enter that auction.

The judge has not indicated when he will deliver his ruling, but it is expected to come before June 22, which is the date that Balsillie has indicated is his drop dead date.

And The Phoenix Coyotes Go To...Who Knows Yet?

There is not expected to be a final ruling on the Phoenix Coyotes situation today, but based on the line of questioning by the judge, and some of the statements he provided, it's looking like the NHL is currently positioned to end up as the loser.

The Judge didn't buy the NHL's contention that it has received "four expressions of interest" for the club: "This old judge is not that excited about expressions of interest," the judge told lawyers for the league according to the Toronto Globe and Mail. "You either make an offer or you don't."

The Judge also called bull on the NHL's contention that the move could wreak havoc with sports leagues and their various rules, and he used as support the midnight move of the Baltimore Colts to Indianapolis.

The primary issue appears to be relocation fees, with the judge seeming to agree that, if he approves the move, Jim Balsillie will have to pay the NHL a relocation fee on top of the $200-plus million he has already bid for the team. The NHL has claimed in papers that the relocation fee should be $100 million. Attorneys for Balsillie argued that that fee is too excessive, and that if that is what the NHL should charge, he will drop his bid.

The Judge stated that the relocation fee must be resolved, and it must be resolved in a manner that protects the interests of the creditors. A fee that is too excessive could cause Balsillie to drop out, and if there are no other legitimate bids -- which there do not appear to be -- the creditors would be harmed by having the NHL continue to run the team out of Phoenix. The Judge has asked the parties involved to settle this issue.

And so the matter continues.

And The Phoenix Coyotes Go To...

Quick note: for those who are tired of this topic, hang on, the mothership should have an Aeros post later today that I will link to over here. Now on with, to me, the fun stuff...

The parties to the mess that is the Phoenix Coyotes will be convening inside a Phoenix courtroom today, and it's just possible that the bankruptcy judge will make some kind of decision that might determine the fate of the team. The Toronto Star says that the judge is faced with making a decision that has Jim Balsillie easing creditor debt versus his reluctance to buck the tradition of sports that has the leagues being the rulers regarding where franchises are located: "(If) Judge Baum is focused on helping creditors, (it) means Balsillie should win," says Penn State law professor Stephen Ross. "But many judges are reluctant to challenge the tradition of sports, which helps the NHL."

One of the mistakes I've been making is that I thought the focus of this case, and the one true precedent, was the one involving Al Davis and the NFL where Davis won the right to move the Raiders to Los Angeles without NFL approval. But it just so happens that there this is a case that is even more on point -- and one which I should know since I'm such a baseball fan. But in 1970, on the literal eve of the regular season, the Seattle Pilots of the American League were relocated to Milwaukee, WI where they became the Milwaukee Brewers. The Pilots were put into bankruptcy by their ownership group, and Bud Selig moved in and purchased the team while it was in bankruptcy.

The Pilots owners were losing money, and they struck up a deal to sell to Selig and his partners for $10.8 million. Local officials in Seattle objected to the deal, and they tried to stop it. The owners then put the team into bankruptcy protection and argued that the deal should be approved because it would pay off the creditors -- does that sound kind of familiar? The NHL argues that the one difference is that the American League supported the move, to which Balsillie has responded that the American League only approved of the deal after the bankruptcy court judge approved of the plan and had instead insisted the team had to remain in Seattle.

I'm not the judge, and what I say has absolutely no power. But I've thought from the get-go this is a loser for the NHL. I understand that they're trying to protect the integrity of the league constitution and by-laws, and that they're trying to prevent the chaos that could result in teams constantly relocating, but I've thought ever since this thing ended up in bankruptcy court that the league was going to lose because the judge's primary concern is the setting whole the creditors, not protecting league constitutions. And frankly, if bankruptcy court judges can go about voiding union contracts, then they can go about approving this deal. (I also feel good about this as it seems there are a lot of bankruptcy experts who agree with what I think.)

(A side note, for anyone interested in reading more about the Seattle Pilots, then allow me to recommend Jim Bouton's groundbreaking Ball Four, which was about the season he spent between the expansion Pilots and the Houston Astros.)

