Phoenix Coyotes bankruptcy
Encyclopedia
In addition to the bankruptcy of the Phoenix Coyotes, this article discusses the NHL's efforts to sell the club since purchasing it out of bankruptcy.
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The Phoenix Coyotes
, a professional ice hockey
team of the National Hockey League
(NHL), filed for bankruptcy in 2009 after incurring several hundred million dollars of losses since their move to Phoneix
, Arizona
from Winnipeg
, Manitoba
, where they were known as the Winnipeg Jets. Bankruptcy court rejected a plan to sell the team and move it to Canada, and the team was purchased by the NHL. Since that time, the team has been operated by the NHL in Phoenix while the team remains for sale.
In December 2008, the media became aware that the Phoenix Coyotes were losing money at a high rate and were being funded by the NHL directly. The media reports were minimized by the NHL's Commissioner Gary Bettman
and Deputy Commissioner Bill Daly
, but secretly the NHL had taken over operations of the Coyotes. In May 2009, the owner of the team Jerry Moyes
put the team into bankruptcy hours before receiving Bettman who was to present a potential offer to purchase. Moyes intended to sell the team to Canadian
billionaire Jim Balsillie
who intended to purchase the team out of bankruptcy and move it to Hamilton
, Ontario
without being restricted by the NHL's rules on relocation.
From May until September 2009, hearings were held in Phoenix bankruptcy court to determine the fate of the Coyotes and the holding company. Two potential bidders for the team surfaced, Chicago White Sox
owner Jerry Reinsdorf
and Ice Edge Holdings, Inc. but they did not put in a bid for the team at the bankruptcy hearing. Instead, the NHL put in the only rival bid to Balsillie for the team, while they fought Moyes' plan to sell the team and move it to Hamilton against the NHL rules. Ultimately, the Phoenix court ruled that the team could not be sold to Balsillie, as the judge held that bankruptcy could not be used to subvert the league's rules. The NHL's original bid was also insufficient for the bankruptcy judge, since it did not treat Moyes and Gretzky as full creditors. Later the NHL settled with Moyes with the league buying the team and assuming all debts.
After the sale, the NHL negotiated a temporary lease with Jobing.com Arena owner, the City of Glendale
, Arizona
. The NHL then proceeded to work with the two potential bidders of Reinsdorf and Ice Edge to work out a deal with Glendale. Ice Edge signed a letter of intent to buy the team from the NHL, while Reinsdorf had won the approval of the City of Glendale. By the end of summer 2010, both bidders had failed to complete a purchase and dropped out. The NHL, which had threatened to move the team to Winnipeg for the 2010–11 season, agreed to keep the team in Glendale for the season, after Glendale agreed to fund its losses. The NHL publicly announced a deadline of December 31, 2010 for any purchase to keep the team in Phoenix after which it might make plans to move the team. In December 2010, a Chicago-based investor, Matthew Hulsizer, along with several investors, was approved by the NHL to purchase the team and reached a lease agreement with Glendale. A deal was reached between Glendale and Hulsizer that involved the sale of bonds by the city to pay Hulsizer over $100 million against future parking revenues at the arena. The Goldwater Institute
, a taxpayer advocacy group, announced that it would challenge the lease agreement in court. The threat led to the failure of the bond sale. Hulsizer abandoned his bid for the Coyotes on June 27, 2011.
For the 2011–12 season, Glendale has set aside $25 million to ensure that the Coyotes will stay in Glendale for another season, while the NHL works on arranging the purchase. In August 2011, a group headed by former San Jose Sharks
CEO Greg Jamison, was identified as a potential purchaser. Jamison's group intends to keep the team in Arizona. Another group, including past bidder Reinsdorf, emerged in September 2011. The City of Glendale intends to complete negotiations with one or the other by the end of December 2011.
were reported to lose up to $35 million on the 2008–09 season. Asked to comment on Phoenix's loss, Bettman was quoted as saying "They're going to get through the season just fine." The Coyotes' President and COO
, Doug Moss admitted that the team had lost a lot of money and was still losing money. He was not prepared to reveal the number of season-ticket subscribers that the team had: "We have never really revealed our season-ticket base . . . it's too low, that's a number that's too low." It was revealed during bankruptcy proceedings that the Coyotes averaged 5,450 season tickets per season for the four seasons from 2005–2009.
The true state of the Phoenix franchise was not revealed, however. In the documents filed with the Phoenix bankruptcy court, the NHL stated that the league took official control of the team on November 14, 2008. The league then began advancing money to the club from league revenues, and made a loan to the club in February 2009, for a combined estimated total of $44.5 million over the full season. The league fired the Coyotes CEO
Jeff Shumway and laid off 18 Coyotes employees. Moyes' documents filed with the court indicated that the team had lost $73 million over the last three years, and that the projected loss was $45 million for 2008–09. In the September 2009 bankruptcy hearings it was noted that an audit had shown that the team had never made a profit since moving from Winnipeg
, Manitoba
in 1996 and lost $54.8 million in 2008 alone.
On December 23, 2008, the Toronto Globe and Mail reported that the Coyotes were receiving financial assistance from the league in the form of advances on league revenues. The Coyotes pledged all of their assets to New York company SOF Investments LP to cover an estimated debt of $80 million. The team had lost an estimated $200 million since 2001 and in recent years posted heavy losses, including $41.6 million in 2006-07, $37.3 million during the 2007-08 season, and $54 million in 2008-09. One of the team's owners, Jerry Moyes
' principal source of revenue, Swift Transportation was also in financial difficulty. Television network ESPN
reported that the league had become involved with the operations of the Coyotes and their revenues. The NHL apparently wanted to work with the city of Glendale which owns the arena and receives revenues from the team. ESPN also reported that Moyes was interested in selling his share of the team. Hollywood producer, and noted hockey fan, Jerry Bruckheimer
was cited as a possible investor.
On May 5, 2009, the Coyotes' holding company, Dewey Ranch Hockey LLC, filed for Chapter 11
bankruptcy
. In a statement, Moyes announced that he had agreed in principle to sell the team to PSE Sports and Entertainment, headed by Research in Motion
co-CEO Jim Balsillie
, for $212.5 million. As part of the deal, Balsillie intended to move the Coyotes to Hamilton, Ontario
. Although initial reports said that Balsillie was considering Kitchener
as well, Hamilton already had an NHL-sized arena in place, Copps Coliseum
and Balsillie was already in talks with city officials to secure a lease for the arena. Balsillie had previously made unsuccessful approaches to purchase the Pittsburgh Penguins
and Nashville Predators
, with the intent of relocating
either team to Hamilton.
Anyone who wanted to make a counteroffer had to exceed Balsillie's bid by at least $5 million. At Moyes' request, Balsillie agreed to post debtor-in-possession (DIP) financing of $17 million. Balsillie's efforts also started public relations efforts, including setting up the web site makeitseven.ca to build public support in Canada for his purchase and transfer of the Coyotes to Hamilton.
The announcement came as a surprise to the NHL and even to Coyotes staffers. Bettman had helped broker a deal that would have seen the Coyotes sold to Chicago Bulls
and White Sox
owner Jerry Reinsdorf
. At the time of the announcement, Bettman was in Phoenix to present the deal to Moyes. Unlike Balsillie's offer, the Reinsdorf deal was to ensure the Coyotes stay in Arizona. Terms of the Reinsdorf deal were not disclosed, but The Sports Network
's Bob McKenzie
speculated that it was almost certainly less than the Balsillie offer.
The NHL responded by stripping Moyes of virtually all of his ownership authority (although he remained the owner in title). Bettman said that Moyes may not have had the authority to file the bankruptcy petition, and may not have even been in full control of the team by virtue of the massive financial assistance he'd received. Although it has been widely speculated that southern Ontario is big enough to support a third NHL team alongside the Toronto Maple Leafs
and Ottawa Senators
(despite the Buffalo Sabres
and Detroit Red Wings
being right on the doorstep of the region as well), Bettman suggested that it was not likely the league would approve any plan to move the Coyotes to Canada, and accused Moyes and Balsillie of attempting to "circumvent" league rules. He also reiterated that the NHL was committed to the Phoenix area.
s, including Moyes himself for an amount in excess of US$
103 million. TSN's Bob McKenzie said that Moyes was very receptive to Balsillie's offer because, as the team's largest unsecured creditor
, the best chance of getting most of his money back was to persuade someone to buy the team out of bankruptcy. The league's position was that it was Moyes' fault that he paid himself so much money and that he was entitled to only $14 million of $103 million loss, which would have been the case if Jerry Reinsdorf
's lower bid was accepted.
At the bankruptcy hearing, the NHL argued that it had been in control of the team since November by virtue of a proxy agreement with Moyes. The NHL claimed this agreement, and several others signed by Moyes, specifically barred Moyes from filing for bankruptcy. Moyes claimed that the agreement only gave the league voting rights, not outright control. Bankruptcy court judge Redfield Baum scheduled a second hearing for May 19 to determine who actually controls the team. However, the NHL's Daly said that regardless of how the judge ruled, the league owners would have the final say in whether to allow the Coyotes to move. Daly repeated Bettman's doubts about Balsillie's bid, saying Balsillie was acting "in total disregard" for NHL rules.
At the May 19 hearing, Baum ordered the NHL and Moyes to settle the ownership question through mediation, while expressing skepticism for the NHL's argument that the proxy agreements gave it control of the team. He said that he needed to decide whether to allow the move to Hamilton before the franchise was sold. However, the NHL claimed there was no way it could reach a decision on whether to allow the move in time for the 2009-10 season. The day after the hearing, Balsillie spokesman Rich Rodier told Arizona Republic Coyotes beat writer Jim Gintonio that Balsillie was willing to keep the team in Phoenix for the 2009-10 season, provided that the NHL fund any losses.
Although the judge ordered mediation, none took place. In late May, Balsillie filed a formal application with the NHL to purchase the Coyotes and relocate them to Hamilton. Baum set up a tentative hearing to consider an auction of the team if the NHL Board of Governors rejected Balsillie's bid.
The other three major North American sports organizations filed amicus curiae
briefs with the court supporting the NHL position. They argued that if Baum forced the league to move the Coyotes, it would "disrupt the business" of professional sports. New York's two senators, Chuck Schumer and Kirsten Gillibrand
, also wrote Baum to oppose the move on the grounds that a Hamilton-based team would do severe economic harm to the Sabres. According to the senators, 15 to 20 percent of the Sabres' revenues comes from fans in the area between Hamilton and Buffalo. Hamilton is only 45 miles from Buffalo, New York
and is within the "protected N.H.L. markets" of both the Sabres and the Maple Leafs.
The NHL filed documents stating that four prospective buyers had filed applications with the league. All four intended to keep the Coyotes in Phoenix. These included Jerry Reinsdorf, Toronto Argonauts
' co-owners Howard Sokolowski and David Cynamon; and John Breslow of Las Vegas, who was already an owner of 3% of the Coyotes. A fourth remained anonymous. The league stated that any franchise moved without the league's permission, such as moving it to Hamilton would render it valueless. "At most, the proposed transaction would transfer a collection of used hockey equipment — none of which could bear the NHL logo."
At a June 9, 2009 hearing, Judge Baum agreed with the NHL that the league is within its rights to demand a relocation fee. Balsillie lawyer Richard Rodier suggested that the league would set the fee as high as $100 million to dissuade Balsillie. Balsillie himself was quoted as saying that he was open to paying the fee, although his lawyers suggested that he would walk away from the deal if the fee is 'exorbitant.'
