Tuesday, May 5, 2009

Phoenix Coyotes Bankruptcy: Breaking News

Breaking News: The Phoenix Coyotes today filed for Chapter 11 bankruptcy protection. The filing plan appears to be a pre-packaged plan, under which the Coyotes (and specifically their holding company) filed to effectuate a sale of the franchise.

SportsJudge previously posted on a "hypothetical" Coyotes bankruptcy specifically involving a pre-packaged plan filing in the following articles:

"What Would Happen If The Coyotes Went Bankrupt? - March 2

"What would happen if the Coyotes actually filed for bankruptcy? First, the Coyotes would have to decide whether to file a pre-packaged plan. In a pre-pack, the Coyotes and their creditors would negotiate a refinancing structure for the Coyotes' debt before filing, and then to make the deal work, the Coyotes would file Chapter 11 to take advantage of Bankruptcy Code provisions needed to carry out the plan. A pre-pack would resolve the case rather quickly. In the sports context, a pre-pack would likely involve transferring ownership to a new group which would assume most, if not all, of the team's debt. The L.A. Kings used a pre-pack during their bankruptcy in 1995."

"Coyote Roundup" - March 9

The two pieces of particular interest are that (1) the lease has a "poison pill" clause that would impose a $750 million fee on the Coyotes for breaking the lease and (2) the Coyotes just brought their lease payments up to date after seven months of delinquency.

For a more detailed background on the legal history of bankruptcies in professional sports, you can also check out my full law review article on the topic here.

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