And Gary Bettman really needs to be careful regarding the arguments that he is pushing before the Court. For instance, over the weekend, the NHL filed papers in which they questioned Balsillie's integrity, noting that Balsillie recently settled with Canadian and American securities regulators regarding allegations that he and others backdated stock options at Research In Motion with Balsillie and his fellow company officials paying more than $70-million (Canadian) to settle the allegations.

Now the reason that Bettman might want to be careful with this argument can best be summed up by one name: William "Boots" Del Biaggo. Boots recently pled guilty to falsifying documents to obtain $100 million in fraudulent loans, and that he did so by way of a Ponzi scheme. Boots used these loans to purchase a $25 million stake in the Nashville Predators. Now the Predators were actually supposed to be purchased from Craig Leipold, current owner of the Minnesota Wild, by one Jim Balsillie. But when Balsillie started making plans to move the Predators to Hamilton, Bettman and the league stepped in to stop the deal and to broker the deal which allowed Boots to become one of the owners.

If Bettman wants to keep pressing the integrity issue at Balsillie, then any attorney who knows what he's doing will certainly push back with Boots Del Baggio, and I can guarantee that that attorney, and the judge, are going to know what exactly Bettman and the league knew about Boots, and when they learned it.

It was also reported that the owners of the CFL's Toronto Argonauts are interested in purchasing the team, and that they would keep the Coyotes in Phoenix. But from what I've read, only an idiot would believe that -- so I guess that means Bettman has either fallen for it or else he's lying. In fact, according to the Toronto Globe and Mail, these guys want to move the team to Toronto.

So later today, maybe, hockey fans might have some idea of what is to become of the Phoenix Coyotes. I've been wrong, often, but I think the law is in favor of Balsillie.

Meanwhile...An Update on the Phoenix Coyotes

Actually, there's not much to update as we're still waiting on the court date, but...some of the Canadian papers have been digging through all of the documents and papers filed by the NHL in support of their effort to take control of the Phoenix Coyotes.

Among those documents is the NHL Constitution. And the constitution has what has been dubbed the Doomsday Clause which says that upon the unanimous consent of all of the league members, the NHL can be dissolved. So while I haven't read the briefs that have been filed, I'm taking the filing of this document to mean that Gary Bettman is threatening to destroy the NHL if he doesn't get to keep a badly failing team in Phoenix.

And in other papers filed by the NHL, Gary Bettman argues that he has four ownership groups that are prepared to purchase the Coyotes, including the owners of the CFL's Toronto Argonauts, Jerry Reinsdorf, the minority owner of the Coyotes, and a Phoenix businessman who prefers to remain anonymous. And all of these groups want to keep the team in Phoenix.

Bettman argues that the bankruptcy shouldn't be approved because Coyotes owner Jerry Moyes didn't try hard enough to find a legit buyer for the franchise. This of course, contradicts what Bettman said in an e-mail to Moyes back in April in which he said it was proving difficult to find a new owner for the team.

But how about that Doomsday Clause? Seriously, it just seems like the NHL just keeps attempting to commit suicide. There's Gary Bettman, who has got to be the worst commissioner in the history of sports yet has a firm grip on his job. There's bad TV contract after bad TV contract. There's the glowing puck. There's the fact that Los Angeles and New York City have two teams, but Toronto has only one, and don't forget that lockout that shut down the entire sport for a year, but which seems to have failed in its goal of providing economic certainty for all teams.

My first love is baseball. And baseball will always be my number one sport. But I've always liked hockey, since I was a mere kid at the time of the original Houston Aeros, and since I've been covering this version of the Houston Aeros I've become a huge fan as I've gotten to know what great guys the players are and just been around. And it almost kills me to watch the NHL go on constant self-destruct mode.

I might not feel this way if it weren't for what Houston went through with losing the Houston Oilers despite supporting what was often an awful product, but it just seems to me that the Canadians, the people who love this sport more than anyway, have to suffer with a lack of big league franchises in their national game while teams fail year after year in Atlanta and Phoenix and Tampa and Miami, but Winnipeg and Quebec City and Hamilton deserve the teams more than the States do.

So perhaps it would be best for the NHL to exercise that Doomsday Clause. Then maybe some competent people could come and run things. Though I somehow suspect that, like the cockroach surviving the nuclear war, Gary Bettman will survive everything.

