Part XIII: Phoenix Coyotes - The Final Cut?

[CGG]

Perhaps someone can clarify for me, is putting money in an escrow account the same as making a down payment, or is it just a way of saying "look, I have $25M"? If it's the latter, I'm not sure why that would change your opinion so decisively.

It really just means "look, I have $25 million". It's the COG that was announcing this as some great accomplishment, but Hulz can no doubt get his money back any time he wants. Maybe he has already done so, who knows.

As speculated by others, it's entirely possible that COG wanted upfront proof of financial wherewithal before they'd negotiate with anyone else, lessons learned from the Ice Edge guys.

It's also possible that they begged and pleaded the guy to plunk down $25 million temporarily just so they could announce it and confuse the fine citizens of Glendale, a pre-emptive strike at roughly the same time the NHL gained access to the $25 million COG-posted loss reserve. I'm sure some residents actually think that Glendale is saved, and none of their $25 million will actually be used to fund the team because they now have Hulz's $25 million. Even though they don't, it's in an escrow account somewhere.

 

[Killion]

So, as far as I can tell there are about 35 businesses at Westgate now. If the CFD was levying about $5 million per year on current tenants then it would average to about $142,000 extra in charges for each tenant per year. Obviously, some would pay more and some would pay less. There are a number of businesses that probably wouldn't be affected at all if the Coyotes left, such as the largest tenant (the multiplex movie theater), or various smaller specialty retailers. The main impact would presumably be on the restaurants, which would lose an influx of Coyotes fans on about 40 nights a year.

I would be very surprised, excluding the theater & some of the restaurants, if any number of the specialty retailers & service providers had gross annual sales in excess of $1-2M per annum. The F&B sector may not have a problem with imposing a 2-3% surcharge, however, even they couldnt guarantee a minimum contribution in the order of $143,000+. Margins are slim enough in the restaurant business as it is, even with packed houses.

Secondly, I cant imagine a scenario whereby a business leased space from Ellman a year or 5 ago with a proviso in the lease whereby they would be subject to surcharges, and I think you'd be hard pressed in this economy to find willing tenants moving forward with new leases who would agree to paying that kind of money, or even 10% of it, guaranteed, against future earnings & sales. The only way I could see this working is on "spec", whereby the businesses' voluntarily opt in (or not) in attaching a 1-3% tax passed on to the consumers without minimum requirements. That system, however, is impracticable as the CFD would have no idea whats coming in, and, it relies on an "honor system" which would be ripe for abuse.

So, whats Plan 'B'?...

 

[Fidel Astro]

Hi boys, I'm back to say hello. The only arrows that I see pointed are those pointed from the bows of a very boisterous Winnipeg crowd. The only acknowledged movement in the situation is the placing of a 25 million dollar deposit in escrow. That is a very big and expensive arrow and it points to the team staying.

I still think this $25 million/escrow thing is incredibly vague. It may very well be that I just don't understand this kind of transaction, but I have a few questions, which may be unanswerable at this point:

-Does the buyer's $25 million in escrow mean Glendale is off the hook for their $25 million to the NHL? I haven't seen anything that indicates this. They way I understand it (and, again, I might have this totally wrong), the NHL can still draw from Glendale's $25 million, but Glendale has the buyer's cash ready and waiting, so if the team stays, they'll have that to replace whatever the NHL used. Is that right?

-Since Glendale's weird announcement of the $25mm/escrow, have there been any positive (from a staying-in-AZ perspective) public statements by anyone involved? The NHL is sticking to the same script it has used for the past year, although even Bettman has sounded skeptical about the Coyotes lately...and the mayor or whatever she is (Scruggs, I think?) of Glendale said she had absolutely no idea what's going to happen in a recent article.

Doesn't exactly sound like anyone's confident. Have I missed any kind of public announcement about movement, either way, on this issue? Based on what the key people have been saying, I'd have to say the situation has either remained exactly the same (i.e. nothing is happening) or has gotten worse for the Coyotes (clock ticking, lack of confidence from people involved in the deal.)

