Phoenix CXXXVII - and the band plays on

[Ciao]

And doing nothign isn't the answer either. If the NHL wants to deal with the franchise to where its no longer a problem then they need to pull the plug on it and take what ever Fertitta is willing to offer. Waiting and waiting someone to show up buy the franchise then pay 100% of the cost of the arena where there is so far no such person willing isn't solution either.

Sometimes nothing is a pretty good hand.

The Coyotes have been playing with a nothing hand for ten years, and they're still alive and in place in Glendale. I wouldn't count them out any time soon.

 

[Braun]

Sometimes nothing is a pretty good hand.

The Coyotes have been playing with a nothing hand for ten years, and they're still alive and in place in Glendale. I wouldn't count them out any time soon.

Exactly. When the commissioner is willing to do anything to save your ass it buys a lot of extra time other teams wouldn’t get.

 

[BattleBorn]

Sorry to take this the land of "We don't know for sure, but......"
Barroway has been connected to the ownership for about 4 years. If, in that time, the average losses, including interest payments and neglecting the Vegas and Seattle expansions, has only been 10M/yr, then I find it difficult to believe he can be out of money.

So, while I respect BB and his analysis, I disagree on that count, and on the count that I can't figure out how it's possible that a franchise went from admitting a 20M/yr loss (year 1 of IA) to only having 10M in losses, when attendance hasn't changed, the salary cap floor has gone up, and the subsidy from Glendale has been lost.

In any case, it sure is the easiest thing to do to stay in Glendale indefinitely and try to ride it out, hoping for better days.

Cheers everyone... It's snowing in Chicago....

BB, two financial facts argue against the pro forma you have suggested. 1) The accumulated debt is very costly which adds another layer of expense most other franchises are not having to pay. 2) Salary expense has risen steadily over the years such that even at the bottom end it is significantly more than the years the team was losing $30MM. Seat revenue has remained stagnant and I don`t believe the team has been the beneficiary of an improving ad revenue stream. Without expansion monies and RS, this team would have been moved long ago. I too am very skeptical of the $10MM per year loss figure, something triple that is more likely. Of course only a portion of that is AB`s responsibility, his brother in crime(GB) has been more than happy to front the differences and tack on the amount owing to the already outsized debt load.

Forbes has a portion of their valuation that takes debt into account when figuring each team's debt to value. Are we operating under the assumption that Forbes can collect info on the team's debt, calculate the debt to their determined team value, and then ignore the servicing of the debt when calculating their operating income? While I'll grant that they may not have the actual costs of the debt exact, to assume that they don't include it while figuring annual operating income doesn't seem to connect.

 

[MNNumbers]

I would assume that the expansion payment is included. That makes 16M worth of difference...

 

[gstommylee]

I would assume that the expansion payment is included. That makes 16M worth of difference...

That 21m will only push things off for a year. In the long term it won't do them much.

 

[Ciao]

That 21m will only push things off for a year. In the long term it won't do them much.

How long is "the long term"?

Ten years ago I wouldn't have believed that any of the band-aids that the Coyotes were grabbing for would have made and long-term difference either, but here they are.

Sometimes all you need is to be able to keep taking your next breaths, and eventually things might work out.

I think people, myself included, have long underestimated the Arizona Coyotes as a business enteprise. Predict their demise if you will. I'll believe it when I see it.

 

[Acesolid]

Say what you want. These loses are only sustainable as long as we are in a booming economy, with a bull market, with easy credit, and with the rest of the NHL healthy and the Coyotes getting the full focus of the NHL's help. Also, the expansion money ×2 helps a lot. As does the exploding global sport franchise values.

But what happens if there is a bear market and a recession? What happens when the expansion gravy train stops? What happens when the bear market takes hold and the flow of easy and cheap credit stops? What happens when the NHL has 5-6 fires to put out instead of 1? What happens when that recession causes the "sports team value bubble" to stop expanding... or even contract?

The answer is that you cant lose tens of millions of dollars every year forever. It's the law of financial gravity.

History shows that it's possible in a bull market, when creditors and investors see the glass as "half-full"... but when they see it as "half-empty"... well it's a whole other ball game.

May I remind everyone that the reason that Atlanta relocated was that during the previous recession, the NHL found itself with a couple of fires at once. And it could only save the Yotes.