More From Chapter 11: The Strange Case of the Phoenix Coyotes and Some Other NHL Oddities

There was a bankruptcy court hearing in Phoenix yesterday regarding the attempt of Jerry Moyes to put the Phoenix Coyotes into Chapter 11 Bankruptcy while selling the team to Canadian billionaire Jim Balsillie who wants to move the team to Hamilton, Ontario. And in 12 days, we should all have some idea of where the Coyotes will be playing next season.

The judge yesterday ordered all parties to file briefs by June 5, 2009, and he ordered a hearing for June 9, 2009, in which he stated he hopes to offer a ruling on whether putting the Coyotes into bankruptcy allows the team to be relocated without approval, per NHL bylaws, of the owners. The NHL, with the support of the NBA, NFL, and MLB, is arguing that the bankruptcy court doesn't have the power to order a move that contradicts league bylaws. Moyes and Balsillie say that the court can void whatever contracts it wants and ignore whatever internal bylaws it wants in order to set whole the creditors.

According to the Toronto Globe & Mail, the judge expressed reluctance to order the move, and says he's not sure that he has the power to rewrite NHL bylaws. He might be reluctant, but I call bullshit on his argument about NHL bylaws. If bankruptcy courts can void union contract after union contract after union contract when mismanaged corporations go into Chapter 11, then he can ignore NHL bylaws.

The judge stated that if he rules in favor of relocation, the bankruptcy auction for the club will be held on June 22. If he rules that there can be no relocation, then the bankruptcy auction will be held on September 10.

Balsille has stated that if there is no decision regarding relocation by June 29, he will withdraw his bid for the team. And the Globe & Mail is also reporting that the NHL will be spending about $17 million over the next several weeks to keep the team running -- most of that money will be going to one Wayne Gretzky.

AND SOME MORE NON-HOCKEY NHL NEWS:

The Wall Street Journal yesterday mentioned that one of the teams closely following the Coyotes matter is the Atlanta Thrashers. Without citing any sources, the Journal reported that if the Chapter 11 relocation is allowed, then the same thing would probably be happening with the Thrashers. It also stated that the Nashville Predators are also in the mix for this type of relocation since the team has a clause in its contract that allows it to get out of its lease if the team averages under 14,000 per game in attendance for a season.

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The Columbus Blue Jackets, meanwhile, are heading up an effort to sell Nationwide Arena to Franklin County, the county where the Blue Jackets arena is located. The purpose of the sale would be to help the Blue Jackets, who are having financial difficulties that are partly originated from the lease the team has with the arena.

Apparently, the County's assuming of the arena would result in a better lease for the team. As it stands, the Blue Jackets lease the arena and pay for its operations, but arena revenue isn't covering the operating costs. The club states that this forces the team to take money from hockey operations to make up the rest of the operating costs.

The sale of the arena to the county would be funded by, of course, the taxpayers, who would pay increased tax costs on alcohol and tobacco sales. The puck is now in the zone of the state politicians who are debating whether to grant the county the authority to impose the tax, or else giving the county the approval to hold an election on the issue.

Oh, and the Blue Jackets stated that if the lease problems aren't resolved in their favor, they will relocate to another city.

*********************
Charles Wang, the owner of the New York Islanders, announced last week that unless the Town of Hempstead, NY approves of an arena project for the Islanders by October 3, then the Islanders will be relocating when the team's lease expires in 2015. The franchise, apparently, makes the Coyotes look like a financial success, having lost between $15-20 million last season alone. And among the suitors mentioned for the Islanders, should relocation result, are all of the usual suspects: Hamilton, Las Vegas, Kansas City, and Houston.

*********************
And things are getting interesting up Dallas way where today Tom Hicks, owner of the Dallas Stars and Texas Rangers, announced that he is now selling a majority interest of the Rangers. It was not long ago that Hicks defaulted on loans to the creditors who made the purchase of the Stars and Rangers possible, saying that the default was just a negotiating tactic to get better terms on the loans. At that time, Hicks also stated that he was willing to sell a minority interest in the Stars and Rangers.

Now he's on the record as saying that he's up for selling a majority interest in the Rangers. It appears, for now, that the Stars are safe. But then again, Hicks appears to be having some real financial difficulties, no matter the PR spin, so I wouldn't count out Hicks putting a majority interest in the Stars up for sale soon.

