Phoenix bankruptcy/ownership Part XI: A Fistful of Dollars?

[HockeyAnalysis]

I don't believe any of this is true.

I believe documents submitted by the Balsillie camp (don't remember which particular party) put the relocation fees around $250 million, and the $212.5 million figure assumes minimal to no damages to Glendale (again working from memory, but I think it assumed three years of damages at a very low per-year figure, an the judge has already said is invalid).

I am pretty sure that is not true. The Balsillie camp has gone out of their way to not indicate what they might be willing to pay or what they think is a reasonable contract. See tonights Prime Time Sports interview as an example. The judge himself has ruled that the the league is entitled to the difference in expansion fees that the NHL would get from a Hamilton franchise and from a Phoenix franchise as per the Raiders II decision. Rodier postulated tonight that if the NHL's own relocation fees were used the number might in fact be lower.

 

[Wetcoaster]

According to Howard Bloom Publisher of Sports Business News, Balsillie is now the front runner and he predicts the other bids will fall by the wayside.

Howard Bloom of Sportsbusinessnews.com says that with the ruling, Balsillie has to be considered the frontrunner for ownership of the franchise.

"I really think that when all is said and done, Jim Balsillie has moved from the outside to the inside," Bloom told CTV News Channel Wednesday evening. "He probably has to be considered almost the favourite."

Bloom says he expects other bids for the franchise to fall apart in the next month.

"The NHL's nightmare scenario is likely to unfold," he said.

If Balsillie does manage to win the team, the NHL could have a few tricks up its sleeve to keep him out, Bloom said.

He said the NHL could charge an exorbitant relocation fee of over $100 million or attempt to find another bidder who would move the team elsewhere.

http://www.ctv.ca/servlet/ArticleNe...oyotes_auction_090805/20090805?hub=TopStories

And this:

The Reinsdorf offer, like Balsillie’s offer, like a still unofficial third offer from the Ice Edge Holdings group, is conditional.

Reinsdorf’s conditions include serious handouts from local government in Glendale, Ariz., some to the tune of $23 million US a year, which have been privately negotiated and not put before City Council or the local taxpayers.

That kind of political deftness may not pass the local smell test.

The Ice Edge offer, which has yet to appear in writing, seems flimsy at best, with one of the conditions being games, including playoff games, being played in Saskatoon of all places. Imagine, having Saskatoon financially prop up an NHL market: How bad would that look?

And then there is Balsillie, the Research in Motion billionaire, whose bid financially meets more of the criteria than the other bids - which puts him in some favor with the bankruptcy judge - but the move to Hamilton and the overt tactics he has used has done nothing but anger the NHL.

To further complicate matters, Judge Baum had called for an Aug. 11 hearing to listen to arguments from all the interested lawyers, including former owner Jerry Moyes, the NHL, Balsillie, the creditors, and the City of Glendale - all to address the possibilities of allowing someone to bid on a league property that was already turned down by the league.

Needless to say, the Balsillie people are excited by their newfound position and while there are all kinds of legal hurdles still to clear, the possibility of getting the franchise is closer to real than it has ever been before.

“It’s the best outcome for creditors and for the future of the franchise,†Balsillie spokesman, Bill Walker said last night. “We think Jim Balsillie’s bid will emerge the winner because it offers the best financial terms and the best market in Hamilton, where hockey fans are thirsting for this team.â€

http://www.sportsbusinessnews.com/_news/news_397555.php

 

[Kritter471]

I am pretty sure that is not true. The Balsillie camp has gone out of their way to not indicate what they might be willing to pay or what they think is a reasonable contract. See tonights Prime Time Sports interview as an example. The judge himself has ruled that the the league is entitled to the difference in expansion fees that the NHL would get from a Hamilton franchise and from a Phoenix franchise as per the Raiders II decision. Rodier postulated tonight that if the NHL's own relocation fees were used the number might in fact be lower.

I swear I saw a $250 million fee somewhere on one of these threads from a member of the Moyes/JB team. I don't have the time or energy to go digging for it, but maybe GSC or kdb or someone who's read each of the documents can remember where it was.

