More On Balsillie and Coyotes

As promised there will be more coming as I hear and read more information. A couple of brief updates:

Several sources are telling TSM this morning that the reason the League is so upset is that Jerry Moyes, the Coyotes’ chief executive officer and managing member had actually resigned his right to make any decisions as they pertain to the Coyotes as early as two weeks ago (as sources in the Arizona media reported and the team refuted). So far no one from the league will confirm this.

Steve Simmon’s column in today’s Toronto Sun perfectly captures where things stand right now from my opinion:

“Jim Balsillie is well on his way to becoming the dumbest, most stubborn, successful entrepreneur around. How else to explain his latest hockey outburst — his clumsy, all-too-public attempt to bully the National Hockey League into allowing him to purchase the now-bankrupt Phoenix Coyotes franchise and move it to southern Ontario.If all he is attempting here is to find his name in the headlines, he is certainly accomplishing that. But if he honestly believes he can pull an end-run on commissioner Gary Bettman, secure an NHL franchise, move it, and use a public website to drum up support for a seventh Canadian franchise, then he is either getting terrible advice or he is simply fond of banging his head against the wall. Because that’s all he can accomplish here. This is a war he may not be able to win.
Even if he’s willing to overpay for the moribund Coyotes, which he is.”

I totally agree. This is a very strange way to get the leagues blessing to become a member of the club especially when the league has show that this is perhaps more important then ones background or financial wherewithal. I am not sure who is advising Balsillie on this matter, but I think, perhaps he is getting bad advice.

“The league will say it has control over the franchise and any possible movement. They will say that, knowing also there is a long-term lease in Phoenix. But what Moyes and Balsillie are banking on here is direction from the bankruptcy court: Once the court orders the Coyotes to accept the Balsillie offer, which is entirely possible considering there is unlikely to be another offer anywhere close, then Balsillie will pick up the franchise and attempt to move it, likely to Hamilton, with the NHL fighting it all the way.This, almost certainly, will go to court, the way Al Davis had to go to court when he moved the Oakland Raiders to Los Angeles in the National Football League many years ago. Davis won his lawsuit against the NFL. Balsillie is gambling he can win here. Does a second NHL team in southern Ontario make sense? Yes. Does Balsillie have the wherewithal to operate this team? Yes. Is it in the NHL’s best interest to have another team around Toronto? Yes. But the reality is, the number of owners who have attempted to ambush the NHL and succeeded is zero.”

I think that the assumptions Balsillie is making, if Simmons is correct is wrong. I can’t see Balsillie suing the NHL to get into the club and I can’t see a trustee in bankruptcy voiding the league franchise agreement.

Bob McKenzie has a great article up on too:

“The first thing you need to know is that NHL commissioner Gary Bettman was in Phoenix today, ostensibly to put the finishing touches on an intent to purchase agreement from Chicago White Sox owner Jerry Reinsdorf, whose intention was to apparently keep the financially-troubled Coyotes in their current home of Glendale, which is also home to Reinsdorf’s spring-training baseball facility (a mile away from the Coyotes’ Arena). That offer was expected to materialize within the next few days.”

Everything I am hearing (and reported earlier yesterday am) confirms this. Don’t think that the Balsillie bid is going to stop Reinsdorf per se. The Bankruptcy proceedings may, not the $212.5 offer.

“Balsillie’s bid of $212.5 million is what is known as a ”stalking horse bid.” All that effectively means is that Balsillie’s bid officially kicks off an official auction process. If anyone chooses to outbid Balsillie, they must do so by at least $5 million. The bankruptcy court is obliged to accept the highest offer that provides the best financial relief to the secured creditors, which ironically includes the NHL as the second largest ($35 million). It is unfathomable to think anyone would make the $217.5 million offer to keep the team in Phoenix. But where this starts to get confusing is the conditional aspect of the offer. Balsillie is only prepared to pay $212.5 million as long as the franchise is moved to southern Ontario.”

Bingo! The condition precedent problem for both the Coyotes and Balsillie.

“The question then becomes, can a bankruptcy court in Arizona mandate the NHL to relocate or transfer a franchise in order to satisfy the needs of the Coyotes’ secured creditors? It’s an interesting legal question and without putting words in anyone’s mouth – no one is commenting anyway – the safe bet is that Balsillie’s group believes that’s a possibility while the NHL doesn’t believe a bankruptcy court can tell it how to conduct its affairs.”

That is right. The 212.5 million dollar question is…..what does the franchise agreement say with respect to transfers AND….is that language legally binding? If it says the league can kill the transfer and a court will back that clause, Balsillie is out of luck. If it says the league can kill the transfer and a Balsillie and the Coyotes are willing to fight in court and the court agrees that the provision is illegal then they have a good shot. IF the provision says the league can kill a transfer with a 1/3 of the owners agreeing to kill it, well then it gets really, really interesting.

“The NHL, meanwhile, is likely to battle Balsillie on the issue of ”control.” While the league will get destroyed in the court of public opinion in Canada, it is quite likely to exert what it perceives to be its legal rights on how it does business. That is, the league believes it ultimately controls who owns NHL franchises and where they are located. To do that, NHL commissioner Gary Bettman will ultimately require the backing of the board of governors, but he has had it in the past. It remains to be seen whether he has it this time, but this has all the makings of a battle royale. The battle lines are clearly drawn. While Bettman and the NHL will take a beating in that court of public opinion in Canada, one suspects this situation will ultimately be decided in a legal court.

That is correct. This, perhaps more then the lockout will challenge Bettman’s authority and control over his group of owners. Will he survive this is the right question. $212.5 million sounds pretty good to the owners of the Thrashers, Panthers and the estate of Bill Davidson to name but a few.

If you are looking for another perspective on the matter Damien Cox’s is here. The gist is that the only way the team ends up in southwestern Ontario is if Balsillie and Bettman kiss and make up, which Damien suggests isn’t very likely.

You can read my other article on this matter here

Simmons is here

McKenzie is here

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