On June 15, Baum ruled against Balsillie's proposal, stating that the timeline imposed by Balsillie was unrealistic and did not provide enough time for the courts or the NHL to wade through the issues posed by the relocation. Baum also rejected the proposal in part due to the fact that Balsillie's offer did not include any relocation fee to the NHL, to which they would be entitled since southern Ontario is potentially a more lucrative market than Phoenix. In the ruling, the judge also dismissed claims made by Moyes and Balsillie's lawyers that the NHL was violating antitrust laws in not allowing the move. The ruling effectively ended any chance of the Coyotes moving for the 2009-10 season.
Baum's ruling did not rule out Balsillie as an NHL franchise owner. Balsillie indicated at the time that he would continue bidding on the team in spite of the failure of his first offer. The NHL indicated a desire to hold an auction in September to find a new owner for the team, indicating that the auction would be open to prospective owners who would keep the team in Arizona, and stated that at least four potential buyers had been identified. The league had also indicated a willingness to hold a second auction, open to relocation, if the team could not be sold in the planned September auction.
On July 9, the Court set two auction dates for the team. The first auction on August 20, would be a primary auction with the stipulation that whoever has the winning bid, must agree to keep the team in Phoenix for at least 5 years, after which they may relocate with league approval at any time. An undisclosed minimum bid must be met in this auction. Should this auction fail, the second auction on September 10, will be run with no minimum bid; in which the new owner will have the right and authority to move the team to another location at any time without league approval after the 2009-10 season. Balsillie stated that he was willing to keep the team in Phoenix for the time being and intended to bid in the August auction.
On July 29, the NHL Board of Governors met to consider the application of Balsillie to purchase the Coyotes and the relocation. The Governors voted overwhelmingly 29–1 against Balsillie (unanimously except for Moyes' representative). The Governors also voted to approve Reinsdorf as a potential owner. Daly stated that Balsillie was rejected under bylaw 35 of the NHL Constitution, which allows applications to be rejected to persons which the NHL believes are not of "good character and integrity." Balsillie responded in a filing saying that "the NHL has long tolerated indicted and even convicted criminals among its ranks", noting that moral grounds and questions of character have never been used "in the entire history of the NHL to reject any applicant."
The NHL also revealed another bid, by businessman Anthony Leblanc of Thunder Bay, Ontario to purchase the Coyotes, which they also rejected as 'incomplete' but encouraged Leblanc to pursue the bid. Leblanc's company, Ice Edge Holdings Inc. publicly revealed their bid with a letter of intent filed with the bankruptcy court. The club would bid up to $150 million for the team, and keep it in Phoenix, with up to five games played annually in Saskatoon
, Saskatchewan
. Ice Edge also named Canadian businessman Daryl Jones as one of the principals in its group.
On August 13, 2009, Judge Baum ordered the NHL to hand over documents regarding the Coyotes' relocation. These documents were related to any potential expansion to Hamilton, and any relocation fees charged for any franchise moves by the NHL. Documents filed with the court included the previously secret NHL Constitution and also the section of the NHL Bylaws which spelled rules of relocation fees. Balsillie's lawyers filed the documents, claiming that sections of the Constitution violate anti-trust law and asked that the judge ignore the rules of the NHL on that basis. These became part of the public record and available on various web sites to download.
On September 6, 2009, it was reported by the Toronto Star that the NHL set a potential relocation fee of $101 million to $195 million to move the Phoenix Coyotes to Hamilton, while economics professor Andrew Zimbalist in a study conducted for James Balsillie valued the move at $11.2 million to $12.9 million. On September 7, 2009, Balsillie had reportedly sweetened his offer by US$40–50 million to buy out the lease of the Glendale Arena.
On September 9, 2009, it was reported that both Reinsdorf and Ice Edge Holdings had withdrawn from the bidding for the Coyotes, leaving only Balsillie and the NHL as prospective purchasers. It was announced on September 24 that Wayne Gretzky
had stepped down as head coach.
On September 30, 2009, Judge Baum rejected both bids. This effectively ended any chance of a forced sale to Balsillie and relocating the Coyotes to Canada. However, the NHL's bid was criticized for its failure to repay Moyes and Gretzky, two of the largest creditors, though the league had a chance to improve its bid. While Balsillie's bid treated both as full creditors, the NHL promised Moyes only about $14 million of his claimed losses of $104 million, which would be shared with Gretzky who has a claim of about $22 million.
Since securing ownership of the team the league openly stated that it was in negotiations with Ice Edge Holdings, Leblanc's partnership of Canadian and Phoenix-area businessmen, but was rumoured to have resumed negotiations with Reinsdorf also. The Ice Edge bid, while planning to keep the team in Phoenix, also proposed to play five Coyotes home games in Saskatoon each season as part of a five-year plan to return the Coyotes to profitability.
A new prospective purchaser for the team appeared in late November 2009. Steve Stotland, a Montreal
businessman, was reported to be teaming with undisclosed local investors to prepare a bid to buy the team. Stotland had previously been involved with the Washington Capitals
and was interested in purchasing the Montreal Canadiens
in 2000. Stotland attended the November 12 game between the Coyotes and Canadiens and met with team management.
In December 2009, the NHL announced that Ice Edge Holdings had signed a letter of intent with the NHL to purchase the Coyotes. Ice Edge would still have to negotiate a lease agreement with the City of Glendale, and get its ownership approved by the NHL Board of Governors.
That same month of December 2009, the NHL discussed the purchase of the Coyotes with True North Sports and Entertainment (TNSE), owners of the Winnipeg
-based Manitoba Moose
, as a back-up plan to move the team to Winnipeg with the understanding that the NHL would make all possible efforts to keep the team in Glendale. TNSE had been seeking an NHL team to fill its MTS Centre
since 2007. The agreement became public knowledge in March 2010 when it was reported in the media that the league had negotiated an agreement-in-principle to sell the team to TNSE, in the event negotiations to keep the team in Arizona fail.
By March 2010, the NHL had not finished the sale to Ice Edge. It was reported that Ice Edge had run into trouble securing sufficient financing although the group denied the claims. The NHL launched a lawsuit for $61 million against former Coyotes owner Jerry Moyes
to recover $10 million in bankruptcy court costs, $20 million in losses for 2009-10 and $11.6 million owed to creditors. On May 10, 2010, the lawsuit was transferred from New York to Arizona. Moyes is planning to move for dismissal of the case. It was reported in December 2010, that the court is considering Moyes motion to dismiss the case.
On April 9, 2010, the City of Glendale announced that it had received two offers to purchase the Coyotes, with Memorandums of Understanding from both Ice Edge Holdings and Glendale Hockey (headed by Chicago Bulls
and Chicago White Sox
owner Jerry Reinsdorf
). The MOU's would both keep the team based in Glendale's Jobing.com Arena. Both groups would change the name of the team from Phoenix Coyotes to Arizona or Glendale Coyotes.
Reinsdorf's memorandum proposed a "community facilities district" that would sell bonds and collect revenue. The city would pay the NHL up to US$65 million in three-year increments -- $21.6 million the first year, $21.6 million the second year and $21.8 million the third year. This was immediately objected to by the conservative Goldwater Institute of Arizona, stating that it placed undue risk on the City of Glendale and Reinsdorf took none of the risk. Ice Edge's proposal, which required annual fees of $5 million in parking revenues, was more acceptable to the Institute.
On April 13, 2010, the City of Glendale, at a weekly council meeting, approved Reinsdorf's proposal by a vote of 6-0 while rejecting Ice Edge Holdings' proposal 5–1. The agreement included a special tax district surrounding the arena, expected to generate $47 million annually from businesses in support of the team. The agreement allowed Reinsdorf the option to move the team after five years if revenues are not up to expectations. John Kaites, an attorney for Reinsdorf and a partner in the Glendale Hockey, LLC group has claimed the out-clause to be an "assessment period". Former Coyotes CEO Jeff Shumway criticized the deal, saying that the team would not have gone bankrupt if the same deal had been available two years earlier. Reinsdorf's bid, which will pay the NHL $65 million for the team, has to be approved by the league board of governors. After the vote, Bettman was quoted as characterizing the Glendale vote as a "terrific step" and that he anticipated that the league would have no problems in approving Reinsdorf's purchase, including the 5-year 'out clause'. Bettman declined to give a timetable for the purchase approval.
On May 7, 2010, the Globe and Mail reported that negotiations to finalize the details of the MOU between Reinsdorf and Glendale were going poorly and Glendale had sought out Ice Edge to return to negotiations. What is reported to be in dispute are the terms of the special tax district. The Arizona Republic reported that negotiations had resumed with Ice Edge, with Glendale removing its objection to guaranteeing $5 million in revenues from parking for the team. Scott Burnside of ESPN characterized the Reinsdorf deal as "dead", and that Glendale must agree to some conditions of the NHL's such as guaranteeing operating losses before any sale to Ice Edge. On May 10, it was reported that negotiations between Glendale and Ice Edge had broken down.
Glendale, which plans to cut its 2010-11 budget by $14.7 million through cost-cutting, faced a NHL-imposed deadline during the negotiations. The NHL could sell the team and move it if a deal is not done by July 1, 2010. At a May 11, 2010 meeting, Glendale City Council voted to extend the sales period by agreeing to fund the team's losses for the 2010–11 season (up to a maximum of $25 million) if the team is not sold by July 1. The NHL, which had drawn up a schedule with the team playing in Winnipeg, as a back-up plan, required the condition to continue the team in Phoenix. Daly appeared at the Council meeting, stating that the sale of the Coyotes is still expected to close by the end of June and the payments may never be needed. Glendale city manager Ed Beasley stated that both Reinsdorf and the Ice Edge group were still in the running to purchase the team. The decision also gave Beasley the authority to set up a 'Community Facilities District' around the arena. The District would collect fees, possibly including ticket surcharges and parking charges, that would be directed to the hockey club. According to the TNSE's Mark Chipman, Glendale wired the $25 million in funds to the NHL ten minutes before a 5 PM deadline set by the NHL on an unspecified date in May 2010, narrowly averting the transfer of the team to Winnipeg. The TNSE had a group of executives in New York negotiating with the NHL.
On June 4, 2010, Glendale announced that it had a new Memorandum of Understanding with Ice Edge. The new MOU had a new clause whereby Ice Edge can exit its agreement with Glendale. To retain negotiating rights with Glendale, Ice Edge was given ten days to provide legal assurances from its bankers showing it can borrow the money it needs and the $25 million fund for the NHL. Reinsdorf responded to the announcement by announcing that he was withdrawing from the bidding, saying "it was time to move on."
A lease agreement with Ice Edge was not finalized and negotiations between Ice Edge and the City of Glendale reached an impasse in July 2010. Ice Edge's financing of the Coyotes' purchase was an issue, and the city required financial statements showing Ice Edge could afford to purchase and run the Coyotes. Ice Edge delivered statements in June 2010 but these were considered unsatisfactory by the city. At the end of August, Ice Edge announced that it would focus its efforts instead on getting an ECHL
team in Thunder Bay, Ontario
.
Although the team had a successful season
, reaching 100 points for the first time to finish fourth in their conference, and earning their first playoff berth since 2001-2002, attendance remained poor. The NHL shook up the Coyotes' front office in July 2010. Moss who had been president and chief operating officer of the club since 2002 was let go, being replaced by Chief financial officer Mike Nealy who was promoted to chief operating officer. This was followed by the departure of vice-president Jeff Holbrook, who would be succeeded by former Phoenix Suns
executive Jim Brewer in August 2010.