Perhaps the $250 million was potential damages to Glendale. I am just positive that number was associated with a relocation bid in filings or a release somewhere along the line.

 

[HockeyAnalysis]

I swear I saw a $250 million fee somewhere on one of these threads from a member of the Moyes/JB team. I don't have the time or energy to go digging for it, but maybe GSC or kdb or someone who's read each of the documents can remember where it was.

Perhaps the $250 million was potential damages to Glendale. I am just positive that number was associated with a relocation bid in filings or a release somewhere along the line.

$250 million might be what some postulated the penalty the judge might award Glendale for breaking the lease, but that wouldn't come out of Balsillie's pocket. What would happen is Glendale would be made an unsecured creditor for $250 million and they, along with all the remaining unsecured creditors would divvy up whatever money is left from Balsillie's $212.5 million bid after the secured creditors are paid off. What the judge determines the city is owed for breaking the lease will go a long way to comparing the bids to see which one is best.

 

[billy blaze]

Relocation verbatim from the Raiders II case:

"In determining the Raiders damages, the jury should have considered " the value of the NFL's Los Angeles expansion opportunity in 1980, prior to the NFL's illegal conduct, less the value of the Oakland opportunity returned to the league"

So if Raiders II is followed- relocation price should be how much is expansion opportunity worth for Southern Ontario less the value of the Phoenix expansion opportunity returned to the NHL-

$80 million dollars was the last relocation price in 2000, so based on inflation since the a good guess would be $125 for expansion in 2009- NHL has never issued two sets of expansion fees for any prior expansion, so argument would be made that all expansion opportunities should be same price (ie if NHL21 in Kansas City applies for relocation and is told price is $125 million, Balsillie would argue all expansion opportunities are $125 million, market does not matter, nor has it mattered in the past expansion opportunities.

taking that approach league could be sued by PSE should NHL come back and say KC your relocation cost is $125 million, PSE yours is $500 million.

tricky tightrope for the NHL to walk- have to name a price that is fair to all.

 

[billy blaze]

$250 million might be what some postulated the penalty the judge might award Glendale for breaking the lease, but that wouldn't come out of Balsillie's pocket. What would happen is Glendale would be made an unsecured creditor for $250 million and they, along with all the remaining unsecured creditors would divvy up whatever money is left from Balsillie's $212.5 million bid after the secured creditors are paid off. What the judge determines the city is owed for breaking the lease will go a long way to comparing the bids to see which one is best.

Moyes was telling potential investors that the price of expansion in NHL was $265 million.

 

[Ward Cornell]

Relocation verbatim from the Raiders II case:

"In determining the Raiders damages, the jury should have considered " the value of the NFL's Los Angeles expansion opportunity in 1980, prior to the NFL's illegal conduct, less the value of the Oakland opportunity returned to the league"

So if Raiders II is followed- relocation price should be how much is expansion opportunity worth for Southern Ontario less the value of the Phoenix expansion opportunity returned to the NHL-

$80 million dollars was the last relocation price in 2000, so based on inflation since the a good guess would be $125 for expansion in 2009- NHL has never issued two sets of expansion fees for any prior expansion, so argument would be made that all expansion opportunities should be same price (ie if NHL21 in Kansas City applies for relocation and is told price is $125 million, Balsillie would argue all expansion opportunities are $125 million, market does not matter, nor has it mattered in the past expansion opportunities.

taking that approach league could be sued by PSE should NHL come back and say KC your relocation cost is $125 million, PSE yours is $500 million.

tricky tightrope for the NHL to walk- have to name a price that is fair to all.

Question: if the NHL set the relocation cost so high that Balsillie walks. Would the NHL need to adhere to that cost in the future and not drop it for another owner?
Especially considering the ecomony the price should actually go up in the future!

 

[XX]

Question: if the NHL set the relocation cost so high that Balsillie walks. Would the NHL need to adhere to that cost in the future and not drop it for another owner?
Especially considering the ecomony the price should actually go up in the future!