 

[Killion]

A) Does the buyer's $25 million in escrow mean Glendale is off the hook for their $25 million to the NHL? I haven't seen anything that indicates this. They way I understand it (and, again, I might have this totally wrong), the NHL can still draw from Glendale's $25 million, but Glendale has the buyer's cash ready and waiting, so if the team stays, they'll have that to replace whatever the NHL used. Is that right?

B) Since Glendale's weird announcement of the $25mm/escrow, have there been any positive (from a staying-in-AZ perspective) public statements by anyone involved? The NHL is sticking to the same script it has used for the past year, although even Bettman has sounded skeptical about the Coyotes lately...and the mayor or whatever she is (Scruggs, I think?) of Glendale said she had absolutely no idea what's going to happen in a recent article.

A) I dont believe Glendale is off the hook for the $25M. Their agreement with the NHL, at least IMO, is a separate issue from Hulsizers' show of intent with his deposit. Glendales release over this matter was confusing, however, I cannot imagine a scenario whereby he would agree to cover the leagues losses & relieve Glendale of its obligations pre-closing on a sale. The longer this plays out, the more likely that if a sale is consummated, actual possession of the team wont take effect until after the playoffs, meaning Glendale will be paying. If a sale is consummated shortly & he takes possession during the season, he may agree to relieve Glendale of its obligation & workout something directly with the league over losses.

B) Mayor Elaine Scruggs. As you know, most recent comments reported in AzCentral last Saturday from a meeting she had with the public a week ago Wednesday. "Out of our hands. Between the NHL & the prospective owner. Lease agreement in principal. Nothing formalized. No earthly idea whats going on". Daly was quoted Saturday in Prague; "Working with the prospective owner & Glendale last few days". Cautiously optimistic. Nothing since that I'm aware of.

 

[Whileee]

I still think this $25 million/escrow thing is incredibly vague. It may very well be that I just don't understand this kind of transaction, but I have a few questions, which may be unanswerable at this point:

-Does the buyer's $25 million in escrow mean Glendale is off the hook for their $25 million to the NHL? I haven't seen anything that indicates this. They way I understand it (and, again, I might have this totally wrong), the NHL can still draw from Glendale's $25 million, but Glendale has the buyer's cash ready and waiting, so if the team stays, they'll have that to replace whatever the NHL used. Is that right?

-Since Glendale's weird announcement of the $25mm/escrow, have there been any positive (from a staying-in-AZ perspective) public statements by anyone involved? The NHL is sticking to the same script it has used for the past year, although even Bettman has sounded skeptical about the Coyotes lately...and the mayor or whatever she is (Scruggs, I think?) of Glendale said she had absolutely no idea what's going to happen in a recent article.

Doesn't exactly sound like anyone's confident. Have I missed any kind of public announcement about movement, either way, on this issue? Based on what the key people have been saying, I'd have to say the situation has either remained exactly the same (i.e. nothing is happening) or has gotten worse for the Coyotes (clock ticking, lack of confidence from people involved in the deal.)

I still think that plunking down $25 million shows some serious intent. Trying to fathom how the City of Glendale is using this money, or how they want others to interpret it, is a baffling pursuit. I think they clearly wanted to convey the message that this somehow gets them off the hook for the $25 million obligation to the NHL. Subsequent reports showed that this was not the understanding of others involved in the transaction. It might be interesting to see if anything emerges in the next few days with the next scheduled date for a draw-down on the escrow is tomorrow (October 15). But my guess is that all parties have agreed to leave that issue alone until negotiations are concluded one way or another.

As far as I know, the only subsequent public statements have come from the Glendale Mayor ("This is in the hands of the NHL" and "I have no earthly idea how this will turn out" and "Glendale has done all that it can") and from the NHL's Daly ("we've been in discussions with the City of Glendale and potential owners over the past few days", "we are still optimistic that we can transition to new ownership in the near future", and "we are committed to Phoenix").

So, notwithstanding the somewhat strange recent pronouncements from the City of Glendale, the only other public signs still look positive.

Killion.... beat me to the punch...