It was reported on September 17 that Hulsizer had deposited $25 million into the Glendale escrow account, as a sign of "good faith". Glendale declined to name Hulsizer by name, for confidentiality reasons. In its statement, Glendale stated "is moving forward with the prospective buyer for the purchase of the Phoenix Coyotes, subject to the negotiations and approval of the prospective buyer and the purchase price of the NHL." The statement was later clarified that Hulsizer put $25 million into escrow as a sign of good faith and that his funds were not to be used to pay the NHL's bills running the Coyotes.
On October 9, 2010, the Arizona Republic reported that negotiations between Hulsizer and Glendale were at an impasse. Hulsizer was reportedly pursuing a purchase of the team with the NHL first, without negotiating a lease to play in Glendale. Hulsizer has to negotiate a price that may or may not include paying for this season's NHL expenses. According to Glendale mayor Elaine Scruggs
, "Glendale has done everything we can to negotiate with the latest buyer. It is truly out of our hands right now.".
On October 15, the Toronto Globe and Mail newspaper reported that purchase negotiations between Hulsizer and the NHL had reached an impasse. According to the report, Hulsizer has demanded a discount on the $165 million asking price of the NHL, while the NHL is unwilling to lose money in the transaction, and that the NHL may increase the asking price if it has invested further money into the team. The Globe reports that Hulsizer's escrow account deposit came from an investment bank, and not from Hulsizer himself. According to an unnamed NHL governor, the NHL governors do not want the franchise to return to Winnipeg but will approve the move if the deal is not completed by December 31. That same day, Glendale released a statement on its web site announcing that the city had reached an agreement in principle on a lease with the Hulsizer group. Daly told TSN that "the next step will be proceeding to the NHL ownership approval process. We are hopeful this represents the beginning of the end of this long process."
Hulsizer attended the October 16, 2010 Coyotes' home game versus the Detroit Red Wings
and discussed the team with general manager Don Maloney
and coach Dave Tippett
. He spoke publicly for the first time about the purchase stating that he had verbally agreed with the NHL on the purchase price: "Buying a hockey team is like buying a piece of art. You don't do it to make a lot of money. You do it because you love it." The agreement with Glendale is also an oral agreement and the agreement was to be discussed at Glendale council on October 19 behind closed doors.
Hulsizer attended a November 10, 2010 game of the Coyotes against the Blackhawks in Chicago. Although poor attendance at some games at Jobing.Com Arena had led to negative speculation, Hulsizer confirmed that the "process is moving forward" and that "something will be announced imminently." Some media speculation had stated that an escape clause with Glendale was a sticking point in negotiations. Hulsizer spoke to Fox Sports Arizona and he stated that the City of Glendale "has been excellent to work with." By November 23, 2010, the lease between Glendale and Hulsizer had not been discussed publicly by Glendale city council.
On December 6, 2010, Hulsizer met with members of the NHL's executive committee at the NHL owner's winter meetings. The executive committee approved of Hulsizer as a potential owner. At the same time, the NHL again came to an agreement with TNSE for a possible purchase and move of the team to Winnipeg should the eventuality come to pass.
Under the announced agreement, the city of Glendale intended to buy back the parking rights to the arena from the Coyotes at a price of $100 million, and manage the arena at an annual cost of $17 million for the next five and a half years, (totalling $97 million) at which point Hulsizer has the option to buy the arena for $140 million. Glendale hopes to host the 2013 NHL All-Star Game. The $100 million would be raised by a bond issue by the city. The lease would run until 2033, at which point Hulsizer could purchase the arena for $40 million. The Coyotes would make payments totalling $6 million annually to the city. Also under the agreement, the Coyotes would apply to the NHL to rename the team the "Arizona Coyotes".
Glendale council approved the lease agreement on December 14, 2010 by a vote of 5–2, with Bettman and Daly in attendance. The council was advised that the NHL would not allow the team to leave Phoenix for at least seven years. A controversial section of the agreement, allowing Hulsizer to vacate the agreement if the city defaults or if a lawsuit invalidates any or part of the deal was amended to require Hulsizer to give Glendale 120 days to negotiate. The possibility of a law suit was raised by the Goldwater Institute
, over concerns that the deal is an unconstitutional subsidy and the $97 million for management fees is "grossly disproportionate to the fair market value" and potentially violates a "gift clause" in state law. The deal with Hulsizer is more expensive for Glendale than proposed agreements with past owner Jerry Moyes and more expensive than proposed agreements with Jerry Reinsdorf and Ice Edge Holdings.
The NHL deadline of December 31, 2010 came and passed. Daly indicated in comments to the media that the NHL intends to complete the sale to Hulsizer, and has not started any relocation process. On January 20, 2011, the Arizona Republic reported in an editorial, that Glendale was modifying the lease agreement to appease concerns of the Goldwater Institute, which had threatened to oppose the sale in court. The Goldwater Institute has not decided whether to sue Glendale or not. On January 26, 2011, Bob McCown, a Canadian nationally-syndicated radio talk show host, reported that Glendale's bond sale had failed and that the city was going to hire a securities firm to sell the securities. The report was denied by Daly as "totally false." In February 2011, the City listed bonds for sale for a total amount of $116 million. The Moody's Investor Service, upon review of the bond issue and Glendale, downgraded the city of Glendale's debt rating.
As of April 2011, the bonds still had not sold. This was attributed to the possible lawsuit of the Goldwater Institute. Media has reported that the NHL will attempt to arrange alternate financing to keep the team in Phoenix. According to Daly: “We believe Goldwater has become irrelevant to the process. We do not expect Goldwater to change its position. We will have to move on without them.” The Arizona Republic reported that the NHL sent Glendale a bill of $25 million to cover the Coyotes' $36.6 million in losses for the 2010–11 season. The bill was forwarded under the agreement that Glendale would put aside $25 million to cover the season's losses while the search for a new owner would continue.
On June 27, 2011, the Phoenix Business Journal reported that Hulsizer had ended his bid for the Coyotes. According to the report, his group of investors did not want to go through another several months of negotiating with Glendale. According to the reports, Jerry Reinsdorf
had re-emerged as a potential buyer for the club.
made a public records request to the City of Glendale for any documents pertaining to negotiations with potential new owners of the Coyotes. The City declined, and the Goldwater Institute filed a complaint with the Maricopa County Superior Court. In July 2009, the court ordered that Glendale must make all records of negotiations public. In August 2009, Goldwater filed an 'conditional objection' with the bankruptcy court over possible $15 to $23 million annual subsides to Jerry Reinsdorf to inform the court that a potential sale to Reinsdorf under those terms would violate Arizona state law. Glendale released some documents to Goldwater, but not all, and Goldwater applied to the court in January 2010 to find Glendale in contempt of court. In response, Glendale filed a request for a protective order with the court and offered Goldwater access to view documents in-camera.
When the proposed sale to Hulsizer and its lease agreement became public, Glendale filed studies to justify the purchase of parking rights at the Arena property and shared those with Goldwater. Goldwater wrote a letter to Glendale informing it that proposed lease agreement appears to violate Arizona's gift clause. In February 2011, the Goldwater Institute, in a public statement, called for Glendale to reconsider the proposed sale of bonds to finance the Hulsizer purchase, stating "the financial risk appears enormous and the transaction appears to violate the Arizona Constitution." The Institute had also found that one of the firms which had conducted the parking revenues analysis was being sued for "intentionally and fraudulently inflated event and attendance projections to inflate projected revenue and achieve an investment-grade rating" after a similar parking study in another city's issuance of bonds.
After the bonds were listed for sale with bond rating agencies, the Goldwater Institute wrote letters to those agencies, formally advising them of their belief that the bond sale violates Arizona state law, and that the Institute may file a lawsuit. The bonds did not sell immediately and on March 3, 2011 Glendale held a press conference on the lack of progress on the bond sale and to make a plea for public support. Mayor Scruggs asserted that "the Goldwater Institute is obstructing the city's ability to sell the necessary bonds". Media reports circulated that the City of Glendale was preparing to file a lawsuit against the Goldwater Institute alleging tortious interference
with the bond sale and seeking up to $500 million in damages should the team leave Glendale. Goldwater president Darcy A. Olsen
replied that any such action "would be frivolous and unsuccessful." Glendale Deputy City Manager for Communications Julie Frisoni confirmed only that a lawsuit was an option, but that it intended to work with Goldwater, and had contacted Goldwater board members, stating "the situation as it exists cannot continue without a resolution."
On March 8, Bettman and Daly travelled to Glendale to meet with city officials privately. The NHL attempted to arrange a private meeting with Goldwater, but Goldwater insisted on a public meeting. Bettman held a press conference, making it clear that the NHL was still committed to the sale, but that "I will not say today when the end is and I will not set a deadline, but at some point, we may have no choice but to begin pursuing our other alternatives." On March 15, 2011 the Goldwater Institute announced it will file a legal challenge against Glendale, on the grounds that the deal between Glendale and Hulsizer would violate the Arizona Constitution. On March 18, 2011, Daly took part in a Phoenix radio talk show to discuss the situation. He noted that Goldwater had been "effective" in stopping sales of the bonds, but that the NHL was working to find bond buyers "who are interested regardless of whatever litigation risk there might be from Goldwater."
On March 20, Hulsizer announced in an interview that he would agree to guarantee any short-fall in parking revenues up to $75 million. To ESPN, Hulsizer wrote that he had transmitted that to the Goldwater Institute in a letter. "The situation was stuck and we need to move forward. While we still believe the original deal is legal we wanted to make things simple." According to ESPN, the concession followed discussions between Arizona senator John McCain
, former Arizona state attorney general Grant Woods
, and officials with Goldwater. The following day, the Goldwater's Olsen announced that the Hulsizer guarantee did not change the Institute's view that the deal was still illegal under Arizona law. In an interview on radio, Olsen explained the Goldwater position. Hulsizer did not guarantee the bonds up to $75 million, but intended to back parking revenues up to $75 million over the 30-year lease. At $2.5 million per year, Olsen estimated that would be the parking revenues at the Arena from concerts alone. The taxpayers of Glendale were not being offered any guarantee on the bonds. Glendale met in a public forum with Goldwater to attempt to end the impasse, but both sides did not change their positions on the possible deal.
The media speculated that Hulsizer had abandoned his effort to purchase the Coyotes and pursue the St. Louis Blues, a claim denied by his investment group. The Ice Edge group, which had at one time sought to purchase the team, then became a minority investor with Hulsizer's syndicate, informed Hulsizer that it was no longer interested in investing in the purchase of the Coyotes.
The backup plan to sell the team to True North Sports and return it to Winnipeg if an agreement could not be reached was rendered moot in May 2011, when the group instead announced a deal to purchase the Atlanta Thrashers
and move that team to Winnipeg instead.
In June 2011, the Westgate City Center
development adjacent to the Jobing.Com Arena received notices of foreclosure. Part of the reason given for the foreclosure was the uncertainty around the Coyotes. The Center will remain open. The Steve Ellman companies will attempt to reschedule debt on the Center or part or all of the Center will be sold to settle debt to lenders. Ellman acquired Westgate in 2006 by swapping his ownership in the Coyotes for Jerry Moyes' ownership share of Westgate. Ellman had moved the Coyotes to Glendale in 2005 after failing to get an arena built at the former Los Arcos Mall in Scottsdale. Two auctions are scheduled for foreclosed Westgate City Center properties. One auction, for September 19, 2011, is for properties securing a $97.5 million dollar loan from iStar Financial. The auction failed to sell at a reserve price of $40 million, and the 33 acres (13.4 ha) property has become the property of iStar. A second auction is scheduled for November 3, 2011 for properties securing a $202 million dollar loan from Credit Suisse.
