Monday, August 10, 2009

Sports and the Law: Coyotes Saga Continues

The ongoing bankruptcy case of the Phoenix Coyotes has taken another turn over the last few days that will see the case drag on well into September. (For previous posts on the Phoenix Coyotes bankruptcy case, click here.) Originally, Judge Redfield Baum, the judge overseeing the case, scheduled an auction for August 5 to decide which of the bidders planning on keeping the Coyotes in Phoenix should be allowed to buy the team. Then, on Friday, July 31, an avalanche of court filings and a request by the NHL caused Judge Baum to hold a hearing on Monday, August 3, about whether to postpone the auction. As you may have guessed from the title of this post, Judge Baum did in fact postpone the auction until September 10.

This raises two simple questions moving forward:
(1) How does this affect the bankruptcy case?
(2) How will this affect the Coyotes on the ice?

The most important consequence of Judge Baum's recent decision is that the auction will be open to ALL bidders - that is, bidders who plan to keep the Coyotes in Phoenix (Jerry Reinsdorf and others) and those who wish to relocate the franchise (Jim Balsillie). This is exactly what the NHL has sought to avoid. The NHL, and specifically the league's owners, is no fan of Jim Balsillie, and Judge Baum's decision to open the auction to all bidders is a blow to the NHL. Moreover, the NHL's contends that its overwhelming rejection of Jim Balsillie as an owner should operate to prevent him from taking control of the franchise even if he wins the auction. However, this ignores the fact that Judge Baum has stated that the NHL can’t keep Balsillie from taking ownership of the Coyotes unless it can prove there has been a “material change” in his qualifications since 2006, when Balsillie was previously approved as an owner in a failed attempt to buy the Pittsburgh Penguins. The NHL has even filed a motion to throw out Balsillie's bid based on this rejection on which Judge Baum may rule on Tuesday, no doubt arguing that there has been such a "material change" in circumstances.

This all means that Balsillie still has a legitimate shot at beating out the known competing bids for the Coyotes: a $148 million bid by Jerry Reinsdorf and a $150 million bid by Ice Edge Holdings LLC, a group of Canadian and American businessmen. Balsillie still has several hurdles to overcome, including previously discussed antitrust issues, the aformentioned motion, and the current lease with the city of Glendale to play at Arena. Of the three bids, Balsillie's still appears to be the one that makes most financial sense, as the all-cash bid exceeds the others by more than $62 million. Conversely, Reinsdorf's bid, while favored by the NHL, does not include cash and is focused on reorganizing the franchise's debt. If (and this is a BIG if) Balsillie can overcome these three hurdles, which should be resolved before the September 10 auction, expect his bid to win due to its economic superiority.

So how will this affect the Coyotes on the ice? The primary area where the case has had a significant impact is in free agency. With the financial situation of the team in utter chaos, the Coyotes were rather invisible in free agency. The franchise's most notable signing was 36 year old defenseman Adrian Aucoin, a 14 year veteran whose best days are behind him. They also resigned Scottie Upshall, a mid-season acquisition from the Philadelphia Flyers. The team still has Shane Doan, a veteran of the Canadian national team, but there is only so much one player can do. With minimal action in free agency due to the ongoing bankruptcy case, expect the Coyotes to finish near where they did last season: the Pacific Division cellar. Indeed, both the Kings and Penguins finished lower in the standings the season after they emerged from bankruptcy. (The season after the Sabres and Senators emerged from bankruptcy was the year lost to the lockout.) Is it possible the players could rally around the ownership's turmoil and turn in a solid season? Sure it's possible, but not likely.

Stay tuned to the SportsJudge Blog for more on this case as it continues to unfold. It's sure to take a few more unexpected turns before all is said and done.

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