 

[cheswick]

A) I dont believe Glendale is off the hook for the $25M. Their agreement with the NHL, at least IMO, is a separate issue from Hulsizers' show of intent with his deposit. Glendales release over this matter was confusing, however, I cannot imagine a scenario whereby he would agree to cover the leagues losses & relieve Glendale of its obligations pre-closing on a sale. The longer this plays out, the more likely that if a sale is consummated, actual possession of the team wont take effect until after the playoffs, meaning Glendale will be paying. If a sale is consummated shortly & he takes possession during the season, he may agree to relieve Glendale of its obligation & workout something directly with the league over losses.

B) Mayor Elaine Scruggs. As you know, most recent comments reported in AzCentral last Saturday from a meeting she had with the public a week ago Wednesday. "Out of our hands. Between the NHL & the prospective owner. Lease agreement in principal. Nothing formalized. No earthly idea whats going on". Daly was quoted Saturday in Prague; "Working with the prospective owner & Glendale last few days". Cautiously optimistic. Nothing since that I'm aware of.

The $25 million Hulsizer put down is compeltely unrelated. The COG even went and revised their official statement to change the part where they are no longer on the hook. The deal with the NHL is clear and is available online. The COG has no control over the $25 mil they put into escrow. The NHL submits cash losses to an escrow agent and the agent then gives tehm teh money. Nothing the COG can do about it. This transaction is done once a month on the 15th.

 

[MaskedSonja]

The $25 million Hulsizer put down is compeltely unrelated. The COG even went and revised their official statement to change the part where they are no longer on the hook. The deal with the NHL is clear and is available online. The COG has no control over the $25 mil they put into escrow. The NHL submits cash losses to an escrow agent and the agent then gives tehm teh money. Nothing the COG can do about it. This transaction is done once a month on the 15th.

Not that I don't necessarily believe you, but you could provide a link please?

Considering many of us have been debating for awhile these very things, we would be delighted to see some concrete evidence to discuss

 

[Scottrocks58*]

Where we stand -
1. On Jan 1, the NHL can entertain relocation offers.
2. Hulsizer put 25 million dollars up as a deposit on the team.
3. Scruggs, aside from being an idiot, has stated that there is an agreement between COG and Hulsizer in principle.
4. Scruggs said that it is now up to the NHL.

That much is out there.

What I think is going on is that Hulsizer and the NHL are in some pretty stressful negotiations. Hulsizer might be strongarming the NHL to lower the sales price as he knows that the NHL really does want the team to stay in Phoenix.

 

[Free Edler]

Where we stand -
1. On Jan 1, the NHL can entertain relocation offers.
2. Hulsizer put 25 million dollars up as a deposit on the team.
3. Scruggs, aside from being an idiot, has stated that there is an agreement between COG and Hulsizer in principle.
4. Scruggs said that it is now up to the NHL.

That much is out there.

What I think is going on is that Hulsizer and the NHL are in some pretty stressful negotiations. Hulsizer might be strongarming the NHL to lower the sales price as he knows that the NHL really does want the team to stay in Phoenix.

Clearly Hulsizer is a smart guy if he's been able to cobble together $25M cash for a deposit on an NHL team, but it's been explicitly stated by the NHL that they will not lose money on the sale of the Coyotes. He can't possibly be that thick/arrogant if the price is firm.

Any 'negotiating' done by Hulsizer seems to be pretty pointless if the league isn't going to back off their price on a money-losing team when they've probably already got a cheque from TNSE/whomever in Winnipeg sitting on their desk waiting to be cashed.

 

[cheswick]

Not that I don't necessarily believe you, but you could provide a link please?

Considering many of us have been debating for awhile these very things, we would be delighted to see some concrete evidence to discuss

Escrow agreement: http://beta.images.theglobeandmail.com/archive/00660/Escrowdocs_pdf_660001a.pdf

Original Statement: http://www.azcentral.com/ic/community/pdf/glendale-coyotes-statement-1-0922.pdf

Revised Statement: http://www.azcentral.com/ic/community/pdf/glendale-coyotes-statement-2-0922.pdf

For the heck of it, AMULA agreement between the NHL and COG for this season (stipulating Dec 31 deadline and the NHL's ability to negotiate with relocation parties prior to the deadline): http://beta.images.theglobeandmail.com/archive/00660/Glendaledocs_pdf_660002a.pdf

 

[Whileee]

Not that I don't necessarily believe you, but you could provide a link please?

