Thursday, September 10, 2009
Judge: Rejecting both bids possible
PHOENIX -- A bankruptcy judge raised the possibility Thursday of rejecting both bids to buy the Phoenix Coyotes.
Judge Redfield T. Baum called the possibility "more than theoretical" during a marathon court hearing kicking off the two-day auction of the franchise.
Canadian billionaire Jim Balsillie's bid is contingent on moving the team to Hamilton, Ontario, over the overwhelming opposition of the NHL.
The other bid is by the NHL, which has said it will resell the team, either to an owner who would keep the team in Glendale or, failing that, to someone who would relocate the franchise.
Balsillie and NHL commissioner Gary Bettman were in the crowded courtroom. Both had been scheduled to be questioned by attorneys on Friday. However, attorneys for the NHL and Glendale said at the end of Thursday's hearing they would not need to question Balsillie.
Bettman will be questioned by Balsillie's aggressive attorney Jeff Kessler.
"Mr. Kessler took my deposition in this case and we go back a long time together," Bettman said after the day ended. "I think we've both been in the sports and legal business for about 30 years. Actually, I think he's probably taken my deposition more than once."
Balsillie left the courthouse without commenting on the day's events.
"We'll talk tomorrow," he told the gaggle of reporters, many of them from Canada.
Baum raised the prospect of throwing out both bids during arguments on whether Balsillie can get out of a lease agreement with the city of Glendale without a significant penalty.
Jordan Kroop, an attorney for the debtors group headed by Coyotes owner Jerry Moyes that took the team into bankruptcy, was talking about the two bids facing the judge when Baum interrupted him.
"There is a third opportunity when we're done here," the judge said. "No sale."
"Theoretically," Kroop responded.
"I think it's more than theoretical," Baum replied.
Balsillie has boosted his bid to $242.5 million, adding $50 million for Glendale if the city withdrew its objection to the sale. He wants to transfer the team across the continent for the coming season but has said he might need to play a few games in Glendale while the move is made.
To accept Balsillie's bid, Baum must overrule the 26-0 vote by the NHL board of governors rejecting Balsillie as an owner. The board said it found Balsillie to be untrustworthy, based on the Canadian Blackberry mogul's previous failed attempts to buy the Pittsburgh Penguins and Nashville Predators, as well as his Coyotes dealings.
The judge would also have to set a relocation fee that would have to be paid to the league to move the team.
The NHL submitted its $140 million bid at the last minute because of concerns there would be no other offers that would keep the team in Arizona.
As it turned out, the league was correct. First a group headed by Chicago sports baron Jerry Reinsdorf pulled out and then Ice Edge Holdings, a partnership of Canadian and American investors, withdrew. Both cited an inability to reach a new lease agreement with Glendale.
The judge had questions about Glendale's claims of damages ranging from $500 million to $792 million if the team leaves. Balsillie and Moyes want the damages capped at a far less amount.
The main difference between the two bids is the amount of money given to Moyes. Under the Balsillie plan, Moyes could get up to $104 million, the amount he said he loaned the team. He has also said he has $200 million invested in the franchise that he never expects to recoup.
The NHL and Glendale contend, among other things, that the $104 million is lost equity, not debt, a concept the judge challenged at Thursday's hearing.
The $50 million offer didn't change the city's opposition to Balsillie.
"Given the two choices that we have," said William Baldiga, the Boston bankruptcy attorney hired by Glendale, "we are prepared to put our lot in with the NHL. It's not our preferred lot but it's where we are today. It gives us the ability to mitigate our harm."
He said the city believed a buyer could be found outside of bankruptcy to keep the team in Arizona.
Most of the day was taken up by often contentious questioning of experts hired by the various parties to analyze the value of the franchises in Glendale and, potentially, in Hamilton.
At one point, the judge said too much time was being spent on the relocation issue.
"I know this is a big number," Baum said, "but the relocation fee is not the most important legal issue that's going to be submitted to the court."
During the questioning, NHL attorney Shep Goldfein revealed that in the now-withdrawn Ice Edge bid, coach Wayne Gretzky had agreed to reduce his annual salary from about $8 million to $2 million.
Goldfein challenged the methodology used by economics professor Andrew Zimbalist, hired by Balsillie, to determine the estimated relocation fee of $11.2 million to $12.9 million to move the team to Hamilton. Analysts for the NHL came up with figures ranging from $101 million to $195 million.