So, sure, the Coyotes are safe now.... but when someday the economy goes in a periodic recession... well it wont be the case.

 

[PredsHead]

Forbes has a portion of their valuation that takes debt into account when figuring each team's debt to value. Are we operating under the assumption that Forbes can collect info on the team's debt, calculate the debt to their determined team value, and then ignore the servicing of the debt when calculating their operating income? While I'll grant that they may not have the actual costs of the debt exact, to assume that they don't include it while figuring annual operating income doesn't seem to connect.

Honestly I am not sure that is why I asked the question, on their site it says this:

"Revenues and operating income are for the 2017-18 season, include postseason and applicable non-NHL arena revenue, and are net of revenue sharing and arena debt service." and also "‡ Earnings before interest, taxes, depreciation and amortization."

That leads me to believe that their operating income number does not cover any non-arena debt service payments, but I could be completely wrong.

 

[Tom ServoMST3K]

Say what you want. These loses are only sustainable as long as we are in a booming economy, with a bull market, with easy credit, and with the rest of the NHL healthy and the Coyotes getting the full focus of the NHL's help. Also, the expansion money ×2 helps a lot. As does the exploding global sport franchise values.

But what happens if there is a bear market and a recession? What happens when the expansion gravy train stops? What happens when the bear market takes hold and the flow of easy and cheap credit stops? What happens when the NHL has 5-6 fires to put out instead of 1? What happens when that recession causes the "sports team value bubble" to stop expanding... or even contract?

The answer is that you cant lose tens of millions of dollars every year forever. It's the law of financial gravity.

History shows that it's possible in a bull market, when creditors and investors see the glass as "half-full"... but when they see it as "half-empty"... well it's a whole other ball game.

May I remind everyone that the reason that Atlanta relocated was that during the previous recession, the NHL found itself with a couple of fires at once. And it could only save the Yotes.

So, sure, the Coyotes are safe now.... but when someday the economy goes in a periodic recession... well it wont be the case.

To add onto This, I think mostly everyone here thinks that team values are completely unsustainable right now.

If that bubble bursts, a lot of teams will be in trouble.

In 2011 an NHL franchise was sold for 110 million.

 

[Ciao]

Who can't lose tens of millions of dollars every year forever? Some people can and do so on pet projects.

Somebody is paying the bills for the Arizona Coyotes, and I'm not sure we really know who that is; nor what that persons or organizations resources, goals and strategy are with respect to the Coyotes.

The Coyotes have defied gravity long enough that it makes me think there is someone or something keeping them up in the air, and I'm not at all certain that their benefactor is ready to let them down to the ground any time soon, if ever.

I'm certainly not holding my breath waiting for the Coyotes to crash, and I wouldn't recommend anyone else do so either. It might never happen.

 

[Fenway]

It's been no secret, that Quebecor got gun shy. Last reports were they were looking for investors in regards to an NHL team. I don't think anyone in Quebec is currently on the radar to pull the trigger on a $650 million USD franchise

I sense that investors in Quebec might be more willing to invest in a MLB team returning to Montreal.

 

[Centrum Hockey]

Tommy,
No, but I KNOW that Houston won't pay that for a relocated team.


I think that Quebec will pay more than Houston.

But, note that I did NOT say I think that will happen. What I said was that, in the event the losses in the Phoenix market become untenable, AND Fertitta won't pay enough to satisfy the BOG, then Quebec becomes the next best financial solution...In other words, financially, it's better than losing lots in Phoenix, and it's better than giving Houston an even deeper cut.

I happen to think that
Quebec will pay about 500M USD
Fertitta will pay about 350M USD (this is a bigger guess)

But what will happen is anyone's guess, because we don't know how the BOG would order their priorities. So far, we know that continuing to hope for an arena solution in Phoenix market is the top priority.

Would the NHL ever pull off an ownership swap with two existing team's where one team relocates to Quebec or Houston and a existing team receives a new owner

 

[gstommylee]

Would the NHL ever pull off an ownership swap with two existing team's where one team relocates to Quebec or Houston and a existing team receives a new owner

That will never happen. Quebec isn't getting a team any time soon unless its a eastern conference team that as to move.