The Phoenix Business Journal reported on June 27, that Glendale and the NHL were negotiating with Hulsizer, Reinsdorf and an un-named group. Later that day, it was reported by the Journal that Hulsizer had dropped out of the bidding.
On August 19, the Phoenix Business Journal reported that former San Jose Sharks
CEO Greg Jamison was leading a group to purchase the Coyotes and keep the team in Arizona. The group plans to make a payment for exclusive negotiating rights. Jamison was president and CEO of the Sharks and its parent company, Silicon Valley Sports and Entertainment, from 1996 until September 2010.
On September 22, the Arizona Republic reported that Glendale Hockey LLC, a group which include Jerry Reinsdorf, Arizona lawyer John Kaites and Tony Tavares, has entered into negotiations to purchase the Coyotes. David Leibowitz, the group's spokesman, confirmed that Kaites is the managing partner of the group. It represents the second time that Kaites and Reinsdorf have entered into talks to purchase the team. The Jamison group is apparently still interested in purchasing the Coyotes.
----
Phoenix Coyotes
The Phoenix Coyotes are a professional ice hockey team based in Glendale, Arizona. They are members of the Pacific Division of the Western Conference of the National Hockey League . They play their home games at Jobing.com Arena....
, a professional ice hockey
Ice hockey
Ice hockey, often referred to as hockey, is a team sport played on ice, in which skaters use wooden or composite sticks to shoot a hard rubber puck into their opponent's net. The game is played between two teams of six players each. Five members of each team skate up and down the ice trying to take...
team of the National Hockey League
National Hockey League
The National Hockey League is an unincorporated not-for-profit association which operates a major professional ice hockey league of 30 franchised member clubs, of which 7 are currently located in Canada and 23 in the United States...
(NHL), filed for bankruptcy in 2009 after incurring several hundred million dollars of losses since their move to Phoneix
Phoenix, Arizona
Phoenix is the capital, and largest city, of the U.S. state of Arizona, as well as the sixth most populated city in the United States. Phoenix is home to 1,445,632 people according to the official 2010 U.S. Census Bureau data...
, Arizona
Arizona
Arizona ; is a state located in the southwestern region of the United States. It is also part of the western United States and the mountain west. The capital and largest city is Phoenix...
from Winnipeg
Winnipeg
Winnipeg is the capital and largest city of Manitoba, Canada, and is the primary municipality of the Winnipeg Capital Region, with more than half of Manitoba's population. It is located near the longitudinal centre of North America, at the confluence of the Red and Assiniboine Rivers .The name...
, Manitoba
Manitoba
Manitoba is a Canadian prairie province with an area of . The province has over 110,000 lakes and has a largely continental climate because of its flat topography. Agriculture, mostly concentrated in the fertile southern and western parts of the province, is vital to the province's economy; other...
, where they were known as the Winnipeg Jets. Bankruptcy court rejected a plan to sell the team and move it to Canada, and the team was purchased by the NHL. Since that time, the team has been operated by the NHL in Phoenix while the team remains for sale.
In December 2008, the media became aware that the Phoenix Coyotes were losing money at a high rate and were being funded by the NHL directly. The media reports were minimized by the NHL's Commissioner Gary Bettman
Gary Bettman
Gary Bruce Bettman is the commissioner of the National Hockey League , a post he has held since February 1, 1993. Previously, Bettman was a senior vice-president and general counsel to the National Basketball Association...
and Deputy Commissioner Bill Daly
Bill Daly
William L. "Bill" Daly is an attorney and the Current Deputy Commissioner and chief legal officer of the NHL under Commissioner Gary Bettman. He is also a Hockey Hall of Fame Board Member and former NHL Vice President and Chief Legal Officer. Before joining the NHL front office he worked for the...
, but secretly the NHL had taken over operations of the Coyotes. In May 2009, the owner of the team Jerry Moyes
Jerry Moyes
Jerry Moyes is the founder, chairman and CEO of Phoenix-based Swift Transportation, one of the largest trucking companies in the nation. Moyes is also owner of charter airline Swift Air. He was a majority owner of the Phoenix Coyotes of the National Hockey League before the Coyotes filed...
put the team into bankruptcy hours before receiving Bettman who was to present a potential offer to purchase. Moyes intended to sell the team to Canadian
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
billionaire Jim Balsillie
Jim Balsillie
James Laurence "Jim" Balsillie is a Canadian businessman and co-CEO of the Canadian company Research In Motion. He is a member of the Trilateral Commission, a private political organization...
who intended to purchase the team out of bankruptcy and move it to Hamilton
Hamilton, Ontario
Hamilton is a port city in the Canadian province of Ontario. Conceived by George Hamilton when he purchased the Durand farm shortly after the War of 1812, Hamilton has become the centre of a densely populated and industrialized region at the west end of Lake Ontario known as the Golden Horseshoe...
, Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
without being restricted by the NHL's rules on relocation.
From May until September 2009, hearings were held in Phoenix bankruptcy court to determine the fate of the Coyotes and the holding company. Two potential bidders for the team surfaced, Chicago White Sox
Chicago White Sox
The Chicago White Sox are a Major League Baseball team located in Chicago, Illinois.The White Sox play in the American League's Central Division. Since , the White Sox have played in U.S. Cellular Field, which was originally called New Comiskey Park and nicknamed The Cell by local fans...
owner Jerry Reinsdorf
Jerry Reinsdorf
Jerry M. Reinsdorf is a CPA, lawyer and an owner of the MLB's Chicago White Sox and the NBA's Chicago Bulls. He started his professional life as a tax attorney with the Internal Revenue Service. He has been the head of the White Sox and Bulls for over 20 years.He made his initial fortune in real...
and Ice Edge Holdings, Inc. but they did not put in a bid for the team at the bankruptcy hearing. Instead, the NHL put in the only rival bid to Balsillie for the team, while they fought Moyes' plan to sell the team and move it to Hamilton against the NHL rules. Ultimately, the Phoenix court ruled that the team could not be sold to Balsillie, as the judge held that bankruptcy could not be used to subvert the league's rules. The NHL's original bid was also insufficient for the bankruptcy judge, since it did not treat Moyes and Gretzky as full creditors. Later the NHL settled with Moyes with the league buying the team and assuming all debts.
After the sale, the NHL negotiated a temporary lease with Jobing.com Arena owner, the City of Glendale
Glendale, Arizona
Glendale is a city in Maricopa County, Arizona, USA, located about nine miles northwest from Downtown Phoenix. According to 2010 Census Bureau, the population of the city is 226,721....
, Arizona
Arizona
Arizona ; is a state located in the southwestern region of the United States. It is also part of the western United States and the mountain west. The capital and largest city is Phoenix...
. The NHL then proceeded to work with the two potential bidders of Reinsdorf and Ice Edge to work out a deal with Glendale. Ice Edge signed a letter of intent to buy the team from the NHL, while Reinsdorf had won the approval of the City of Glendale. By the end of summer 2010, both bidders had failed to complete a purchase and dropped out. The NHL, which had threatened to move the team to Winnipeg for the 2010–11 season, agreed to keep the team in Glendale for the season, after Glendale agreed to fund its losses. The NHL publicly announced a deadline of December 31, 2010 for any purchase to keep the team in Phoenix after which it might make plans to move the team. In December 2010, a Chicago-based investor, Matthew Hulsizer, along with several investors, was approved by the NHL to purchase the team and reached a lease agreement with Glendale. A deal was reached between Glendale and Hulsizer that involved the sale of bonds by the city to pay Hulsizer over $100 million against future parking revenues at the arena. The Goldwater Institute
Goldwater Institute
The Goldwater Institute is a Phoenix, Arizona-based conservative public policy research organization established in 1988. The president is Darcy A. Olsen. The Goldwater Institute advances public policies with emphasis on lower taxes, limited government spending, school choice, and a reduction in...
, a taxpayer advocacy group, announced that it would challenge the lease agreement in court. The threat led to the failure of the bond sale. Hulsizer abandoned his bid for the Coyotes on June 27, 2011.
For the 2011–12 season, Glendale has set aside $25 million to ensure that the Coyotes will stay in Glendale for another season, while the NHL works on arranging the purchase. In August 2011, a group headed by former San Jose Sharks
San Jose Sharks
The San Jose Sharks are a professional ice hockey team based in San Jose, California, United States. They are members of the Pacific Division of the Western Conference of the National Hockey League...
CEO Greg Jamison, was identified as a potential purchaser. Jamison's group intends to keep the team in Arizona. Another group, including past bidder Reinsdorf, emerged in September 2011. The City of Glendale intends to complete negotiations with one or the other by the end of December 2011.
Warning signs
On December 8, 2009, during a press conference at the annual December NHL board of governors' meeting, the issue of the state of the economy was raised by reporters. The Phoenix CoyotesPhoenix Coyotes
The Phoenix Coyotes are a professional ice hockey team based in Glendale, Arizona. They are members of the Pacific Division of the Western Conference of the National Hockey League . They play their home games at Jobing.com Arena....
were reported to lose up to $35 million on the 2008–09 season. Asked to comment on Phoenix's loss, Bettman was quoted as saying "They're going to get through the season just fine." The Coyotes' President and COO
Chief operating officer
A Chief Operating Officer or Director of Operations can be one of the highest-ranking executives in an organization and comprises part of the "C-Suite"...
, Doug Moss admitted that the team had lost a lot of money and was still losing money. He was not prepared to reveal the number of season-ticket subscribers that the team had: "We have never really revealed our season-ticket base . . . it's too low, that's a number that's too low." It was revealed during bankruptcy proceedings that the Coyotes averaged 5,450 season tickets per season for the four seasons from 2005–2009.
The true state of the Phoenix franchise was not revealed, however. In the documents filed with the Phoenix bankruptcy court, the NHL stated that the league took official control of the team on November 14, 2008. The league then began advancing money to the club from league revenues, and made a loan to the club in February 2009, for a combined estimated total of $44.5 million over the full season. The league fired the Coyotes CEO
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
Jeff Shumway and laid off 18 Coyotes employees. Moyes' documents filed with the court indicated that the team had lost $73 million over the last three years, and that the projected loss was $45 million for 2008–09. In the September 2009 bankruptcy hearings it was noted that an audit had shown that the team had never made a profit since moving from Winnipeg
Winnipeg
Winnipeg is the capital and largest city of Manitoba, Canada, and is the primary municipality of the Winnipeg Capital Region, with more than half of Manitoba's population. It is located near the longitudinal centre of North America, at the confluence of the Red and Assiniboine Rivers .The name...
, Manitoba
Manitoba
Manitoba is a Canadian prairie province with an area of . The province has over 110,000 lakes and has a largely continental climate because of its flat topography. Agriculture, mostly concentrated in the fertile southern and western parts of the province, is vital to the province's economy; other...
in 1996 and lost $54.8 million in 2008 alone.
On December 23, 2008, the Toronto Globe and Mail reported that the Coyotes were receiving financial assistance from the league in the form of advances on league revenues. The Coyotes pledged all of their assets to New York company SOF Investments LP to cover an estimated debt of $80 million. The team had lost an estimated $200 million since 2001 and in recent years posted heavy losses, including $41.6 million in 2006-07, $37.3 million during the 2007-08 season, and $54 million in 2008-09. One of the team's owners, Jerry Moyes
Jerry Moyes
Jerry Moyes is the founder, chairman and CEO of Phoenix-based Swift Transportation, one of the largest trucking companies in the nation. Moyes is also owner of charter airline Swift Air. He was a majority owner of the Phoenix Coyotes of the National Hockey League before the Coyotes filed...