It would be market specific prices to Hamilton. There's nothing that says the NHL has to charge a flat rate fee.

 

[nye]

It would be market specific prices to Hamilton. There's nothing that says the NHL has to charge a flat rate fee.

Southern Ontario.

I'd argue that a team in Hamilton precludes a second team in Toronto, for a very long time.

What would you charge for a license to print money?

 

[bbud]

highlights of interview with Daly

- as of now Reinsdorf still in- auction not preferred result- biggest concern two Glendale groups may pull out or drop away now- hoping not the case- could happen in next couple of days

- Reinsdorf frustated with seller (Moyes)- making it difficult for buyers ( depositions)

- Ice Edge - Daly says working hard- got involved late- got involved July- Canadian games brought up from the start- Canadian games short term- only in early years of ownership

- Balsillie- Daly says ultimate question can a judge alter bylaws, disputes Balsillie $ figures- Glendale damages $500 million- unspecified claims-

- Coyotes- hockey side- Maloney good job in summer -busines side- sellers obstructing Coyote fans, management investors for team sponsorship, intentional on Moyes Balsillie part

- Tuesday hearing- believes all in auction raises issues- suspects whether Balsillie's bid is qualified bid will be under review- thinks Balsillie may be disqualified-

went on to other topics Olympic camps (insurance), state of the league regards to recession

I would have to ask daly how they keep saying JB will be done in next round every time and he bounces back up , just to see his answer lol.
About damages at COG how is it then JRs walkaway bid doesnt have attachments of damages if he leaves and in fact penalizes COG how can he have it both ways?
Other than that standard NHL spin .

 

[bbud]

I swear I saw a $250 million fee somewhere on one of these threads from a member of the Moyes/JB team. I don't have the time or energy to go digging for it, but maybe GSC or kdb or someone who's read each of the documents can remember where it was.

Perhaps the $250 million was potential damages to Glendale. I am just positive that number was associated with a relocation bid in filings or a release somewhere along the line.

there were a few posts and articles earlier in this thread pages saying between 250-275 million but no official #s and in fact the judge told NHL to provide such a long time back .

 

[bbud]

It was his right but his motive is suspect. He was not protecting himself from creditors he was trying to end run the NHL which was running the team at the time. So yes I guess it does bug me

There is also some good information showing the NHL may have been trying to end run Moyes as well , JR and his associates were about to make an offer and were according to GB en route along with him to see Moyes when he filed , i do think he found out the deal was a bit susupect and took other action.
i do think there is more to this than we know at this time.

 

[HockeyAnalysis]

Moyes was telling potential investors that the price of expansion in NHL was $265 million.

That might be the NHLs dream number but it is likely on the high side. But even taking that number, if we take into account that Jerry Reinsdorf is supposedly willing to pay $148 million for the Coyotes, $265-148 = $117 million which I would suggest would be the upper limit on a relocation fee.

There are Nashville Predator financial forecasts that use $15 million as estimated expansion revenue in the 2010-11 season, $15 million for each of 30 teams would equate to $450 million which would put the expansion fee at $225 million for each of two expansion franchises. $225-148 = $77 million. That might be the more reasonable amount.

The NHL is going to have to come up with a number though and from there Balsillie will have to try to negotiate it down if it is at all unreasonable and Judge Baum will make a final decision. My guess is the NHL will come up with a number around $125-150 million and hope that it sticks but I have my doubts.

 

[bbud]

Is'n;t what was leaked simply what Reinsdorf wanted, not what Glendale agreed to? Is it known for a fact what concessions Glendale was willing to make?

I am sure the COG did not want contempt charges against Moyes for leaking news about a 100 million dollar subsidy if they were not really working on said deal there was some truth to the deal with COG and JR had to be .
No need to be mad if Moyes was wrong.

 

[bbud]

That might be the NHLs dream number but it is likely on the high side. But even taking that number, if we take into account that Jerry Reinsdorf is supposedly willing to pay $148 million for the Coyotes, $265-148 = $117 million which I would suggest would be the upper limit on a relocation fee.

