In a move that could keep the team in the Valley of Sun for the 2009-2010 season, U.S Bankruptcy Judge Redfield Baum ordered Phoenix Coyotes owner Jerry Moyes and the NHL into mediation in an attempt to work out their differences before a potential court case.
In a move that could keep the team in the Valley of Sun for the 2009-2010 season, U.S Bankruptcy Judge Redfield Baum ordered Phoenix Coyotes owner Jerry Moyes and the NHL into mediation in an attempt to work out their differences before a potential court case.
Not a surprise; litigants are frequently shuttled off to mediation in order to save all sides time and money, especially if time is of the essence as well. Here, time is definitely of the essence, but mediation may not even be fast enough for potential owner Jim Balsillie: the NHL says the move to mediation means the Coyotes will likely play in Glendale next season.
The first issue for the bankruptcy court is who actually controls the Coyotes and therefore who can sell the team. Moyes says that he does, as the official franchise owner. The NHL holds that it controls the franchise via a proxy signed by Moyes when the NHL invested money in the team last November. Moyes’ position is that the proxy gives the NHL voting rights like any other investor, but not control of the team. Moyes’ reps say the bankruptcy court seemed to affirm their position, thus the order to move things to mediation. Not a surprise: it would be odd for any proxy to give ownership of a franchise under these circumstances.
The two sides will meet immediately and report back to the bankruptcy court next week. If they reach an agreement — as we suspect they might, given the rather expansive powers the NHL is ascribing to a run-of-the-mill proxy — the next steps will be a decision whether the team can actually move to Canada. That won’t happen until June 22.
The timing presents a huge problem for Moyes and Balsillie, who actually lose by winning. Balsillie wanted to finalize a franchise purchase by June 26, when the NHL draft begins and a perfect chance to start promoting his new Hamilton franchise. With arguments scheduled for June 22, it’s highly unlikely the court will hand down a decision in time for Balsillie to close the deal; court observers don’t even expect a decision until July.
So even if Moyes is successful, the NHL has won. The whole move toward challenging the team’s bankruptcy status, we’re told, was to stall things in order to facilitate what the NHL deems a more orderly sale of the franchise. By essentially keeping the franchise in Phoenix for another season, the NHL has time to provide a bidding war for a potential buyer as well as play some cities (Kansas City, Winnipeg, Seattle) against one another. It also preserves southern Ontario — either Hamilton or suburban Toronto — as a potential goldmine for an expansion franchise, rather than destroying its value as home to an existing franchise. Plus, the NHL is asserting any franchise shift needs league approval: a rather iffy legal proposition given the successful court challenges against such controls in other American professional league.
Of course, even if the Coyotes stay in Phoenix, it will be a rough ride. Companies operating under bankruptcy protection essentially give control to a trustee, who oversees all spending. Paying bills takes longer, and the party has the ability to walk away from many contracts without payment. Large companies are extremely wary of extending credit to a corporation in bankruptcy; small companies do so at extreme risk.
RELATED STORIES: Bettman: Winnipeg better market than Hamilton; Will Glendale arena investment pay off, even if Coyotes leave?; NHL shifts attention back to Copps Coliseum; Coyotes seek shelter in bankruptcy court; NHL to oppose; Who’s in control of Coyotes? Glendale says NHL; team denies; Coyotes still millions in arrears on arena payments; Could Phoenix Coyotes end up in Toronto?; Financial woes continue for Coyotes; Coyotes now current on arena lease payments
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