' principal source of revenue, Swift Transportation was also in financial difficulty. Television network ESPN
ESPN
Entertainment and Sports Programming Network, commonly known as ESPN, is an American global cable television network focusing on sports-related programming including live and pre-taped event telecasts, sports talk shows, and other original programming....
reported that the league had become involved with the operations of the Coyotes and their revenues. The NHL apparently wanted to work with the city of Glendale which owns the arena and receives revenues from the team. ESPN also reported that Moyes was interested in selling his share of the team. Hollywood producer, and noted hockey fan, Jerry Bruckheimer
Jerry Bruckheimer
Jerome Leon "Jerry" Bruckheimer is an American film and television producer. He has achieved great success in the genres of action, drama, and science fiction. His best known television series are CSI: Crime Scene Investigation, CSI: Miami, CSI: NY, Eleventh Hour, Without a Trace, Cold Case, The...
was cited as a possible investor.
Bankruptcy filing
Chapter 11, Title 11, United States Code
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most...
bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
. In a statement, Moyes announced that he had agreed in principle to sell the team to PSE Sports and Entertainment, headed by Research in Motion
Research In Motion
Research In Motion Limited or RIM is a Canadian multinational telecommunications company headquartered in Waterloo, Ontario, Canada that designs, manufactures and markets wireless solutions for the worldwide mobile communications market...
co-CEO Jim Balsillie
Jim Balsillie
James Laurence "Jim" Balsillie is a Canadian businessman and co-CEO of the Canadian company Research In Motion. He is a member of the Trilateral Commission, a private political organization...
, for $212.5 million. As part of the deal, Balsillie intended to move the Coyotes to Hamilton, Ontario
Hamilton, Ontario
Hamilton is a port city in the Canadian province of Ontario. Conceived by George Hamilton when he purchased the Durand farm shortly after the War of 1812, Hamilton has become the centre of a densely populated and industrialized region at the west end of Lake Ontario known as the Golden Horseshoe...
. Although initial reports said that Balsillie was considering Kitchener
Kitchener, Ontario
The City of Kitchener is a city in Southern Ontario, Canada. It was the Town of Berlin from 1854 until 1912 and the City of Berlin from 1912 until 1916. The city had a population of 204,668 in the Canada 2006 Census...
as well, Hamilton already had an NHL-sized arena in place, Copps Coliseum
Copps Coliseum
Copps Coliseum is a sports and entertainment arena, on the corner of Bay Street North and York Boulevard, in Hamilton, Ontario. Depending on event, the Copps Coliseum has a capacity of up to 19,000.It is named after the former Hamilton mayor, Victor K...
and Balsillie was already in talks with city officials to secure a lease for the arena. Balsillie had previously made unsuccessful approaches to purchase the Pittsburgh Penguins
Pittsburgh Penguins
The Pittsburgh Penguins are a professional ice hockey team based in Pittsburgh, Pennsylvania. They are members of the Atlantic Division of the Eastern Conference of the National Hockey League . The franchise was founded in 1967 as one of the first expansion teams during the league's original...
and Nashville Predators
Nashville Predators
The Nashville Predators are a professional ice hockey team based in Nashville, Tennessee. They are members of the Central Division of the Western Conference of the National Hockey League...
, with the intent of relocating
Potential National Hockey League expansion
The National Hockey League has undergone several rounds of expansion and other organizational changes during its nearly 100-year history to reach its current number of thirty teams: twenty-three in the United States, and seven in Canada...
either team to Hamilton.
Anyone who wanted to make a counteroffer had to exceed Balsillie's bid by at least $5 million. At Moyes' request, Balsillie agreed to post debtor-in-possession (DIP) financing of $17 million. Balsillie's efforts also started public relations efforts, including setting up the web site makeitseven.ca to build public support in Canada for his purchase and transfer of the Coyotes to Hamilton.
The announcement came as a surprise to the NHL and even to Coyotes staffers. Bettman had helped broker a deal that would have seen the Coyotes sold to Chicago Bulls
Chicago Bulls
The Chicago Bulls are an American professional basketball team based in Chicago, Illinois, playing in the Central Division of the Eastern Conference in the National Basketball Association . The team was founded in 1966. They play their home games at the United Center...
and White Sox
Chicago White Sox
The Chicago White Sox are a Major League Baseball team located in Chicago, Illinois.The White Sox play in the American League's Central Division. Since , the White Sox have played in U.S. Cellular Field, which was originally called New Comiskey Park and nicknamed The Cell by local fans...
owner Jerry Reinsdorf
Jerry Reinsdorf
Jerry M. Reinsdorf is a CPA, lawyer and an owner of the MLB's Chicago White Sox and the NBA's Chicago Bulls. He started his professional life as a tax attorney with the Internal Revenue Service. He has been the head of the White Sox and Bulls for over 20 years.He made his initial fortune in real...
. At the time of the announcement, Bettman was in Phoenix to present the deal to Moyes. Unlike Balsillie's offer, the Reinsdorf deal was to ensure the Coyotes stay in Arizona. Terms of the Reinsdorf deal were not disclosed, but The Sports Network
The Sports Network
The Sports Network, commonly abbreviated as TSN, is a Canadian English language Category C specialty channel and is Canada's leading English language sports TV channel. TSN premiered in 1984, in the first group of Canadian specialty cable channels...
's Bob McKenzie
Bob McKenzie (broadcaster)
Robert "Bob" McKenzie is a Canadian hockey commentator who has covered ice hockey since joining TSN in the late 1980s....
speculated that it was almost certainly less than the Balsillie offer.
The NHL responded by stripping Moyes of virtually all of his ownership authority (although he remained the owner in title). Bettman said that Moyes may not have had the authority to file the bankruptcy petition, and may not have even been in full control of the team by virtue of the massive financial assistance he'd received. Although it has been widely speculated that southern Ontario is big enough to support a third NHL team alongside the Toronto Maple Leafs
Toronto Maple Leafs
The Toronto Maple Leafs are a professional ice hockey team based in Toronto, Ontario, Canada. They are members of the Northeast Division of the Eastern Conference of the National Hockey League...
and Ottawa Senators
Ottawa Senators
The Ottawa Senators are a professional ice hockey team based in Ottawa, Ontario, Canada. They are members of the Northeast Division of the Eastern Conference of the National Hockey League...
(despite the Buffalo Sabres
Buffalo Sabres
The Buffalo Sabres are a professional ice hockey team based in Buffalo, New York. They are members of the Northeast Division of the Eastern Conference of the National Hockey League .-Founding and early success: 1970-71—1980-81:...
and Detroit Red Wings
Detroit Red Wings
The Detroit Red Wings are a professional ice hockey team based in Detroit, Michigan. They are members of the Central Division of the Western Conference of the National Hockey League , and are one of the Original Six teams of the NHL, along with the Toronto Maple Leafs, Montreal Canadiens, New York...
being right on the doorstep of the region as well), Bettman suggested that it was not likely the league would approve any plan to move the Coyotes to Canada, and accused Moyes and Balsillie of attempting to "circumvent" league rules. He also reiterated that the NHL was committed to the Phoenix area.
Bankruptcy hearings
The first bankruptcy hearing was scheduled for May 7, 2009. Court documents submitted by Moyes cite thirty creditorCreditor
A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...
s, including Moyes himself for an amount in excess of US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
103 million. TSN's Bob McKenzie said that Moyes was very receptive to Balsillie's offer because, as the team's largest unsecured creditor
Unsecured creditor
An unsecured creditor is a creditor other than a preferential creditor that does not have the benefit of any security interests in the assets of the debtor....
, the best chance of getting most of his money back was to persuade someone to buy the team out of bankruptcy. The league's position was that it was Moyes' fault that he paid himself so much money and that he was entitled to only $14 million of $103 million loss, which would have been the case if Jerry Reinsdorf
Jerry Reinsdorf
Jerry M. Reinsdorf is a CPA, lawyer and an owner of the MLB's Chicago White Sox and the NBA's Chicago Bulls. He started his professional life as a tax attorney with the Internal Revenue Service. He has been the head of the White Sox and Bulls for over 20 years.He made his initial fortune in real...
's lower bid was accepted.
At the bankruptcy hearing, the NHL argued that it had been in control of the team since November by virtue of a proxy agreement with Moyes. The NHL claimed this agreement, and several others signed by Moyes, specifically barred Moyes from filing for bankruptcy. Moyes claimed that the agreement only gave the league voting rights, not outright control. Bankruptcy court judge Redfield Baum scheduled a second hearing for May 19 to determine who actually controls the team. However, the NHL's Daly said that regardless of how the judge ruled, the league owners would have the final say in whether to allow the Coyotes to move. Daly repeated Bettman's doubts about Balsillie's bid, saying Balsillie was acting "in total disregard" for NHL rules.
At the May 19 hearing, Baum ordered the NHL and Moyes to settle the ownership question through mediation, while expressing skepticism for the NHL's argument that the proxy agreements gave it control of the team. He said that he needed to decide whether to allow the move to Hamilton before the franchise was sold. However, the NHL claimed there was no way it could reach a decision on whether to allow the move in time for the 2009-10 season. The day after the hearing, Balsillie spokesman Rich Rodier told Arizona Republic Coyotes beat writer Jim Gintonio that Balsillie was willing to keep the team in Phoenix for the 2009-10 season, provided that the NHL fund any losses.
Although the judge ordered mediation, none took place. In late May, Balsillie filed a formal application with the NHL to purchase the Coyotes and relocate them to Hamilton. Baum set up a tentative hearing to consider an auction of the team if the NHL Board of Governors rejected Balsillie's bid.
The other three major North American sports organizations filed amicus curiae
Amicus curiae
An amicus curiae is someone, not a party to a case, who volunteers to offer information to assist a court in deciding a matter before it...
briefs with the court supporting the NHL position. They argued that if Baum forced the league to move the Coyotes, it would "disrupt the business" of professional sports. New York's two senators, Chuck Schumer and Kirsten Gillibrand
Kirsten Gillibrand
Kirsten Elizabeth Rutnik Gillibrand is an attorney and the junior United States Senator from the state of New York and a member of the Democratic Party...
, also wrote Baum to oppose the move on the grounds that a Hamilton-based team would do severe economic harm to the Sabres. According to the senators, 15 to 20 percent of the Sabres' revenues comes from fans in the area between Hamilton and Buffalo. Hamilton is only 45 miles from Buffalo, New York
Buffalo, New York
Buffalo is the second most populous city in the state of New York, after New York City. Located in Western New York on the eastern shores of Lake Erie and at the head of the Niagara River across from Fort Erie, Ontario, Buffalo is the seat of Erie County and the principal city of the...
and is within the "protected N.H.L. markets" of both the Sabres and the Maple Leafs.
The NHL filed documents stating that four prospective buyers had filed applications with the league. All four intended to keep the Coyotes in Phoenix. These included Jerry Reinsdorf, Toronto Argonauts
Toronto Argonauts
The Toronto Argonauts are a professional Canadian football team competing in the East Division of the Canadian Football League. The Toronto, Ontario based team was founded in 1873 and is one of the oldest existing professional sports teams in North America, after the Chicago Cubs and the Atlanta...
' co-owners Howard Sokolowski and David Cynamon; and John Breslow of Las Vegas, who was already an owner of 3% of the Coyotes. A fourth remained anonymous. The league stated that any franchise moved without the league's permission, such as moving it to Hamilton would render it valueless. "At most, the proposed transaction would transfer a collection of used hockey equipment — none of which could bear the NHL logo."