Et Tu, Wayne: More On Chapter 11 And The Strange Case of the Phoenix Coyotes

Things continue to get interesting in the bankruptcy controversy of the Phoenix Coyotes.

Before I get further into that, let's further address an issue that arose on Saturday when I noted there were reports that the Atlanta Thrashers were being sold to Canadian interests who would move the team to that same Southern Ontario region that the Phoenix Coyotes are hoping to relocate to. But representatives for the Thrashers announced over the weekend that the team was not for sale and that it would not be relocated.

So that aside, what about the Phoenix Coyotes?

The really interesting news came yesterday when the judge in the bankruptcy court ordered the NHL to produce all documents relating to the possible sale of the franchise to Chicago White Sox owner Jerry Reinsdorf (or any other parties who have been in discussions about buying the franchise). This was requested by current (?) Coyotes owner Jerry Moyes. And the judge rightfully granted the motion.

It's one thing for the NHL to state that Jim Balsillie's bid to purchase the team in bankruptcy should be denied because they've got another lined up. But at some point in the proceedings, the NHL has to demonstrate that a valid bid was actually made because the Court's concern is setting whole the parties, particularly the creditors. And if Balsillie's bid will do more to set the whole the creditors than Jerry Reinsdorf's bid, then the judge is going to go with Balsillie. NHL objections be damned.

But the NHL has petitioned the Court to stay that order until after the Court has made a ruling as to whether Jerry Moyes actually has enough control of the club to put it into bankruptcy. The NHL is stating that Jerry Moyes gave all control of the franchise to the NHL in return for financing that would keep the club operating (it's somewhat ironic that the NHL is now making this argument considering that they spent most of this season arguing that the Coyotes were in fine financial shape and that the NHL was exercising no control over the team). But there are also reports that part of an agreement between Moyes and some of the minority owners (including one Wayne Gretzky) overrides any agreement between Moyes and the NHL. (I reiterate what I stated last week: I think this argument is a loser for the NHL).

And the NHL is further arguing that exposing the details of the Reinsdorf bid would actually harm the sale and the value of the club. Once again, I think that's a losing argument. If there's a valid bid that sets things right, then I don't really think a judge will give a damn if a lesser bid is harmed -- especially if that bid was never going to come close to eclipsing the larger bid.

The Toronto Globe and Mail took a more in-depth look into the matter, and it's got a bunch of legal experts saying that the NHL will win because they don't think a judge will dare to go against internal NHL rulings regarding relocation. Most of the experts think the Oakland Raiders matter was just a hiccup, but I still disagree with that. The guys they talked to seem to know the workings of the leagues, but none of them discussed the antitrust aspects, and I firmly believe that that Raiders decision is firmly on point when it comes to the Coyotes -- and if that decision is followed, then the NHL loses and the Coyotes are in Hamilton come this time next season.

There was another expert who made a point, based in bankruptcy law, that the bankruptcy courts can void legal and legitimate contracts to protect creditors. And the franchise agreement between the NHL and the franchises are contracts that can be voided to protect the creditors. Could this harm the league (and all leagues) should the court void that contract? Yes, it could. But damn it, this is the fault of the NHL and Gary Bettman who have let this situation get to where it is now.

The interesting thing, to me, is some stuff I read earlier which is stating the trigger to this whole thing is one Wayne Gretzky. Gretzky's a minority owner of the Coyotes, and supposedly he's the one who forced Moyes to file for bankruptcy and accept the deal with Jim Balsille. It seems that, despite the NHL supposedly assuming control of the franchise, neither Gretzky (in his role as head coach), the team ticket sellers, nor nearly 400 other team employees have been paid recently, so it's alleged that Gretzky is forcing this deal and might be the man responsible for the demise of Gary Bettman.

And finally, last month I wrote about the situation with the Dallas Stars and Tom Hicks, who put the team into default to its debtors by refusing to make debt payments. Well there are people out there who think that Tom Hicks is carefully paying attention to the Coyotes situation because the Stars could be next to take the Chapter 11 route.

There's a long time to go before this matter is settled. But right now, I just think the NHL is a loser on this. Especially if this stays in bankruptcy court, and especially if the antitrust argument begins to come into play. I love hockey, and I really want the NHL in Houston some day, but the NHL deserves what it's getting. It's a poorly run league with a poor TV deal and almost no national coverage in the country where most of its teams are located while the country that longs for hockey is almost shut out.

