Everybody gets a new lease on Coyotes (part duh!)

Time to honor another MakeitSeven.ca ranter. Jay Martin, this means you. Tirelessly Jay has contributed to the Make it Seven rant page, and is the glue holding it together when others had given up hope. Jay has gotten a little mad, for obvious reason, as it is plain that he is a devout hockey fan that really does not like to see what has happened to the great game of hockey. Keep up the good work Jay! Get a third wind, as we are going to overtime. Thanks Jay from all of us fellow ranters at Make it Seven!

For the bullet summary, please go here.

You want the team NHL? Prepare to get out the chequebook, and write the big one!

The NHL is now on record as stating the Coyotes arena lease needs to be reworked:

“I think we’ve got to get the lease situation resolved, or not, by the end of this calendar year,” NHL deputy commissioner Bill Daly said yesterday

What happened to Gary Bettman’s statement that the team was never in jeopardy, and the thought of it was, well, just ‘silly’? Where is that thinking now?

According to the NHL and Gary Bettman, with proper management the Phoenix Coyotes could have been, and would have remained a ‘viable franchise’.

Would that be in it’s current form, Mr. Bettman?

Because, if the Coyotes are indeed viable, why would this season be a ‘lame duck season’ if you as the successful bidder in the auction would need a reworking of the lease?

Now, is the lease really that bad? What is it about the lease that has everybody spooked?

I would argue it isn’t about the lease payments, it’s the lease penalty.

Fill it with some Jonas Brothers, Miley Cirus, and other attractions and get over it!

Fill it with some Jonas Brothers, Miley Cirus, and other attractions and get over it!

But, the penalty is only an issue if you want to leave Glendale.

If the Coyotes are truly as viable a franchise as claimed by Gary Bettman, then why is the lease such an albatross and a hinderance at this point?

We really need to go back in time and again to the Ron McLean and Bettman interview of June 2009.

Why does the NHL flip flop on the issues it claims are important, the facts of the Coyotes case, whenever it becomes convenient for them?

Gary Bettman’s argument is that when you have bankers building arenas, then you have an obligation to continue in a given place, or it turns the league on it’s head, as in this excerpt from the interview:

MacLean: So you say it’s a problem with your investment bankers, that threat of the relocation to Hamilton?

Bettman: Not bankers who lend money to franchises, but bankers who lend money to build arenas and stadiums.

MacLean: Which is huge. One of the reasons for stability in the past.

Bettman: Of course, you have to have stability.

Rumour has it that the NHL wants to take over the franchise to ‘buy time’ to put further pressure on the City of Glendale to grant the necessary reworking of the arena lease, and possible concessions.

Glendale is in no position to grant concessions, so the lease payments aren’t the big issue. The big issue then, is the transfer of ownership to a ‘long term’ buyer.

 Who in their right mind would take over a lease penalty to the tune of $720 million (to as high as $796 million as

As Dr. Evil would say, "Do ya want it? It's going to cost you a bajillion dollars!"

As Dr. Evil would say, "Do ya want it? It's going to cost you a bajillion dollars!"

recently claimed). Soon it will be like Dr. Evil in the Austin Powers movies, “a bajillion dollars”.

The Phoenix Coyotes are not a viable franchise in their current form. Without concessions and a ‘way out’ there will not be a bidder willing to follow through with an offer.

Even Ice Edge says it has only days to come up with a solid plan with Glendale. Well Ice Edge, the fact that you want to move five games to Saskatoon or anywhere else is requesting a break on the arena lease, that the City of Glendale is not at liberty to give you.

And Ice Edge, where is that parking facility you want the action from? Another concession where concessions are under the microscope. It isn’t going to happen.

Perhaps as suggested, the Ice Edge bid will get the boys from Research Edge a little closer to favour in the eyes of the powerful and wealthy, and how about that close to free advertising? So impressive is the Ice Edge chances that here we are witnessing the proof of a snowballs chance, the NHL placing their own bid.

In a previous article, we looked at why everybody gets a new lease on Coyotes life but Jerry Moyes.

We have come back to an important clip from this article before, and it relates to the breaking of a lease in bankruptcy proceedings. Here is the clip:

To quote a clip from Thompson Hine, in October 2007,

“section 502(b)(6) of the U.S. Bankruptcy Code on claims arising from a debtors lease termination does not limit a landlords claim for tort-related damages. Section 502(b)(6) sets limits on the damages that result from the termination of a lease of real property to the greater of one year, or 15 percent, not to exceed three years of the remaining term of such lease. The provision is designed to provide landlords with compensation for losses due to lease terminations, while preventing excessively large claims from long-term leases that would limit the recovery of other unsecured creditors.”

 

We must emphasize the argument the NHL had initially.

When you have a team and bankers building arenas, you cannot simply bail on them (NHL position). The City of Glendale is on the hook for the lease, and we still don’t know what kind of obligation it is. Who holds the Jobing.com arena bond is still a question on the table, and it was reporteldy the $64.5 million question.