There are Nashville Predator financial forecasts that use $15 million as estimated expansion revenue in the 2010-11 season, $15 million for each of 30 teams would equate to $450 million which would put the expansion fee at $225 million for each of two expansion franchises. $225-148 = $77 million. That might be the more reasonable amount.

The NHL is going to have to come up with a number though and from there Balsillie will have to try to negotiate it down if it is at all unreasonable and Judge Baum will make a final decision. My guess is the NHL will come up with a number around $125-150 million and hope that it sticks but I have my doubts.

I did see some posts saying an anon NHL exec thought they had an idea S Ont would go over 400 m for a new franchise i guess its about JB opening a bank vault wide enough now.

 

[Canadiens1958]

Other Options

Recently the Montreal Canadiens were sold to a group headed by the Molson family.

One of the failed suitors was Quebecor Inc headed by Pierre Karl Peladeau. The provincial Quebec government and the various union funds are favourably inclined to investing in a new Quebec City franchise. The dollars are in place to build a new arena in Quebec City and to sustain the franchise.

Paying the expansion franchise fee associated with Quebec City plus a reasonable compensation for the Coyotes would not be a problem. Such a move would solve the Phoenix situation while leaving the Toronto / southern Ontario market at the league's disposal.

 

[HockeyAnalysis]

I did see some posts saying an anon NHL exec thought they had an idea S Ont would go over 400 m for a new franchise i guess its about JB opening a bank vault wide enough now.

Yes, I have heard rumours of that. $400m would be for a second Toronto franchise, not a Hamilton one, and even then $400 would be high. The Montreal Canadiens sold with the arena and the ticket/marketing company for somewhere in the neighborhood of $550 million. If we peg the arena and ticket company at $200 that only makes the team itself worth around $350 million. If the Canadiens are worth $350 million, an unestablished second franchise in Toronto would not garner $400 million. I wouldn't think anyway.

 

[nye]

The NHL says they value it at that, or $500MM, and intend to leave it open until they both want to expand and there is a bid for that amount, adjusted for inflation.

We're talking $20 to $25MM per year over 20 years. Some teams make more than that off local TV.

 

[Ward Cornell]

For what it's worth....Bob McCown on the Fan590 mentioned that when Leopold and Balsillie were talking that Bettman told Leopold to hold off in selling because he would get an extra money from expansion fees to Vegas and KC. Bettman apparently told the BofG that he guarentees expansion fees of $540,000,000 (total) for those two cities. Leopold told Bettman that and Balsillie then mentioned that his offer would be increased $18,000,000! (540,000,000 / 30 = 18,000,000)

Like i said....for what it's worth!

 

[MAROONSRoad]

Some comments/thoughts on the value of a Hamilton franchise:

1) Hamilton, while in southern Ontario, is not located within metro Toronto. In fact, it's a hour drive from downtown Toronto to Hamilton and a Hamilton franchise would not preclude imo a second NHL team within Toronto proper in the future (nor does it preclude the NHL from taking advantage of the Toronto proper market by selling an expansion franchise there in the future).

2) The value of a franchise is dependent on many factors, including importantly the TV broadcast area that is included with the franchise and the availability of an NHL quality arena. You can't put a value on a Hamilton franchise without considering such factors.

3) The Edmonton Oilers recently sold for $200mm CAD without an arena. The Montreal Canadiens recently sold for $550mm including an arena owned by the Canadiens and other assets worth, I'd guess, at least $200mm, puting the value of the Canadiens sans arena, etc. at about $350mm. The Canadiens are one of the top revenue generating teams in the NHL with a 100 year history and have a huge TV audience/contract. A Hamilton franchise would likely be worth closer to the Oilers than the Canadiens.

Oilers recent sales price = $187mm USD ($200mm CAD)
Balsillie's offer for Hamilton Coyotes = $214.5mm USD

It could be argued Balsillie's $214.5mm USD is an over-payment.

