Tuesday, December 23, 2008
Sources: League trying to find new revenue for cash-strapped Coyotes
By Scott Burnside
The NHL hasn't taken over control of the Phoenix Coyotes, but it is taking an active role in trying to find new investors or ownership for the financially strapped franchise and is being kept apprised of any "significant" financial decisions the team makes, ESPN.com has learned from team and league sources.
The league also is trying to help broker changes to the existing lease with the city of Glendale in the hopes of making the situation more attractive to new investors or owners.
Coyotes owner Jerry Moyes is in dire financial straights, with his outside business interests -- most notably Swift Transportation, a large trucking firm -- having been hammered by high gasoline costs, followed by the dramatic downturn in the economy.
And although team officials say the club has never relied on Swift revenues to run the team, the Coyotes aren't in much better shape and are expected to lose another $30 million or more this season, on top of the more than $60 million they are reported to have lost the past two years.
In short, Moyes wants out, a number of sources told ESPN.com. At the very least, he is in desperate need of an influx of capital to help in the continued operation of the team.
Multiple sources told ESPN.com the biggest hurdle is the current lease with Glendale.
The 30-year lease that accompanied significant municipal support in the building of Jobing.com Arena (the municipality put up $180 million of the $220 million price tag) has a number of problem areas as it relates to the franchise's ability to generate revenues.
Take parking. The Coyotes, unlike most teams in the NHL, receive nothing from parking fees at the arena. Instead, they actually pay a surcharge of $2.70 per vehicle. That means instead of generating upwards of $10 million in revenue, they pay more than $2 million.
In short, said one source, they are paying people to park at their building.
Changing that part of the lease is one of the areas the NHL is trying to help renegotiate with the city. Ultimately, the league is hopeful it can help create strategies through which both the municipality and the team can gain, as opposed to simply asking the municipality for concessions.
The league is helping the Coyotes by providing detailed data from other franchises on revenue streams, especially those in nontraditional hockey markets.
Sources say the talks with the city "are in progress" but it's unknown how amenable Glendale officials are to making alterations to the lease.
"Everybody agrees that we need to find a solution that works for both of us," team CEO Jeff Shumway told ESPN.com Tuesday.
No one knows for certain if the Coyotes can finish out the season under the current financial climate, and at some point the specter of bankruptcy looms large.
Sources say the team hasn't come close to failing to meet the payroll, but if that situation were to present itself, the NHL would move swiftly to take over operations.
The fact the league is significantly involved now suggests it is in a position to step in quickly to provide what might be described as "bridge" funding of the team's operational costs and maintain the integrity of the franchise.
"There simply aren't any subtle ways to deal with this situation anymore," a source said.
City of Glendale spokesperson Julie Frisoni said the city has a policy of not discussing ongoing negotiations. She did say that city lawyers have investigated the lease and believe that in the event of bankruptcy, the city and its investment are well-protected.
It's not unprecedented for the NHL to take such a hands-on approach to assisting a team through troubled times. The situation in Phoenix has been likened to the situation in Ottawa a number of years ago, when Rod Bryden was trying to sell the financially troubled Senators.
The league was instrumental in assuring a seamless transition to the current owner, pharmaceutical businessman Eugene Melnyk, and the Senators continue to be a successful franchise.
The league also played a major role in bringing together the sides in the Pittsburgh arena situation, when two years ago it looked as if the Penguins would move out of Pittsburgh, with Kansas City as the most likely destination.
Although the team's financial future seems doom and gloom, there are actually a number of positive elements.
First, ticket sales have increased about 77,000 from a season ago, team officials said. Television ratings have improved dramatically and if the team continues its strong play and can make the playoffs and take advantage of a few home dates (the Coyotes were in seventh place in the Western Conference as of Tuesday), the bottom line will be significantly improved.
The team is not saddled with onerous, long-term, big-value contracts, and the Coyotes have put together an impressive lineup of high-end young players such as Mikkel Boedker, Martin Hanzal and Peter Mueller.
The Coyotes are one of the biggest benefactors of the NHL's revenue-sharing program as well, and last season received $15 million, something that should also be attractive to potential investors.
The NHL has approached head coach Wayne Gretzky about the potential changes to the ownership group and he has assured league officials he isn't going anywhere (he told ESPN.com the same thing last week). That's not insignificant when it comes to luring deep pockets to the desert.
Gretzky remains one of the pre-eminent names in pro sports, and knowing he's on board with the improving Coyotes, even if there is another ownership change, is a huge selling point, sources told ESPN.com.
Although it's assumed Moyes is beating his own financial bushes looking for help, the NHL has also gone back to its list of potential buyers and is approaching or has approached them about their interest in the Coyotes.
Hollywood movie and television mogul Jerry Bruckheimer, long thought to covet an NHL franchise, has been linked to the Coyotes.
Because the primary goal of Moyes and the NHL is to keep the Coyotes in Phoenix, BlackBerry inventor Jim Balsillie would be ruled out, at least for the time being. His interest in NHL ownership generally has been limited to teams he might at some point be able to relocate to Ontario.
It's not believed a breakthrough, either in terms of significant investor relief or an ownership takeover, is imminent, although that could change in a short period of time.
Scott Burnside covers the NHL for ESPN.com.