We must remember the NHL supported the City of Glendale when it convenienced the NHL.

The reason the $148 million offer had any merits at all was because of the lease penalty of $720 million. We could then say, with the taking on of the penalty, the offer was really $868 million. Was this what Gary Bettman would say was the offer that would make Jim Balsillie’s ‘pale in comparison’?

The City of Glendale was a preferred creditor and had much more validity as creditor than Jerry Moyes, according to the NHL, because Moyes was an owner not a lender. The City of Glendale with first dibs.

Now the NHL as a secured creditor to an auction that sees themselves getting paid (is this possible?), is going to argue against the City of Glendale’s right to withhold the lease penalty. Now it’s not a bid deal?

But, more importantly, the rules of bankruptcy law are now being supported by the NHL in the thinking that the true lease obligation despite reported penalty is closer to one years worth of lease payments. Ahhh, the truth at last, justified by the NHL itself.

Judge Baum can now look at the position of two major bidders, the NHL and PSE, and see that they agree on point of law regarding the true lease penalty, and the true obligation in bankruptcy. So much for the $148 million really being much higher, and the PSE bid of $212.5 million, really being ‘much lower’, as previously argued by Bettman.

The NHL entering the bankruptcy circus also puts them on a level, bidding playing field with PSE.

They  (NHL) cannot be judge, jury, and bankruptcy competition at the same time. That is a conflict of interest.

They must choose some authority and pull related to the validity of Jim Balsillie as a suitable owner, or they choose bidder, not both. Obviously they are not at liberty to pick who can be a competitor in the bankruptcy. That would not be fair, and would violate law.

It is becoming quickly obvious to all concerned that the shiny new arena in the works in Kansas City  (or Vegas) has a new owner’s name all over it. Should we call it the White Knight arena? Nah, let’s hold that thought.

The NHL wants to take ownership, finish an arena deal, hand the reigns over to the White Knight, say bye bye to Jerry Moyes, and slap him on the face on the way out.

One problem.

The NHL bid is now on a level playing field with PSE, and is $72.5 million short.

And, if the NHL thinks it is going to ‘contract’ the league if PSE wins, then they better be prepared to pull out the chequebook. This one’s going to hurt!

The cheque will hurt, and the bigger ‘hurt’ will be the further blackening of the NHL’s reputation.

Jerry Moyes was claimed to have been a poor hockey manager. He claimed himself to not know the business very well, and when he looked for help, there was none to be found. It wasn’t because he didn’t ask. He was simply ignored.

And for that ignorance in civil court, I hope there are certain others, including the NHL, ready to pull out the chequebooks too.

That cheque is really going to hurt!

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4 responses to “Everybody gets a new lease on Coyotes (part duh!)

  1. Pingback: Are we onto ‘Something’? Time for the ‘Real Truth’! « Make It Eight, eh? Hockey again for Winnipeg!

  2. Craig, funny thing happened, today we were on the same page. Inevitable I suppose as this thing winds down. But the lease is the undoing of the NHL bid.

    We know that Glendale is hamstrung & can’t make any deals so ultimately it is JB vs the NHL at the finish line. If the NHL somehow wins they are stuck with the lease & Glendale will never be in a better position to collect on it. So why would they negotiate under those conditions?

    By having the NHL bid conditional on a 1 year extension that they want Moyes to provide is questionable. I would assume that Glendale would have to agree since it is in essence a sublet agreement & may not be subject to these proceedings.

    The conditional nature of the NHL offer then may only be a delaying tactic, since if they manage to oust Jim on September 2nd they can withdraw their bid & prevent an auction. This would require the NHL to fund the team for another year while a new deadline for bidding is set.

    I hope Judge Baum is aware that these conditions on the sale will inevitably cause non-performance to occur & torpdeo a stay in Glendale purchase.

    In any event it is possible the NHL itself could be forced into bankruptcy if it wins, in order to rid itself of the lease.

    Patrick

  3. Gary Bettman has done it again, Hes gone and embarrased the NHL again!!!! How many times does this have to happen before the BOG fires him? I dont know the answer to that question. But anyone reading reading this can help me convince them by signing my petition. The Fire Gary Bettman petition can be found at http://www.petitiononline.com/82009/petition.html
    Thank you in advance for your support
    Ken

  4. Patrick, you may well be correct in following a stream of logic that results in the NHL itself having to declare bankruptcy in order to escape the Lease should they be successful in blocking JB & delaying the auction, however, I’m pretty sure Judge Baum’s going to see the League’s manouvering as being duplicitous & contemptuous. Its in the leagues DNA to map out & pulloff just such a stunt to avoid both the Lease Payments & ultimately a highly damaging Anti-Trust suit that’s sure to follow. The NHA begat the NHL when they too wanted troublesome owner Eddie Livingston of the Toronto Arena’s/St.Pats to go away. These guys just love the smell of Napalm & arent afraid to use it. Just ask Jerry Moyes.

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