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Ross D. Franklin/AP
Phoenix Coyotes owner Jerry Moyes, left, walks past Richard Rodier, right, a Toronto
lawyer representing the interests of Blackberry mogul Jim Balsillie.

NHL, Coyotes in Court Over Canadian Billionaire’s Attempt to Buy Team

May 08, 2009 06:15 PM
by Denis Cummings
The NHL is challenging the Phoenix Coyotes’ bankruptcy filing in an attempt to prevent billionaire Jim Balsillie from buying the team and moving it to Canada.

Coyotes File Bankruptcy; NHL Objects

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The Phoenix Coyotes, under the control of owner Jerry Moyes, filed for Chapter 11 bankruptcy Tuesday. The team, which moved to Arizona from Winnipeg in 1996, has never made a profit and lost $73 million from 2005 to 2008, according to court documents.

Canadian billionaire Jim Balsillie, CEO of BlackBerry maker Research in Motion, has offered $212.5 million for the team with the intention of moving it to southern Ontario, likely Hamilton or a Toronto suburb. Balsillie has made two other highly public bids for National Hockey League franchises in the past three years. His attempts have irked many in the NHL who oppose franchise relocations.

“We generally try to avoid relocating franchises unless you absolutely have to. … We don’t run out on cities,” said NHL commissioner Gary Bettman, who as commissioner has overseen the relocation of three teams.

Bettman had been negotiating a deal with White Sox owner Jerry Reinsdorf to buy the Coyotes and keep them in Arizona; though his offer was reportedly significantly less than Balsillie’s, Reinsdorf had the support of the NHL.

By filing bankruptcy, Moyes puts control of the sale in the hands of a bankruptcy court, which would customarily accept the highest offer. Therefore, Balsillie’s bid would likely be accepted, forcing a vote by the NHL governors, who must approve any sale by a majority vote.

Bettman and other NHL officials accused Moyes and Balsillie of trying to circumvent league rules. Speaking Wednesday at a Wall Street Journal forum, Bettman said “this is more about the tactic and I think a challenge to league rules than it is about the economic condition of the club.”

The NHL has filed a motion in the bankruptcy court arguing that Moyes had ceded control of the team to the NHL in November and thus did not have the authority to file bankruptcy. A preliminary hearing was held Thursday, with the next on scheduled for May 19. If the NHL’s motion fails, the team will likely fall under Balsillie’s control.

Moyes has also filed a lawsuit against the NHL, accusing it of acting like an “illegal cartel” that is “excluding competition and restraining trade … through the application of unreasonable restrictions.”

Background: Bettman and Balsillie

NBA executive Gary Bettman took over as NHL commissioner in 1993 “with the mandate of expanding the game in the United States,” writes the National Post. Over the next eight years, Bettman oversaw the addition of nine teams, eight of which were in U.S. cities, and the relocation of the Winnipeg Jets, Quebec Nordiques and Hartford Whalers.

As the NHL tried to expand into non-traditional hockey markets, the popularity of the game slowly declined, with TV ratings falling and several teams having serious financial difficulties. Many traditionalists have called for the NHL to return failing teams in the United States to Canada.

Balsillie made his first attempt to buy a team in 2006 when he inquired about buying the Penguins, but backed away when the league ordered that he could not move the team. He returned in 2007 with a $220 million offer for the Nashville Predators and began planning for a move to Hamilton, going as far as to sign a deal with the city’s Copps Coliseum and accept refundable deposits for season tickets.

Balsillie’s actions angered many in the NHL and Bettman eventually arranged a deal to sell the Predators for $193 million to a consortium including disgraced businessman William “Boots” Del Biaggio. The National Post reports that as many as eight team owners talked with Balsillie about selling at least a share of their teams, but they were discouraged by the league.

Opinion & Analysis: Balsillie’s chances of buying the Coyotes

Due to his acrimonious relationship with the NHL, Balsillie likely did not have the ability to purchase a team in a conventional manner. Therefore, he felt he needed to force the sale of the team and then try to convince NHL owners to approve the sale and relocation.

“Balsillie’s gamble is that enough NHL governors … will love the fact that his $212.5-million (all currency U.S.) offer for the Coyotes will inflate the value of their franchises and therefore vote in favour of his wishes,” explains The Globe and Mail.

Balsillie will face the most resistance from the Toronto Maple Leafs and the Buffalo Sabres, who would object to another team in their area and would demand a large territorial fee.

The NHL has the right to control where its franchises are located under a court decision in the 1970s that ruled the league was a “single economic entity.” Bettman “thus holds a powerful hand if he can keep the NHL board of governors on his side,” writes Colby Cosh of the National Post.

The question of whether the governors will support Balsillie depends on whether they would prefer to have an infusion of cash and a more profitable franchise in the league, or whether they prefer to continue their attempt to expand the NHL’s market.

Fox Sports’ Al Strachan writes that a team in southern Ontario would attract only those who are already hockey fans, while the loss of the Coyotes would cause the loss of fans in the American southwest. “The NHL does not want go backward,” he writes. “It does not want to leave a hockey-less black hole on the map of North America.”

Reference: Court documents; Balsillie’s Web site

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