tag:blogger.com,1999:blog-3262642253132428338.post1060272758616631335..comments2024-02-29T01:19:23.399-05:00Comments on SportsJudge Blog: Dollars and Sense: What Would Happen if the Phoenix Coyotes Went Bankrupt?Marc Edelmanhttp://www.blogger.com/profile/02788558243990338878noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-3262642253132428338.post-68612321714446197822010-11-17T05:33:21.489-05:002010-11-17T05:33:21.489-05:00Interesting post and question..If it comes true Go...Interesting post and question..If it comes true God knows what will be the result exactly...claiming bankruptcyhttp://filepersonalbankruptcy.org/bankruptcy-claim/noreply@blogger.comtag:blogger.com,1999:blog-3262642253132428338.post-34321964871959726872009-03-08T19:34:00.000-04:002009-03-08T19:34:00.000-04:00Marc,To the best of my knowledge, no NHL team trie...Marc,<BR/><BR/>To the best of my knowledge, no NHL team tried to challenge the transfer of ownership in the Kings' case. Nor did my research turn up anything. I would also venture to guess that NHL owners would be rather reluctant to oppose such a transfer of ownership. First, if the ownership group meets the requirements it must in order to get the bankruptcy court to approve the reorganization plan, the NHL owners would likely approve also. This is because such requirements include (among other things) that the plan have a reasonable likelihood of success and that the plan pay creditors at least as much as they would have received if the company liquidated. Second, and more practically, I find it unlikely that the NHL owners would disapprove the new ownership group and leave the team without owners. Moreover, the NHL owners would be flying in the face of the bankruptcy court if they rejected the new owners. After all, if the new owners are good enough for the bankruptcy court, why not for the NHL?Tim Cedronehttps://www.blogger.com/profile/12040777182631189792noreply@blogger.comtag:blogger.com,1999:blog-3262642253132428338.post-69291818205998080162009-03-04T16:06:00.000-05:002009-03-04T16:06:00.000-05:00Tim:Well put, and all very interesting. Do we kno...Tim:<BR/><BR/>Well put, and all very interesting. Do we know if any NHL team tried to challenge the transfer of ownership of the Kings? I presume the answer is no, but I'm just throwing it out there. I hope you will keep monitoring the Coyote situation for us.Marc Edelmanhttps://www.blogger.com/profile/02788558243990338878noreply@blogger.comtag:blogger.com,1999:blog-3262642253132428338.post-27621965873837648742009-03-03T22:51:00.000-05:002009-03-03T22:51:00.000-05:00Marc,Good questions. First, a Chapter 11 filing wo...Marc,<BR/><BR/>Good questions. First, a Chapter 11 filing would, in theory, facilitate the Coyotes' ability to move out of Phoenix (or Glendale to be precise). Their arena lease would be treated as an unexpired lease, giving the Coyotes to assume (perform) or reject (not perform) the lease pursuant to 11 U.S.C. section 365. Under section 365(g), the Coyotes could reject the lease, thereby freeing itself of its contractual obligations. This would then enable them to find a more suitable lease in another city, if so desired. The only drawback is that rejection of the lease would give the arena landlord (the City of Glendale) a pre-bankruptcy unsecured claim against the Coyotes. Unsecured creditors typically receive small payouts in Chapter 11 cases, so Glendale would likely not receive much on their claim. Glendale would also be subject to a landlord's duty to mitigate their damages for breach of a lease. So, yes, Chapter 11 could potentially facilitate the Coyotes' ability to break their lease and move to another city.<BR/><BR/>Second, upon filing a Chapter 11 petition, the current managers of the company will retain control of the business as "debtor-in-possession" ("DIP") under 11 U.S.C. sections 1107-1108. The DIP is really just a change in form more than substance; no one is actually appointed. The difference is that now, the company, as DIP, has a responsibility to keep the business running so as to maximize creditors' recovery. In some circumstances, the court will appoint a trustee in bankruptcy ("TIB") or an examiner in a Chapter 11 case if there is serious concerns about how the DIP is running the business post-filing. (This is different than a Chapter 7 liquidation where a TIB is automatically appointed.)<BR/><BR/>Finally, the NHL Constitution would be treated as an executory contract in a Chapter 11 filing, thus giving the Coyotes the unilateral right to assume the contract under the aforementioned section 365. Section 365 also permits assumption and assignment of contracts. Thus, the Coyotes could assume the Constitution and then assign it to new ownership in the reorganization plan, without worrying about getting league approval. This is exactly what happened in the L.A. Kings' reorganization plan in 1995, where the new ownership group assumed all of the previous owners' hockey-related obligations, including the NHL Constitution.Tim Cedronehttps://www.blogger.com/profile/12040777182631189792noreply@blogger.comtag:blogger.com,1999:blog-3262642253132428338.post-32807913022133863082009-03-02T22:30:00.000-05:002009-03-02T22:30:00.000-05:00Tim,Great post. As you know, I'm not a bankru...Tim,<BR/><BR/>Great post. As you know, I'm not a bankruptcy guy (short of one, painful case that I was given during my junior associate years). So, this lies far from my area of expertise.<BR/><BR/>If the Coyotes filed for Chapter 11, would it facilitate their ability to move out of Phoenix (given the possibility of breaking their lease).<BR/><BR/>Also, do you have any idea of whether a court could appoint a debtor-in-possession ("DIP") and, if so, how that would jive with the general NHL Constitution that requires the other teams in the league to approve new ownership. (I believe the MLB Constitution allows the teams to vote to terminate a franchise if that franchise declares for bankruptcy specifically to avoid the DIP issue)>Marc Edelmanhttps://www.blogger.com/profile/02788558243990338878noreply@blogger.com