Any suggestion that a new NHL franchise in Hamilton is worth close to the Montreal Canadiens and the Bell Centre, etc. is ridiculous imho.

4) On to territorial rights: I don't believe Buffalo has a strong case for indemnification: a) the franchise is located in a foreign country (a passport is now required just to cross the border) and b) Buffalo doesn't lay claim to any exclusive TV territory in southern Ontario.

5) The big issue for a Hamilton franchise is the media rights vis-a-vis the TMLs. The more expansive territory/rights a team in Hamilton is granted, the larger the indemnity that would likely be owed to Toronto.

The result: no, a Hamilton franchise is not reasonably worth or going to cost Balsillie as much as some here seem to suggest. Anything above $300mm inclusive of everything would probably be an over-payment. A second franchise operating in downtown Toronto with the exact same TV territory as the Leafs would be an entirely different story.

GHOST

 

[bbud]

Some comments/thoughts on the value of a Hamilton franchise:

1) Hamilton, while in southern Ontario, is not located within metro Toronto. In fact, it's a hour drive from downtown Toronto to Hamilton and a Hamilton franchise would not preclude imo a second NHL team within Toronto proper in the future (nor does it preclude the NHL from taking advantage of the Toronto proper market by selling an expansion franchise there in the future).

2) The value of a franchise is dependent on many factors, including importantly the TV broadcast area that is included with the franchise and the availability of an NHL quality arena. You can't put a value on a Hamilton franchise without considering such factors.

3) The Edmonton Oilers recently sold for $200mm CAD without an arena. The Montreal Canadiens recently sold for $550mm including an arena owned by the Canadiens and other assets worth, I'd guess, at least $200mm, puting the value of the Candiens sans arena, etc. at about $350mm. The Candiens are one of the top revenue generating teams in the NHL with a 100 year history and have a huge TV audience/contract. A Hamilton franchise would likely be worth closer to the Oilers than the Canadiens.

Oilers recent sales price = $187mm USD ($200mm CAD)
Balsillie's offer for Hamilton Coyotes = $214.5mm USD

It could be argued Balsillie's $214.5mm USD is an over-payment.

Any suggestion that an new NHL franchise in Hamilton is worth close to the Montreal Canadiens and the Bell Centre, etc. is ridiculous imho.

4) On to territorial rights: I don't believe Buffalo has a strong case for indemnification: a) the franchise is located in a foreign country (a passport is now required just to cross the border) and b) Buffalo doesn't lay claim to any exclusive TV territory in southern Ontario.

5) The big issue for a Hamilton franchise is the media rights vis-a-vis the TMLs. The more expansive territory/rights a team in Hamilton is granted, the larger the indemnity that would likely be owed to Toronto.

The result: no, a Hamilton franchise is not reasonably worth or going to cost Balsillie as much as some here seem to suggest. Anything above $300mm inclusive of everything would probably be an over-payment. A second franchise operating in downtown Toronto with the exact same TV territory as the Leafs would be an entirely different story.

GHOST

Your #s make sense but i do see a greedy NHL and the boss would be posturing to open the doors a bit higher that also makes sense.
I do wonder why TML would worry i think the rivalry would do them a ton of good talk about huge interest in games .

 

[nye]

Some comments/thoughts on the value of a Hamilton franchise:

1) Hamilton, while in southern Ontario, is not located within metro Toronto. In fact, it's a hour drive from downtown Toronto to Hamilton and a Hamilton franchise would not preclude imo a second NHL team within Toronto proper in the future (nor does it preclude the NHL from taking advantage of the Toronto proper market by selling an expansion franchise there in the future).

2) The value of a franchise is dependent on many factors, including importantly the TV broadcast area that is included with the franchise and the availability of an NHL quality arena. You can't put a value on a Hamilton franchise without considering such factors.

3) The Edmonton Oilers recently sold for $200mm CAD without an arena. The Montreal Canadiens recently sold for $550mm including an arena owned by the Canadiens and other assets worth, I'd guess, at least $200mm, puting the value of the Candiens sans arena, etc. at about $350mm. The Candiens are one of the top revenue generating teams in the NHL with a 100 year history and have a huge TV audience/contract. A Hamilton franchise would likely be worth closer to the Oilers than the Canadiens.