At a June 9, 2009 hearing, Judge Baum agreed with the NHL that the league is within its rights to demand a relocation fee. Balsillie lawyer Richard Rodier suggested that the league would set the fee as high as $100 million to dissuade Balsillie. Balsillie himself was quoted as saying that he was open to paying the fee, although his lawyers suggested that he would walk away from the deal if the fee is 'exorbitant.'
Baum's ruling did not rule out Balsillie as an NHL franchise owner. Balsillie indicated at the time that he would continue bidding on the team in spite of the failure of his first offer. The NHL indicated a desire to hold an auction in September to find a new owner for the team, indicating that the auction would be open to prospective owners who would keep the team in Arizona, and stated that at least four potential buyers had been identified. The league had also indicated a willingness to hold a second auction, open to relocation, if the team could not be sold in the planned September auction.
On July 9, the Court set two auction dates for the team. The first auction on August 20, would be a primary auction with the stipulation that whoever has the winning bid, must agree to keep the team in Phoenix for at least 5 years, after which they may relocate with league approval at any time. An undisclosed minimum bid must be met in this auction. Should this auction fail, the second auction on September 10, will be run with no minimum bid; in which the new owner will have the right and authority to move the team to another location at any time without league approval after the 2009-10 season. Balsillie stated that he was willing to keep the team in Phoenix for the time being and intended to bid in the August auction.
On July 29, the NHL Board of Governors met to consider the application of Balsillie to purchase the Coyotes and the relocation. The Governors voted overwhelmingly 29–1 against Balsillie (unanimously except for Moyes' representative). The Governors also voted to approve Reinsdorf as a potential owner. Daly stated that Balsillie was rejected under bylaw 35 of the NHL Constitution, which allows applications to be rejected to persons which the NHL believes are not of "good character and integrity." Balsillie responded in a filing saying that "the NHL has long tolerated indicted and even convicted criminals among its ranks", noting that moral grounds and questions of character have never been used "in the entire history of the NHL to reject any applicant."
The NHL also revealed another bid, by businessman Anthony Leblanc of Thunder Bay, Ontario to purchase the Coyotes, which they also rejected as 'incomplete' but encouraged Leblanc to pursue the bid. Leblanc's company, Ice Edge Holdings Inc. publicly revealed their bid with a letter of intent filed with the bankruptcy court. The club would bid up to $150 million for the team, and keep it in Phoenix, with up to five games played annually in Saskatoon
Saskatoon
Saskatoon is a city in central Saskatchewan, Canada, on the South Saskatchewan River. Residents of the city of Saskatoon are called Saskatonians. The city is surrounded by the Rural Municipality of Corman Park No. 344....
, Saskatchewan
Saskatchewan
Saskatchewan is a prairie province in Canada, which has an area of . Saskatchewan is bordered on the west by Alberta, on the north by the Northwest Territories, on the east by Manitoba, and on the south by the U.S. states of Montana and North Dakota....
. Ice Edge also named Canadian businessman Daryl Jones as one of the principals in its group.
On August 13, 2009, Judge Baum ordered the NHL to hand over documents regarding the Coyotes' relocation. These documents were related to any potential expansion to Hamilton, and any relocation fees charged for any franchise moves by the NHL. Documents filed with the court included the previously secret NHL Constitution and also the section of the NHL Bylaws which spelled rules of relocation fees. Balsillie's lawyers filed the documents, claiming that sections of the Constitution violate anti-trust law and asked that the judge ignore the rules of the NHL on that basis. These became part of the public record and available on various web sites to download.
On September 6, 2009, it was reported by the Toronto Star that the NHL set a potential relocation fee of $101 million to $195 million to move the Phoenix Coyotes to Hamilton, while economics professor Andrew Zimbalist in a study conducted for James Balsillie valued the move at $11.2 million to $12.9 million. On September 7, 2009, Balsillie had reportedly sweetened his offer by US$40–50 million to buy out the lease of the Glendale Arena.
On September 9, 2009, it was reported that both Reinsdorf and Ice Edge Holdings had withdrawn from the bidding for the Coyotes, leaving only Balsillie and the NHL as prospective purchasers. It was announced on September 24 that Wayne Gretzky
Wayne Gretzky
Wayne Douglas Gretzky, CC is a Canadian former professional ice hockey player and former head coach. Nicknamed "The Great One", he is generally regarded as the best player in the history of the National Hockey League , and has been called "the greatest hockey player ever" by many sportswriters,...
had stepped down as head coach.
On September 30, 2009, Judge Baum rejected both bids. This effectively ended any chance of a forced sale to Balsillie and relocating the Coyotes to Canada. However, the NHL's bid was criticized for its failure to repay Moyes and Gretzky, two of the largest creditors, though the league had a chance to improve its bid. While Balsillie's bid treated both as full creditors, the NHL promised Moyes only about $14 million of his claimed losses of $104 million, which would be shared with Gretzky who has a claim of about $22 million.
Sale to the NHL and failed purchases
On October 26, 2009, Jerry Moyes reached a deal to sell the Coyotes to the NHL for $140 million. On the deal, Daly stated "it remains the NHL’s intention upon taking control of the club, to stabilize the club’s operations and, as quickly as possible, to resell the club to a new owner who is committed to operating the club in the Glendale/Phoenix market". The sale was finalized on November 3, 2009. The price included $36.3 million already owed to the NHL, $80.7 million in secured claims and $11.3 cash going to the seller. $2 million went for professional fees and the NHL paid $11.6 million in unsecured claims, although not those of Moyes' family. The agreement also lowered a $30 million guaranty by Moyes to $15 million. If the team is resold within two years, the bankrupt estate will receive the net profit. The NHL agreed to pay the modified arena lease until June.Since securing ownership of the team the league openly stated that it was in negotiations with Ice Edge Holdings, Leblanc's partnership of Canadian and Phoenix-area businessmen, but was rumoured to have resumed negotiations with Reinsdorf also. The Ice Edge bid, while planning to keep the team in Phoenix, also proposed to play five Coyotes home games in Saskatoon each season as part of a five-year plan to return the Coyotes to profitability.
A new prospective purchaser for the team appeared in late November 2009. Steve Stotland, a Montreal
Montreal
Montreal is a city in Canada. It is the largest city in the province of Quebec, the second-largest city in Canada and the seventh largest in North America...
businessman, was reported to be teaming with undisclosed local investors to prepare a bid to buy the team. Stotland had previously been involved with the Washington Capitals
Washington Capitals
The Washington Capitals are a professional ice hockey team based in Washington, D.C. They are members of the Southeast Division of the Eastern Conference of the National Hockey League . Since their founding in 1974, "The Caps" have won one conference championship to reach the 1998 Stanley Cup...
and was interested in purchasing the Montreal Canadiens
Montreal Canadiens
The Montreal Canadiens are a professional ice hockey team based in Montreal, Quebec, Canada. They are members of the Northeast Division of the Eastern Conference of the National Hockey League . The club is officially known as ...
in 2000. Stotland attended the November 12 game between the Coyotes and Canadiens and met with team management.
In December 2009, the NHL announced that Ice Edge Holdings had signed a letter of intent with the NHL to purchase the Coyotes. Ice Edge would still have to negotiate a lease agreement with the City of Glendale, and get its ownership approved by the NHL Board of Governors.
That same month of December 2009, the NHL discussed the purchase of the Coyotes with True North Sports and Entertainment (TNSE), owners of the Winnipeg
Winnipeg
Winnipeg is the capital and largest city of Manitoba, Canada, and is the primary municipality of the Winnipeg Capital Region, with more than half of Manitoba's population. It is located near the longitudinal centre of North America, at the confluence of the Red and Assiniboine Rivers .The name...
-based Manitoba Moose
Manitoba Moose
The Manitoba Moose were a Canadian professional ice hockey team based in Winnipeg, Manitoba that played in the International Hockey League from 1996 to 2001 and American Hockey League from 2001 to 2011. The team moved to St. John's, Newfoundland and Labrador in 2011 to become the St...
, as a back-up plan to move the team to Winnipeg with the understanding that the NHL would make all possible efforts to keep the team in Glendale. TNSE had been seeking an NHL team to fill its MTS Centre
MTS Centre
The MTS Centre is an indoor sports arena and entertainment venue in downtown Winnipeg, Manitoba, Canada and home of the Winnipeg Jets of the National Hockey League. It is located on the former Eaton's site and is owned and operated by True North Sports & Entertainment. The 440,000 square feet ...
since 2007. The agreement became public knowledge in March 2010 when it was reported in the media that the league had negotiated an agreement-in-principle to sell the team to TNSE, in the event negotiations to keep the team in Arizona fail.
By March 2010, the NHL had not finished the sale to Ice Edge. It was reported that Ice Edge had run into trouble securing sufficient financing although the group denied the claims. The NHL launched a lawsuit for $61 million against former Coyotes owner Jerry Moyes
Jerry Moyes
Jerry Moyes is the founder, chairman and CEO of Phoenix-based Swift Transportation, one of the largest trucking companies in the nation. Moyes is also owner of charter airline Swift Air. He was a majority owner of the Phoenix Coyotes of the National Hockey League before the Coyotes filed...
to recover $10 million in bankruptcy court costs, $20 million in losses for 2009-10 and $11.6 million owed to creditors. On May 10, 2010, the lawsuit was transferred from New York to Arizona. Moyes is planning to move for dismissal of the case. It was reported in December 2010, that the court is considering Moyes motion to dismiss the case.
On April 9, 2010, the City of Glendale announced that it had received two offers to purchase the Coyotes, with Memorandums of Understanding from both Ice Edge Holdings and Glendale Hockey (headed by Chicago Bulls
Chicago Bulls
The Chicago Bulls are an American professional basketball team based in Chicago, Illinois, playing in the Central Division of the Eastern Conference in the National Basketball Association . The team was founded in 1966. They play their home games at the United Center...
and Chicago White Sox
Chicago White Sox
The Chicago White Sox are a Major League Baseball team located in Chicago, Illinois.The White Sox play in the American League's Central Division. Since , the White Sox have played in U.S. Cellular Field, which was originally called New Comiskey Park and nicknamed The Cell by local fans...
owner Jerry Reinsdorf
Jerry Reinsdorf
Jerry M. Reinsdorf is a CPA, lawyer and an owner of the MLB's Chicago White Sox and the NBA's Chicago Bulls. He started his professional life as a tax attorney with the Internal Revenue Service. He has been the head of the White Sox and Bulls for over 20 years.He made his initial fortune in real...
). The MOU's would both keep the team based in Glendale's Jobing.com Arena. Both groups would change the name of the team from Phoenix Coyotes to Arizona or Glendale Coyotes.
Reinsdorf's memorandum proposed a "community facilities district" that would sell bonds and collect revenue. The city would pay the NHL up to US$65 million in three-year increments -- $21.6 million the first year, $21.6 million the second year and $21.8 million the third year. This was immediately objected to by the conservative Goldwater Institute of Arizona, stating that it placed undue risk on the City of Glendale and Reinsdorf took none of the risk. Ice Edge's proposal, which required annual fees of $5 million in parking revenues, was more acceptable to the Institute.
On April 13, 2010, the City of Glendale, at a weekly council meeting, approved Reinsdorf's proposal by a vote of 6-0 while rejecting Ice Edge Holdings' proposal 5–1. The agreement included a special tax district surrounding the arena, expected to generate $47 million annually from businesses in support of the team. The agreement allowed Reinsdorf the option to move the team after five years if revenues are not up to expectations. John Kaites, an attorney for Reinsdorf and a partner in the Glendale Hockey, LLC group has claimed the out-clause to be an "assessment period". Former Coyotes CEO Jeff Shumway criticized the deal, saying that the team would not have gone bankrupt if the same deal had been available two years earlier. Reinsdorf's bid, which will pay the NHL $65 million for the team, has to be approved by the league board of governors. After the vote, Bettman was quoted as characterizing the Glendale vote as a "terrific step" and that he anticipated that the league would have no problems in approving Reinsdorf's purchase, including the 5-year 'out clause'. Bettman declined to give a timetable for the purchase approval.