 

[aqib]

Forbes has a portion of their valuation that takes debt into account when figuring each team's debt to value. Are we operating under the assumption that Forbes can collect info on the team's debt, calculate the debt to their determined team value, and then ignore the servicing of the debt when calculating their operating income? While I'll grant that they may not have the actual costs of the debt exact, to assume that they don't include it while figuring annual operating income doesn't seem to connect.

Everytime people site Forbes, they are not only operating under the assumption that Forbes can collect info on the teams debt, they are alsy assuming that Forbes can collect info on every marketing deal, sponosrship arrangement, etc.

 

[BattleBorn]

To add onto This, I think mostly everyone here thinks that team values are completely unsustainable right now.

If that bubble bursts, a lot of teams will be in trouble.

In 2011 an NHL franchise was sold for 110 million.

The bubble isn’t bursting. Even if it does, not only is he in before the bubble, but it’s probably worth the risk assuming you can get out soon enough or hedge your bets by bringing in other folks. Such as AB.

Who can't lose tens of millions of dollars every year forever? Some people can and do so on pet projects.

Somebody is paying the bills for the Arizona Coyotes, and I'm not sure we really know who that is; nor what that persons or organizations resources, goals and strategy are with respect to the Coyotes.

The Coyotes have defied gravity long enough that it makes me think there is someone or something keeping them up in the air, and I'm not at all certain that their benefactor is ready to let them down to the ground any time soon, if ever.

I'm certainly not holding my breath waiting for the Coyotes to crash, and I wouldn't recommend anyone else do so either. It might never happen.

AB is, because he’s got so much upside in this deal that most of us can’t even understand it. We’re living in a world where the St. Louis Blues sold for sub $200MM prices less than a decade ago.

You’ve got a house that costs you $50,000/year that you can take out on credit, but the value goes up $150K a year, do you take the risk?

The answer should be yes.

Everytime people site Forbes, they are not only operating under the assumption that Forbes can collect info on the teams debt, they are alsy assuming that Forbes can collect info on every marketing deal, sponosrship arrangement, etc.

They can’t, but provide a better source and I’m sure we’ll use it. As it is, we’ll use the Bad Forbes figures from years ago as a baseline and figure up or down from there based on our personal feelings of the situation.

At least Forbes is neutral. They don’t care if the Coyotes move or not. That’s why I like them, outside of their clout in the non hockey world

 

[mesamonster]

The bubble isn’t bursting. Even if it does, not only is he in before the bubble, but it’s probably worth the risk assuming you can get out soon enough or hedge your bets by bringing in other folks. Such as AB.

AB is, because he’s got so much upside in this deal that most of us can’t even understand it. We’re living in a world where the St. Louis Blues sold for sub $200MM prices less than a decade ago.

You’ve got a house that costs you $50,000/year that you can take out on credit, but the value goes up $150K a year, do you take the risk?

The answer should be yes.


They can’t, but provide a better source and I’m sure we’ll use it. As it is, we’ll use the Bad Forbes figures from years ago as a baseline and figure up or down from there based on our personal feelings of the situation.

At least Forbes is neutral. They don’t care if the Coyotes move or not. That’s why I like them, outside of their clout in the non hockey world

So according to your theory, AB has no downside? Do you actually believe that if no partner or investor materializes and the Coyotes franchise is forced to continue in its present state for the forseeable future that AB will still arise from the ashes with a tidy return? I think we can all agree that the bills are, and have been for a few years been paid for by the league. Do you actually think that GB, at the end of the day, really cares about AB coming out whole? I don`t, I think GB has told AB that the sands have shifted and AB will now be a massive net loser! The BOG couldn`t care less about AB. In their world he was simply a placeholder, who as long as the franchise values continued to rise they would find a way out for him. Guess what, the league has overstepped their domain and has now priced their franchises at levels well above their actual value. The Coyotes? What are they really worth? Well based upon the absence of potential buyers, they are only worth what some investor or investors is willing to pay. Today, that value is NOTHING! Oh sure, perhaps a value buyer might float a lowball offer, but beyond that, the value of this team has nothing to do with the present asking price of an expansion franchise. The Coyotes value, void of some behind the scenes league price manipulation is only what the next guy is willing too pay plus the debt. That value to today is a big fat zero! SO BB I am not sure where you are coming from with your insistence that somehow this moribund franchise is somehow worth more than its debt?