Oilers recent sales price = $187mm USD ($200mm CAD)
Balsillie's offer for Hamilton Coyotes = $214.5mm USD

It could be argued Balsillie's $214.5mm USD is an over-payment.

Any suggestion that an new NHL franchise in Hamilton is worth close to the Montreal Canadiens and the Bell Centre, etc. is ridiculous imho.

4) On to territorial rights: I don't believe Buffalo has a strong case for indemnification: a) the franchise is located in a foreign country (a passport is now required just to cross the border) and b) Buffalo doesn't lay claim to any exclusive TV territory in southern Ontario.

5) The big issue for a Hamilton franchise is the media rights vis-a-vis the TMLs. The more expansive territory/rights a team in Hamilton is granted, the larger the indemnity that would likely be owed to Toronto.

The result: no, a Hamilton franchise is not reasonably worth or going to cost Balsillie as much as some here seem to suggest. Anything above $300mm inclusive of everything would probably be an over-payment. A second franchise operating in downtown Toronto with the exact same TV territory as the Leafs would be an entirely different story.

GHOST

Your evaluation and the position the NHL will argue may be two entirely different things.

 

[Brodie]

Your evaluation and the position the NHL will argue may be two entirely different things.

If the NHL goes in there and argues Hamilton == Toronto, they'll be slaughtered. The fact is, Hamilton != Toronto and the market for the Coyotes in Hamilton is not the same as a team located in downtown Toronto, or even Etobicoke/Northern Mississauga.

 

[nye]

If the NHL goes in there and argues Hamilton == Toronto, they'll be slaughtered. The fact is, Hamilton != Toronto and the market for the Coyotes in Hamilton is not the same as a team located in downtown Toronto, or even Etobicoke/Northern Mississauga.

They'll argue that is why they need to be able to control relocation.

A team in Hamilton has an impact on the value of a 2nd team in Toronto, or precludes that expansion opportunity altogether in the immediate future. As a league, they have an interest in a wide mix of geographical locations for current interest and future growth and there is a limit to the number of franchises that can be supported by the talent pool.

If expansion to places like Kansas City and Las Vegas had price tags around $200MM, and the if the NHL can support those numbers, only a loon would argue that Toronto, or even Hamilton was not worth 2x-3x that money.

 

[MAROONSRoad]

Smart lawyer is Balsillie’s ace in the hole

A good article by Stephen Brunt, which puts things in an interesting perspective:

It isn’t tough to find someone to malign Richard Rodier, chief counsel to Jim Balsillie in his quest to secure an NHL franchise for Hamilton.

He has been described as a “rogue” lawyer, has been blamed in some circles for Balsillie’s failure to make friends among the NHL’s governors, has rubbed people the wrong way, has been accused of leading the billionaire down a quixotic path that can’t possibly end in success.

Some of that is pure NHL propaganda – both sides have been playing the information and disinformation game to the limits – but some of it also comes from those sympathetic to Balsillie’s cause, who are convinced he is the victim of bad advice.

But as this story enters a new and intriguing chapter, with Balsillie’s bid now part of the September auction for the remains of the Phoenix Coyotes, best keep one thing in mind.

Bankruptcy law is Rodier’s world. When it became clear that there was no direct route to NHL ownership for Balsillie – or at least NHL ownership in Hamilton – the entire strategy shifted to finding a club teetering on the brink, to find an owner who had lost faith, who needed to get out and get out fast.

Enter Jerry Moyes, who believed – rightly it turns out, given the revelations about the city of Glendale’s backroom dealings with Jerry Reinsdorf – that the NHL would be more than happy to sacrifice him, to throw him under the bus to preserve the illusion of a successful sunbelt strategy.

Link:

http://www.theglobeandmail.com/sports/smart-lawyer-is-balsillies-ace-in-the-hole/article1244048/

GHOST