On May 7, 2010, the Globe and Mail reported that negotiations to finalize the details of the MOU between Reinsdorf and Glendale were going poorly and Glendale had sought out Ice Edge to return to negotiations. What is reported to be in dispute are the terms of the special tax district. The Arizona Republic reported that negotiations had resumed with Ice Edge, with Glendale removing its objection to guaranteeing $5 million in revenues from parking for the team. Scott Burnside of ESPN characterized the Reinsdorf deal as "dead", and that Glendale must agree to some conditions of the NHL's such as guaranteeing operating losses before any sale to Ice Edge. On May 10, it was reported that negotiations between Glendale and Ice Edge had broken down.
Glendale, which plans to cut its 2010-11 budget by $14.7 million through cost-cutting, faced a NHL-imposed deadline during the negotiations. The NHL could sell the team and move it if a deal is not done by July 1, 2010. At a May 11, 2010 meeting, Glendale City Council voted to extend the sales period by agreeing to fund the team's losses for the 2010–11 season (up to a maximum of $25 million) if the team is not sold by July 1. The NHL, which had drawn up a schedule with the team playing in Winnipeg, as a back-up plan, required the condition to continue the team in Phoenix. Daly appeared at the Council meeting, stating that the sale of the Coyotes is still expected to close by the end of June and the payments may never be needed. Glendale city manager Ed Beasley stated that both Reinsdorf and the Ice Edge group were still in the running to purchase the team. The decision also gave Beasley the authority to set up a 'Community Facilities District' around the arena. The District would collect fees, possibly including ticket surcharges and parking charges, that would be directed to the hockey club. According to the TNSE's Mark Chipman, Glendale wired the $25 million in funds to the NHL ten minutes before a 5 PM deadline set by the NHL on an unspecified date in May 2010, narrowly averting the transfer of the team to Winnipeg. The TNSE had a group of executives in New York negotiating with the NHL.
On June 4, 2010, Glendale announced that it had a new Memorandum of Understanding with Ice Edge. The new MOU had a new clause whereby Ice Edge can exit its agreement with Glendale. To retain negotiating rights with Glendale, Ice Edge was given ten days to provide legal assurances from its bankers showing it can borrow the money it needs and the $25 million fund for the NHL. Reinsdorf responded to the announcement by announcing that he was withdrawing from the bidding, saying "it was time to move on."
A lease agreement with Ice Edge was not finalized and negotiations between Ice Edge and the City of Glendale reached an impasse in July 2010. Ice Edge's financing of the Coyotes' purchase was an issue, and the city required financial statements showing Ice Edge could afford to purchase and run the Coyotes. Ice Edge delivered statements in June 2010 but these were considered unsatisfactory by the city. At the end of August, Ice Edge announced that it would focus its efforts instead on getting an ECHL
ECHL
The ECHL is a mid-level professional ice hockey league based in Princeton, New Jersey with teams scattered across the United States...
team in Thunder Bay, Ontario
Thunder Bay, Ontario
Thunder Bay is a city in and the seat of Thunder Bay District, Ontario, Canada. It is the most populous municipality in Northwestern Ontario, and the second most populous in Northern Ontario after Greater Sudbury...
.
Although the team had a successful season
2009–10 Phoenix Coyotes season
The 2009–10 Phoenix Coyotes season was the Coyotes' 31st season in the National Hockey League , 38th season over all, and 14th season in Phoenix. After numerous seasons of losing money, the team was placed into bankruptcy and taken over by the NHL...
, reaching 100 points for the first time to finish fourth in their conference, and earning their first playoff berth since 2001-2002, attendance remained poor. The NHL shook up the Coyotes' front office in July 2010. Moss who had been president and chief operating officer of the club since 2002 was let go, being replaced by Chief financial officer Mike Nealy who was promoted to chief operating officer. This was followed by the departure of vice-president Jeff Holbrook, who would be succeeded by former Phoenix Suns
Phoenix Suns
The Phoenix Suns are a professional basketball team based in Phoenix, Arizona. They are members of the Pacific Division of the Western Conference in the National Basketball Association and the only team in their division not to be based in California. Their home arena since 1992 has been the US...
executive Jim Brewer in August 2010.
Failed sale to Matthew Hulsizer
In September 2010, it was reported that Matthew Hulsizer, the Chicago chief executive of options-trading firm PEAK6 Investments had reached a preliminary lease arrangement with the City of Glendale. His proposal would see Ice Edge have a minority interest in the team. Glendale Council received a briefing on the proposal on September 7, 2010. City council was hopeful of reaching a deal with Hulsizer before September 15, but according to Councilman Manny Martinez, the negotiations would not be completed and voted on by then. The date is the first date that the NHL can start billing Glendale for Coyotes' costs from the $25 million set aside by Glendale.It was reported on September 17 that Hulsizer had deposited $25 million into the Glendale escrow account, as a sign of "good faith". Glendale declined to name Hulsizer by name, for confidentiality reasons. In its statement, Glendale stated "is moving forward with the prospective buyer for the purchase of the Phoenix Coyotes, subject to the negotiations and approval of the prospective buyer and the purchase price of the NHL." The statement was later clarified that Hulsizer put $25 million into escrow as a sign of good faith and that his funds were not to be used to pay the NHL's bills running the Coyotes.
On October 9, 2010, the Arizona Republic reported that negotiations between Hulsizer and Glendale were at an impasse. Hulsizer was reportedly pursuing a purchase of the team with the NHL first, without negotiating a lease to play in Glendale. Hulsizer has to negotiate a price that may or may not include paying for this season's NHL expenses. According to Glendale mayor Elaine Scruggs
Elaine Scruggs
Elaine Scruggs , mayor of Glendale, Arizona, relocated from Pasadena, California with her husband Larry in 1971. Scruggs has been serving as mayor of Glendale since 1993....
, "Glendale has done everything we can to negotiate with the latest buyer. It is truly out of our hands right now.".
On October 15, the Toronto Globe and Mail newspaper reported that purchase negotiations between Hulsizer and the NHL had reached an impasse. According to the report, Hulsizer has demanded a discount on the $165 million asking price of the NHL, while the NHL is unwilling to lose money in the transaction, and that the NHL may increase the asking price if it has invested further money into the team. The Globe reports that Hulsizer's escrow account deposit came from an investment bank, and not from Hulsizer himself. According to an unnamed NHL governor, the NHL governors do not want the franchise to return to Winnipeg but will approve the move if the deal is not completed by December 31. That same day, Glendale released a statement on its web site announcing that the city had reached an agreement in principle on a lease with the Hulsizer group. Daly told TSN that "the next step will be proceeding to the NHL ownership approval process. We are hopeful this represents the beginning of the end of this long process."
Hulsizer attended the October 16, 2010 Coyotes' home game versus the Detroit Red Wings
Detroit Red Wings
The Detroit Red Wings are a professional ice hockey team based in Detroit, Michigan. They are members of the Central Division of the Western Conference of the National Hockey League , and are one of the Original Six teams of the NHL, along with the Toronto Maple Leafs, Montreal Canadiens, New York...
and discussed the team with general manager Don Maloney
Don Maloney
Donald Michael "Slip" Maloney is a former NHL player, and is currently the general manager of the Phoenix Coyotes. He played for the New York Rangers for parts of eleven seasons. His best season came in the 1982–83 season, in which he tallied 29 goals and 69 points in 78 games...
and coach Dave Tippett
Dave Tippett
David G. Tippett is a National Hockey League head coach, currently of the Phoenix Coyotes. He is the 6th person to be the head coach of the Coyotes, and the 21st coach in the Phoenix Coyotes/Winnipeg Jets franchise. He is the former head coach of the Dallas Stars...
. He spoke publicly for the first time about the purchase stating that he had verbally agreed with the NHL on the purchase price: "Buying a hockey team is like buying a piece of art. You don't do it to make a lot of money. You do it because you love it." The agreement with Glendale is also an oral agreement and the agreement was to be discussed at Glendale council on October 19 behind closed doors.
Hulsizer attended a November 10, 2010 game of the Coyotes against the Blackhawks in Chicago. Although poor attendance at some games at Jobing.Com Arena had led to negative speculation, Hulsizer confirmed that the "process is moving forward" and that "something will be announced imminently." Some media speculation had stated that an escape clause with Glendale was a sticking point in negotiations. Hulsizer spoke to Fox Sports Arizona and he stated that the City of Glendale "has been excellent to work with." By November 23, 2010, the lease between Glendale and Hulsizer had not been discussed publicly by Glendale city council.
On December 6, 2010, Hulsizer met with members of the NHL's executive committee at the NHL owner's winter meetings. The executive committee approved of Hulsizer as a potential owner. At the same time, the NHL again came to an agreement with TNSE for a possible purchase and move of the team to Winnipeg should the eventuality come to pass.
Under the announced agreement, the city of Glendale intended to buy back the parking rights to the arena from the Coyotes at a price of $100 million, and manage the arena at an annual cost of $17 million for the next five and a half years, (totalling $97 million) at which point Hulsizer has the option to buy the arena for $140 million. Glendale hopes to host the 2013 NHL All-Star Game. The $100 million would be raised by a bond issue by the city. The lease would run until 2033, at which point Hulsizer could purchase the arena for $40 million. The Coyotes would make payments totalling $6 million annually to the city. Also under the agreement, the Coyotes would apply to the NHL to rename the team the "Arizona Coyotes".
Glendale council approved the lease agreement on December 14, 2010 by a vote of 5–2, with Bettman and Daly in attendance. The council was advised that the NHL would not allow the team to leave Phoenix for at least seven years. A controversial section of the agreement, allowing Hulsizer to vacate the agreement if the city defaults or if a lawsuit invalidates any or part of the deal was amended to require Hulsizer to give Glendale 120 days to negotiate. The possibility of a law suit was raised by the Goldwater Institute
Goldwater Institute
The Goldwater Institute is a Phoenix, Arizona-based conservative public policy research organization established in 1988. The president is Darcy A. Olsen. The Goldwater Institute advances public policies with emphasis on lower taxes, limited government spending, school choice, and a reduction in...
, over concerns that the deal is an unconstitutional subsidy and the $97 million for management fees is "grossly disproportionate to the fair market value" and potentially violates a "gift clause" in state law. The deal with Hulsizer is more expensive for Glendale than proposed agreements with past owner Jerry Moyes and more expensive than proposed agreements with Jerry Reinsdorf and Ice Edge Holdings.
The NHL deadline of December 31, 2010 came and passed. Daly indicated in comments to the media that the NHL intends to complete the sale to Hulsizer, and has not started any relocation process. On January 20, 2011, the Arizona Republic reported in an editorial, that Glendale was modifying the lease agreement to appease concerns of the Goldwater Institute, which had threatened to oppose the sale in court. The Goldwater Institute has not decided whether to sue Glendale or not. On January 26, 2011, Bob McCown, a Canadian nationally-syndicated radio talk show host, reported that Glendale's bond sale had failed and that the city was going to hire a securities firm to sell the securities. The report was denied by Daly as "totally false." In February 2011, the City listed bonds for sale for a total amount of $116 million. The Moody's Investor Service, upon review of the bond issue and Glendale, downgraded the city of Glendale's debt rating.