 

[BattleBorn]

So according to your theory, AB has no downside? Do you actually believe that if no partner or investor materializes and the Coyotes franchise is forced to continue in its present state for the forseeable future that AB will still arise from the ashes with a tidy return? I think we can all agree that the bills are, and have been for a few years been paid for by the league. Do you actually think that GB, at the end of the day, really cares about AB coming out whole? I don`t, I think GB has told AB that the sands have shifted and AB will now be a massive net loser! The BOG couldn`t care less about AB. In their world he was simply a placeholder, who as long as the franchise values continued to rise they would find a way out for him. Guess what, the league has overstepped their domain and has now priced their franchises at levels well above their actual value. The Coyotes? What are they really worth? Well based upon the absence of potential buyers, they are only worth what some investor or investors is willing to pay. Today, that value is NOTHING! Oh sure, perhaps a value buyer might float a lowball offer, but beyond that, the value of this team has nothing to do with the present asking price of an expansion franchise. The Coyotes value, void of some behind the scenes league price manipulation is only what the next guy is willing too pay plus the debt. That value to today is a big fat zero! SO BB I am not sure where you are coming from with your insistence that somehow this moribund franchise is somehow worth more than its debt?

It’s worth more than its debt, and you’re on the extreme of what the Arizona Coyotes situation is; yes...I agree.

You’re the Alex Jones of the Arizona Megathread, along with a few others. While I don’t agree that you should be silenced, your opinions should be greatly silenced since there’s no evidence to most of your claims. Not the least of which will always be the expansion of the league twice since the supposed doomsday at the “hidden” figures those of your ilk suggest.

 

[Acesolid]

The bubble isn’t bursting

Jeez, you sound just like an investor in "Countrywide Mortgages" in early 2006!

Bubbles pop, it's what they do. The fact is that sports teams aren't making 10 times as much money as thet did two decades ago... and yet they are somehow selling for ten times as much!

The expansion fee for the Ottawa Senators was 50 million $. And almost everyone at the time agreed they OVERPAID! The Wild paid 80 million $, and it was an outrageous sum according to many.

Not long after Gillette paid 180 million $ for the MONTRÉAL CANADIENS in 2001. A huge sum at the time. And now according to Forbes they are worth 1,3 BILLIONS according to Forbes. And it'd probably sell for more on the open market!

That's a ridiculous, nonsensical increase in value.

The Canadiens aren't making the profits that justify anything like this silly valuation.

Sports teams are a speculative bubble right now.

Let me take you on my time machine back to before the Housing Crisis of 2007caused by the US housing market bubble popping:



I'm not saying sport team values are going to crash. I'm just saying that there will be a major "correction" of sports team valuations.

When? Well, it'll be a gradual process at first, as more people "cut the cable cord", and as a result as the inflated TV contracts expire / as the regional sports networks grossly overpaying for sports fall appart... the increase in sports team values will seriously slow down.

And next recession, when a bunch of owners decide to sell at the same time because their "main" business is in trouble and their sports "side-gig" is expandable in their opinion... and they cant AT ALL get the massive sum of money their teams are somehow supposed to be worth.... well you'll see a dramatic correction in team valuations. And you'll see teams sell for their real values... way, way below the inflated current valuations.

Now, maybe I'm wrong. Maybe the Montréal Canadiens own secret money-printing machines under the Centre Bell that print 20 dollar American bills 24/7. Enough money for the team to make the profit justifying a 1.3 BILLION $ valuation.... but I doubt it.

You’re the Alex Jones of the Arizona Megathread, along with a few others. While I don’t agree that you should be silenced, your opinions should be greatly silenced since there’s no evidence to most of your claims. Not the least of which will always be the expansion of the league twice since the supposed doomsday at the “hidden” figures those of your ilk suggest.

The answer isn't "hidden", it's clear as day and out in the open that the Coyotes are borrowing like mad on the NHL line of credit. And like I said, that's fine in a Bull market with quickly increasing team values.

Here's the logic:
"Who cares if I lose 20 million $! Forbes said my team is worth 70 million dollars more this year then last year! And I can probably sell it for a lot more!"

That's what is happening. It's the housing bubble all over again. Team owners are sure they can flip their teams for a huge profit any day they want.

And right now they can. And they might still for 1-2-3-4, or maybe even 5 years.

But eventually a recession will happen. And the party will end.