More On The Strange Case of the Phoenix Coyotes

I find this whole thing with the Phoenix Coyotes to be fascinating. So if you don't mind, I'll keep blogging on it awhile.

First, to address one of the comments from my earlier post: supposedly, the only out in the lease agreement between the Coyotes and Glendale, AZ regarding the use of Jobing.com Arena is bankruptcy. And since the city is seen as one of the creditors because of the money that the team owes on the lease, the Coyotes argument will be that the sale and relocation will allow the team to pay off what it owes on the lease. The city and the NHL are expected to argue that while past debts will be paid off, future income from the team that will be lost by the move will not covered. I don't think a bankruptcy judge cares that much about lost future income. I could be wrong, and we'll be getting an answer to that over the next several months.

Next, I'd like to address a response to this whole issue by a deputy of NHL commissioner Gary Bettman. Jim Balsillie is threatening to take the league to court and charge it with violations of antitrust law if the NHL attempts to stop the relocation of the team to Hamilton, Ontario.

NHL Deputy Commissioner Bill Daly stated: "If I didn't know any better, I would think I was living in a time warp. It's as if the complaint was drafted 30 years ago. Since that time, case after case after case has established a sports league's right to control the location of its franchises. Maybe they haven't been paying attention."

Now maybe it's just me, but I tend to follow these things rather closely. And as much as I can recall -- and I took multiple classes on antitrust and sports law while I was in law school -- there's been only one major court opinion that is on point to this issue. And the league lost. And it lost badly. That case happens to be known as Los Angeles Memorial Coliseum Commission v. NFL ("Raiders I"), 726 F.2d 1381 (9th Cir)., cert. denied, 469 U.S. 990 (1984). And for those who don't recall the matter by that name, it's the case that found the NFL in violation of the U.S. Antitrust laws because it would not allow Al Davis to move the Oakland Raiders to Los Angeles. And as we all know, the Raiders won the case, moved to L.A., then ended up moving back to Oakland.

I suggest Mr. Daly give that a read before mouthing off.

Now here's the thing. I don't think there are have been anymore cases regarding franchise relocation like this one where a particular owner was attempting to move his franchise and the league wouldn't allow it. The Baltimore Colts moved to Indianapolis in the middle of the night without league approval and the league did nothing. The NFL made no attempt to stop Art Modell and Bud Adams from moving their franchises. Los Angeles Raiders moved back to Oakland. The St. Louis Cardinals moved to Phoenix. The Los Angeles Rams moved to Anaheim and then to St. Louis. And the law suits that have been filed in these matters weren't from the team's owners fighting the NFL. They were from Houston and Cleveland and Los Angeles trying to stop the moves. So whatever decisions came from those moves aren't on point.

Meanwhile, do you know why there is a baseball team in Seattle? Because the Mariners were part of a court settlement brought by various Seattle officials after the Seattle Pilots moved to Milwaukee and became the Brewers after just one year in Seattle. And do you know why Tampa Bay has the Rays? Because in 1992 the San Francisco Giants were sold to interests who were going to move the team to Tampa Bay, but MLB and Bud Selig stepped in, found a local owner, and forced the team to stay in San Francisco. So with the Tampa Bay region threatening to sue, MLB caved and granted the city an expansion franchise.

So the NHL can huff and puff all that it wants, but the law is on the side of Jim Balsillie when it comes to franchise relocation.

Oh, and before I go, another NHL team that is in serious financial trouble is suddenly being rumored as to be heading to Hamilton for next season. The Atlanta Thrashers, whose ownership group has been suing each other from almost the moment they brought the team, may have found a Canadian owner who wants to relocate the team to Hamilton. It's all just rumor and innuendo, of course, but there it is.

Chapter 11: The Strange Case of the Phoenix Coyotes

This is the story of Chapter 11 and the Phoenix Coyotes. It's a strange story. It's a sad story. It's maddening. Frustrating. I've spent the past two days -- when not following the Aeros -- on the internets trying to get a firm grasp on all of the personalities, figures, numbers, and arguments. I don't know if I have succeeded, but I'll also give you some links to other sources so that those of you who are interested story can try to understand just what is going on.