As of April 2011, the bonds still had not sold. This was attributed to the possible lawsuit of the Goldwater Institute. Media has reported that the NHL will attempt to arrange alternate financing to keep the team in Phoenix. According to Daly: “We believe Goldwater has become irrelevant to the process. We do not expect Goldwater to change its position. We will have to move on without them.” The Arizona Republic reported that the NHL sent Glendale a bill of $25 million to cover the Coyotes' $36.6 million in losses for the 2010–11 season. The bill was forwarded under the agreement that Glendale would put aside $25 million to cover the season's losses while the search for a new owner would continue.
On June 27, 2011, the Phoenix Business Journal reported that Hulsizer had ended his bid for the Coyotes. According to the report, his group of investors did not want to go through another several months of negotiating with Glendale. According to the reports, Jerry Reinsdorf
Jerry Reinsdorf
Jerry M. Reinsdorf is a CPA, lawyer and an owner of the MLB's Chicago White Sox and the NBA's Chicago Bulls. He started his professional life as a tax attorney with the Internal Revenue Service. He has been the head of the White Sox and Bulls for over 20 years.He made his initial fortune in real...
had re-emerged as a potential buyer for the club.
Goldwater Institute versus City of Glendale
In June 2009, the Goldwater InstituteGoldwater Institute
The Goldwater Institute is a Phoenix, Arizona-based conservative public policy research organization established in 1988. The president is Darcy A. Olsen. The Goldwater Institute advances public policies with emphasis on lower taxes, limited government spending, school choice, and a reduction in...
made a public records request to the City of Glendale for any documents pertaining to negotiations with potential new owners of the Coyotes. The City declined, and the Goldwater Institute filed a complaint with the Maricopa County Superior Court. In July 2009, the court ordered that Glendale must make all records of negotiations public. In August 2009, Goldwater filed an 'conditional objection' with the bankruptcy court over possible $15 to $23 million annual subsides to Jerry Reinsdorf to inform the court that a potential sale to Reinsdorf under those terms would violate Arizona state law. Glendale released some documents to Goldwater, but not all, and Goldwater applied to the court in January 2010 to find Glendale in contempt of court. In response, Glendale filed a request for a protective order with the court and offered Goldwater access to view documents in-camera.
When the proposed sale to Hulsizer and its lease agreement became public, Glendale filed studies to justify the purchase of parking rights at the Arena property and shared those with Goldwater. Goldwater wrote a letter to Glendale informing it that proposed lease agreement appears to violate Arizona's gift clause. In February 2011, the Goldwater Institute, in a public statement, called for Glendale to reconsider the proposed sale of bonds to finance the Hulsizer purchase, stating "the financial risk appears enormous and the transaction appears to violate the Arizona Constitution." The Institute had also found that one of the firms which had conducted the parking revenues analysis was being sued for "intentionally and fraudulently inflated event and attendance projections to inflate projected revenue and achieve an investment-grade rating" after a similar parking study in another city's issuance of bonds.
After the bonds were listed for sale with bond rating agencies, the Goldwater Institute wrote letters to those agencies, formally advising them of their belief that the bond sale violates Arizona state law, and that the Institute may file a lawsuit. The bonds did not sell immediately and on March 3, 2011 Glendale held a press conference on the lack of progress on the bond sale and to make a plea for public support. Mayor Scruggs asserted that "the Goldwater Institute is obstructing the city's ability to sell the necessary bonds". Media reports circulated that the City of Glendale was preparing to file a lawsuit against the Goldwater Institute alleging tortious interference
Tortious interference
Tortious interference, also known as intentional interference with contractual relations, in the common law of tort, occurs when a person intentionally damages the plaintiff's contractual or other business relationships...
with the bond sale and seeking up to $500 million in damages should the team leave Glendale. Goldwater president Darcy A. Olsen
Darcy A. Olsen
Darcy A. Olsen is the president and chief executive officer of the Goldwater Institute. Phoenix-based media have cited Olsen’s leadership, which has resulted in major policy reforms including private school scholarships for foster children, more transparency in government and legal cases...
replied that any such action "would be frivolous and unsuccessful." Glendale Deputy City Manager for Communications Julie Frisoni confirmed only that a lawsuit was an option, but that it intended to work with Goldwater, and had contacted Goldwater board members, stating "the situation as it exists cannot continue without a resolution."
On March 8, Bettman and Daly travelled to Glendale to meet with city officials privately. The NHL attempted to arrange a private meeting with Goldwater, but Goldwater insisted on a public meeting. Bettman held a press conference, making it clear that the NHL was still committed to the sale, but that "I will not say today when the end is and I will not set a deadline, but at some point, we may have no choice but to begin pursuing our other alternatives." On March 15, 2011 the Goldwater Institute announced it will file a legal challenge against Glendale, on the grounds that the deal between Glendale and Hulsizer would violate the Arizona Constitution. On March 18, 2011, Daly took part in a Phoenix radio talk show to discuss the situation. He noted that Goldwater had been "effective" in stopping sales of the bonds, but that the NHL was working to find bond buyers "who are interested regardless of whatever litigation risk there might be from Goldwater."
On March 20, Hulsizer announced in an interview that he would agree to guarantee any short-fall in parking revenues up to $75 million. To ESPN, Hulsizer wrote that he had transmitted that to the Goldwater Institute in a letter. "The situation was stuck and we need to move forward. While we still believe the original deal is legal we wanted to make things simple." According to ESPN, the concession followed discussions between Arizona senator John McCain
John McCain
John Sidney McCain III is the senior United States Senator from Arizona. He was the Republican nominee for president in the 2008 United States election....
, former Arizona state attorney general Grant Woods
Grant Woods
Grant Woods served as attorney general of Arizona from 1991 until 1999. A Republican, he was first elected in 1990 and was reelected in 1994. He was selected by his fellow Attorneys General as the nation’s top Attorney General in 1995. He chaired the Civil Rights and Supreme Court committees for...
, and officials with Goldwater. The following day, the Goldwater's Olsen announced that the Hulsizer guarantee did not change the Institute's view that the deal was still illegal under Arizona law. In an interview on radio, Olsen explained the Goldwater position. Hulsizer did not guarantee the bonds up to $75 million, but intended to back parking revenues up to $75 million over the 30-year lease. At $2.5 million per year, Olsen estimated that would be the parking revenues at the Arena from concerts alone. The taxpayers of Glendale were not being offered any guarantee on the bonds. Glendale met in a public forum with Goldwater to attempt to end the impasse, but both sides did not change their positions on the possible deal.
Season two after bankruptcy
After paying the $25 million for the 2010–11 season to the NHL, an agreement was reached between the NHL and Glendale for Glendale to pay another $25 million to keep the Coyotes in Glendale for the 2011–12 season. It was announced on May 6, 2011, two years after Jerry Moyes put the Coyotes into bankruptcy. Glendale Council in a vote of 5–2, approved the setting aside of another $25 million at a council meeting on May 10, 2011. Bill Daly spoke to the Council to state that the NHL remains committed to keeping the team in Arizona, whether it is with Hulsizer or another owner.The media speculated that Hulsizer had abandoned his effort to purchase the Coyotes and pursue the St. Louis Blues, a claim denied by his investment group. The Ice Edge group, which had at one time sought to purchase the team, then became a minority investor with Hulsizer's syndicate, informed Hulsizer that it was no longer interested in investing in the purchase of the Coyotes.
The backup plan to sell the team to True North Sports and return it to Winnipeg if an agreement could not be reached was rendered moot in May 2011, when the group instead announced a deal to purchase the Atlanta Thrashers
Atlanta Thrashers
The Atlanta Thrashers were a professional ice hockey team based in Atlanta, Georgia, United States. Atlanta was granted a franchise in the National Hockey League on June 25, 1997, and became the league's 28th franchise when it began play in the 1999–2000 NHL season...
and move that team to Winnipeg instead.
In June 2011, the Westgate City Center
Westgate City Center
Westgate City Center is the name of a mixed-use development located in Glendale, Arizona. Westgate is described as a super-regional destination for shopping, entertainment, commercial office and luxury residential...
development adjacent to the Jobing.Com Arena received notices of foreclosure. Part of the reason given for the foreclosure was the uncertainty around the Coyotes. The Center will remain open. The Steve Ellman companies will attempt to reschedule debt on the Center or part or all of the Center will be sold to settle debt to lenders. Ellman acquired Westgate in 2006 by swapping his ownership in the Coyotes for Jerry Moyes' ownership share of Westgate. Ellman had moved the Coyotes to Glendale in 2005 after failing to get an arena built at the former Los Arcos Mall in Scottsdale. Two auctions are scheduled for foreclosed Westgate City Center properties. One auction, for September 19, 2011, is for properties securing a $97.5 million dollar loan from iStar Financial. The auction failed to sell at a reserve price of $40 million, and the 33 acres (13.4 ha) property has become the property of iStar. A second auction is scheduled for November 3, 2011 for properties securing a $202 million dollar loan from Credit Suisse.
The Phoenix Business Journal reported on June 27, that Glendale and the NHL were negotiating with Hulsizer, Reinsdorf and an un-named group. Later that day, it was reported by the Journal that Hulsizer had dropped out of the bidding.
On August 19, the Phoenix Business Journal reported that former San Jose Sharks
San Jose Sharks
The San Jose Sharks are a professional ice hockey team based in San Jose, California, United States. They are members of the Pacific Division of the Western Conference of the National Hockey League...
CEO Greg Jamison was leading a group to purchase the Coyotes and keep the team in Arizona. The group plans to make a payment for exclusive negotiating rights. Jamison was president and CEO of the Sharks and its parent company, Silicon Valley Sports and Entertainment, from 1996 until September 2010.
On September 22, the Arizona Republic reported that Glendale Hockey LLC, a group which include Jerry Reinsdorf, Arizona lawyer John Kaites and Tony Tavares, has entered into negotiations to purchase the Coyotes. David Leibowitz, the group's spokesman, confirmed that Kaites is the managing partner of the group. It represents the second time that Kaites and Reinsdorf have entered into talks to purchase the team. The Jamison group is apparently still interested in purchasing the Coyotes.
See also
- Wayne GretzkyWayne GretzkyWayne Douglas Gretzky, CC is a Canadian former professional ice hockey player and former head coach. Nicknamed "The Great One", he is generally regarded as the best player in the history of the National Hockey League , and has been called "the greatest hockey player ever" by many sportswriters,...
- 2008–09 NHL season2008–09 NHL seasonThe 2008–09 NHL season was the 92nd season of operation of the National Hockey League . It was the first season since prior to the 2004–05 lockout in which every team played each other at least once during the season, following three seasons where teams only played against two divisions in the...
- 2009–10 NHL season2009–10 NHL seasonThe 2009–10 NHL season was the 93rd season of operation of the National Hockey League , and the 100th season since the founding of the predecessor National Hockey Association . It ran from October 1, 2009, including four games in Europe on October 2 and 3—until April 11, 2010, with the 2010...
- 2009–10 Phoenix Coyotes season2009–10 Phoenix Coyotes seasonThe 2009–10 Phoenix Coyotes season was the Coyotes' 31st season in the National Hockey League , 38th season over all, and 14th season in Phoenix. After numerous seasons of losing money, the team was placed into bankruptcy and taken over by the NHL...
- Potential National Hockey League expansionPotential National Hockey League expansionThe National Hockey League has undergone several rounds of expansion and other organizational changes during its nearly 100-year history to reach its current number of thirty teams: twenty-three in the United States, and seven in Canada...
- Winnipeg Jets