Call me "Chicken Little" if you want. But this bubble ain't sustainable. And the fact it hasn't popped yet doesn't prove otherwise.

 

[Bookie21]

The answer isn't "hidden", it's clear as day and out in the open that the Coyotes are borrowing like mad on the NHL line of credit. And like I said, that's fine in a Bull market with quickly increasing team values.
.[/QUOTE]


Do you mind linking the source that the Coyotes are borrowing like mad on the NHL's line of credit? Everything I have heard is Barroway is eating the losses.....

 

[Dirty Old Man]

Jeez, you sound just like an investor in "Countrywide Mortgages" in early 2006!

Hilarious hot take. As opposed to the 'permabears' on here in the megathread.

 

[Acesolid]

The answer isn't "hidden", it's clear as day and out in the open that the Coyotes are borrowing like mad on the NHL line of credit. And like I said, that's fine in a Bull market with quickly increasing team values.
.

Do you mind linking the source that the Coyotes are borrowing like mad on the NHL's line of credit? Everything I have heard is Barroway is eating the losses.....[/QUOTE]

Arizona Coyotes on the Forbes The Business of Hockey List

The Yotes lost up to 50 millions last year. Do you truly believe Barroway gave that money to the team instead of borrowing it?

I dont think so!

 

[Bookie21]

Do you mind linking the source that the Coyotes are borrowing like mad on the NHL's line of credit? Everything I have heard is Barroway is eating the losses.....

Arizona Coyotes on the Forbes The Business of Hockey List

The Yotes lost up to 50 millions last year. Do you truly believe Barroway gave that money to the team instead of borrowing it?

I dont think so![/QUOTE]
Yes I do, thats the reason he's looking for investors. Also there's been no hard evidence or story that he's been "borrowing like mad" on the NHL'S line of credit. So once again, could you link the story about this endless line of credit, or is it just a guess?

 

[TheLegend]

Ozanian’s $50 million is a guess. Based upon estimates of interest costs and such. Doesn’t bother to cite any actual sources for it yet people are ready to treat it as a factual number.



The article does list an operating loss of $11 million. I would be more interested in taking that number and comparing it to similar data from previous years to see if the franchise is making any progress.

 

[cbcwpg]

Stay in Glendale with no new arena isn't as huge a negative as most people seem to think it is.

Well this important guy thinks it is a negative...

“But we wanted to make clear that the long-term future and viability of that team, the Coyotes, isn’t going to be in Glendale.”

For the past 15 years, a succession of ownership groups and the League have tried everything imaginable to make the Glendale location financially sustainable. Our combined efforts have all yielded the same result—a consistent economic loss. The simple truth? The Arizona Coyotes must have a new arena location to succeed. The Coyotes cannot and will not remain in Glendale.

***

Has anything changed in the last couple of years that would suggest the Coyotes are no longer an economic loss?

 

[mesamonster]

It’s worth more than its debt, and you’re on the extreme of what the Arizona Coyotes situation is; yes...I agree.

You’re the Alex Jones of the Arizona Megathread, along with a few others. While I don’t agree that you should be silenced, your opinions should be greatly silenced since there’s no evidence to most of your claims. Not the least of which will always be the expansion of the league twice since the supposed doomsday at the “hidden” figures those of your ilk suggest.

If as you say,"its worth more than its debt", then where are all of the would be buyers/partners wanting to be a part of such a wonderful financial opportunity? The answer is painfully obvious, nobody wants to take on this organization because of the debt and their own inability to procure a new arena option. Can we acknowledge that city and state funding for a new arena is unlikely to occur? Therefore, any new owner or partner is going to have to make due with GRA, a site that GB has said is incompatible with success.

Andy Barroway is a marginally successful hedge fund manager who has always wanted to own a professional sports franchise, his problem was that he has never had the funds to actually buy one without the help of many others. GB steps in and gives AB and 5-6 others the opportunity to own the Coyotes for the princely sum of $45MM and assume league/private debt to secure the rest. What has happened since the transaction? Substantial financial losses each and every year playing in front of crowds that pay low prices and rarely fill the arena. This phenomena is not lost on outside investors, who see a poor credit in the operating entity and the need to invest a minimum of another $500MM in a new arena site. I ask you, who is going to give GB over a billion dollarrs for that opportunity? Today? NOBODY!!