But first, a brief primer. The Phoenix Coyotes were born as the Winnipeg Jets way back in 1972 as part of the World Hockey Association. The Jets were one of the few WHA teams to survive the competition with the NHL, and following the 1979 season, the Jets joined the NHL. Despite an avid fan following in Winnipeg, the NHL allowed the team to be sold to interests in Phoenix, AZ, where the team relocated and became known as the Phoenix Coyotes following the end of the 1995-96 season.

The team went through several owners and arenas while in Phoenix, eventually winding up under the control of trucking magnate Jerry Moyes in 2005. Jerry Moyes began to suffer from financial difficulties, both with the hockey franchise, and his trucking business, and was losing lots of money. At some point in the 2008-09 season, the NHL moved in to help run the franchise, pay bills, and to assist with finding a new owner for the franchise.

That brings us to a man named Jim Balsillie. Balsillie is the co-CEO of RIM -- the company that developed the BlackBerry. He is also Canadian and a very rich man who loves hockey. He has, on several occasions, attempted to buy a NHL franchise with the hopes of relocating the team to the Hamilton, Ontario region of Canada. His attempt to purchase the Pittsburgh Penguins in 2006 fell apart when he refused to guarantee that the team would remain in Pittsburgh.

He then attempted to purchase the Nashville Predators in 2007. In a deal ripe with implications of fraud and league chicanery, Balsillie was shut out and the team was sold to a group headed by William Del Biaggo (Del Biaggo appeared to have pulled a Bernie Madoff with many of his clients and is on his way to jail at the moment) who purchased the team from now-Minnesota Wild owner Craig Leipold for far less money than Balsillie offered.

Throughout the first half of the 2008-09 season, the NHL and league commissioner Gary Bettman denied all rumors of financial difficulties with the Coyotes. Thus it proved to be quite a shocker to many when the NHL moved in and took over some of the team operations -- there is some questioning as to when this actually happened and whether some of the team's questionable trades at the trading deadline were made by the NHL so as to help other teams get out from under questionable contracts.

On Tuesday of this week, May 5, 2009, Moyes filed a petition for Chapter 11 Bankruptcy Reorganization in Phoenix. As part of the the petition, Moyes submitted a plan of reorganization that involves Balsillie purchasing the team for $212.5 million on the condition that he could move the team to Southern Ontario -- this is seen as the city of Hamilton since they are the only city in that region with a NHL capable arena. And as part of the petition, Moyes requested that the court implement a court-approved sale of the team under the Federal Bankruptcy Code, and of which would be open to all bidders -- but it is doubted that any bidder would top Balsillie's pre-submitted bid.

The NHL is attempting to stop this action. First, the league is claiming that Moyes, in exchange for loans from the NHL to keep the team running, effectively gave up all control of his team, thus he does not have the legal ability to move for Chapter 11. And the NHL, which was surprised by the move of Moyes and Balsillie, have been hastily searching for a buyer with ties to Phoenix the area, and they appear to have settled on Jerry Reinsdorf, the owner of the Chicago White Sox and the Chicago Bulls.

Oh, and there's two more things: the Coyotes are supposedly locked into an ironclad 30-year lease with the city of Glendale, AZ to play in Jobing.com Arena; and the Canadians want desperately for the Coyotes to fail and to be forced to move back to Canada because they're rightfully pissed that Commissioner Gary Bettman allowed two of the Canadian franchises to move to the U.S. while expanding deep into the U.S. south in what is widely being seen as a failed attempt to grow the sport's popularity.

Confused much? Well it gets better, or worse, because I'm about to take a look at the laws that might come into play.

But first, a lot of the above info came from the blogs From The Rink and Puck Daddy -- and I have attempted to link to some of the posts, but if you want to really understand, just head over to those blogs and read everything they have, because they have a lot more info than I do, and they've been following the situation a hell of a lot longer. Also, info regarding the history of the Winnipeg Jets, Phoenix Coyotes, and Jim Balsillie came from Wikipedia -- yeah, it's not always the most accurate of sources, but most of what I read jibed with everything else that I read, so it just makes sense to send you there.

So with all of that out of the way, where do all of the parties really stand, and who is likely to triumph? Good questions, which I will try to answer.

Now remember, though I'm an attorney, my only brush with that end of the legal arena came with my own personal bankruptcy back in the late-90s when I was unemployed -- kind of like now, I guess. So I went to the internets. And the info on how Chapter 11 Bankruptcy operates comes from this government website. The blog Bleacher Report has an excellent post on this topic -- one with which I largely agree -- and I also just hit various sites. I also need to tell you that I've studied antitrust law and done some actual court work there, so that knowledge will mostly come from what's left of my mental capabilities.

Essentially, Chapter 11 Bankruptcy provides a generally for a reorganization of a corporation or partnership. The debtor usually proposes a plan of reorganization to keep the business alive while allowing it to pay off creditors. Usually, a trustee will be appointed by the Court to look over the plan and to deal with the creditors. So Moyes filed for a Chapter 11 bankruptcy, and as part of his petition, he filed his plan for reorganization which includes Balsillie paying $212.5 million for the team.

Now if this plan is accepted, that should allow for all creditors to get paid and it should help Moyes out of his financial difficulties -- which appear to be numerous. The NHL says that Moyes lost his ability to file for Chapter 11 when he agreed to take loans from the NHL. This argument will more than likely lose. I can't see a bankruptcy judge telling a party that legally owns a company that it can't file for Chapter 11 because a company which loaned it money wants to keep it running until it can force the sale of that company and recoup its investment. Especially when, as in this instance, the party trying to file for Chapter 11 has a deal lined up that will let all of the investors, including the complaining party, recoup all of their money.

Balsillie's offer is the best that is going to be made for Coyotes. It bails out Moyes, the NHL, and most other debtors -- interestingly, Balsillie posted $17 million in debtor-in-possession financing, so he jumps ahead of the NHL and everybody else and becomes the number one creditor that must be paid back -- something he will probably waive should his bid be accepted.

Should the NHL fail to get the bid dismissed, it is threatening to revoke the ownership rights from whomever owns the team. But if the Chapter 11 isn't dismissed, I'm of the opinion that there's no way a bankruptcy judge will allow for this to happen because that makes the prime asset -- the team -- worthless, which means no creditors are repaid. And that's not what bankruptcy court is about. If there is a means for setting right the debtor and the creditor, that court will do it. It's not about protecting the rights of the NHL.

Part of Balsillie's terms are that he gets to relocate to Southern Ontario without going thought league channels -- in other words, the Toronto Maple Leafs can't veto the deal because he's moving into their territory. But if the NHL's not careful, this whole thing can end up not only in bankruptcy court, but in Federal Court where Balsillie will argue that the league's actions are illegal under antitrust laws. And the only league that has an exemption from antitrust laws is Major League Baseball. And just ask the NFL how it's attempts to stop Al Davis moving where ever he wants to go worked out.

My conclusion in this sloppier-than-intended post, is that Balsillie's in control of this thing. The NHL doesn't like Balsillie -- he sounds like a Canadian version of Mark Cuban -- and it also appears that the NHL doesn't want to admit it was wrong when it allowed an established franchise to move to Phoenix. But once this thing gets into bankruptcy court, where I think it will stay, it's out of luck. The court could care less about the NHL's internal organizational rules; it cares about getting the best deal for the creditors -- of which the NHL is one -- and the debtor. And if they make Balsillie fight this on antitrust grounds, they definitely lose this thing.

Ultimately, I think that Gary Bettman is going to have to swallow his pride and come to an agreement with Balsillie. And the reason for that is simple: the more strong franchises the league has, the better the league is as an entity. The Canadians love hockey like Americans love football. It makes no sense to keep a struggling franchise going when it can be moved into a market where it will thrive.

Now Balsillie is also going to have to compromise. But frankly, I see his movements in this matter as setting up his compromise. I think he agrees to stay in Phoenix for a few years as a lame duck in an attempt to get the lease situation in Glendale fulfilled while a better arena is built in Hamilton. I also believe that Balsillie pays a huge relocation fee, most of which will go to the Maple Leafs to make up for the Coyotes moving into their territory. But seriously, the Maple Leafs shouldn't be worrying about losing any profit -- if Anaheim and Los Angeles can co-exist in the NHL, it makes no sense whatsoever to say that Toronto or Hamilton will fail because there aren't enough people.