Considering many of us have been debating for awhile these very things, we would be delighted to see some concrete evidence to discuss

I am surprised that no reporter or citizen has asked the basic questions of Glendale's Mayor Scruggs, or a city councilor, or the city manager:

a) Which funds have been used to transfer into the escrow account?
b) Has the NHL made any claims for losses (in September)?
c) If not yet, when does the CoG expects the NHL to make its first claim?
d) Does Glendale still expect the new owner to reimburse the City of Glendale for any operating losses covered this year?

 

[TheLegend]

Where we stand -
1. On Jan 1, the NHL can entertain relocation offers.
2. Hulsizer put 25 million dollars up as a deposit on the team.
3. Scruggs, aside from being an idiot, has stated that there is an agreement between COG and Hulsizer in principle.
4. Scruggs said that it is now up to the NHL.

That much is out there.

What I think is going on is that Hulsizer and the NHL are in some pretty stressful negotiations. Hulsizer might be strongarming the NHL to lower the sales price as he knows that the NHL really does want the team to stay in Phoenix.

But to play devil's advocate a moment :

The NHL has TNSE waiting with enough cash to cover whatever the league has in the team so far. So I would surmise it's more into figuring out payment terms and getting the BoG sniff test completed (even if past history has told us THAT really isn't much of a test ).

 

[cheswick]

I am surprised that no reporter or citizen has asked the basic questions of Glendale's Mayor Scruggs, or a city councilor, or the city manager:

a) Which funds have been used to transfer into the escrow account?
b) Has the NHL made any claims for losses (in September)?
c) If not yet, when does the CoG expects the NHL to make its first claim?
d) Does Glendale still expect the new owner to reimburse the City of Glendale for any operating losses covered this year?

I'm pretty sure a reporter did ask for (b) and was given statements for the account for July and August. Ofcourse the first withdrawl could only have been made in Sept.

(d) is sort of answered in the escrow document. It stipualtes that if a sale was done prior to Sept 1 the losses incurred over the summer could be covered by the sale price. Since no sale was consumated I don't see how the COG has any means to obtain loss coverage. Unless they make the new buyer pay $25 million as a part of the lease?

 

[OthmarAmmann]

I still think that plunking down $25 million shows some serious intent. Trying to fathom how the City of Glendale is using this money, or how they want others to interpret it, is a baffling pursuit. I think they clearly wanted to convey the message that this somehow gets them off the hook for the $25 million obligation to the NHL. Subsequent reports showed that this was not the understanding of others involved in the transaction. It might be interesting to see if anything emerges in the next few days with the next scheduled date for a draw-down on the escrow is tomorrow (October 15). But my guess is that all parties have agreed to leave that issue alone until negotiations are concluded one way or another.

As far as I know, the only subsequent public statements have come from the Glendale Mayor ("This is in the hands of the NHL" and "I have no earthly idea how this will turn out" and "Glendale has done all that it can") and from the NHL's Daly ("we've been in discussions with the City of Glendale and potential owners over the past few days", "we are still optimistic that we can transition to new ownership in the near future", and "we are committed to Phoenix").

So, notwithstanding the somewhat strange recent pronouncements from the City of Glendale, the only other public signs still look positive.

Killion.... beat me to the punch...

This. I believe they want to be able to argue it was the NHL's fault if the deal falls apart.

 

[Whileee]

Where we stand -
1. On Jan 1, the NHL can entertain relocation offers.
2. Hulsizer put 25 million dollars up as a deposit on the team.
3. Scruggs, aside from being an idiot, has stated that there is an agreement between COG and Hulsizer in principle.
4. Scruggs said that it is now up to the NHL.

That much is out there.

What I think is going on is that Hulsizer and the NHL are in some pretty stressful negotiations. Hulsizer might be strongarming the NHL to lower the sales price as he knows that the NHL really does want the team to stay in Phoenix.

I think that you are probably correct, and that Hulsizer is trying to get some concessions from the NHL now that he has learned how far Glendale is able to go on the lease.

I would be somewhat surprised if the NHL is able to make any concessions on the price, though. If they did, then why wouldn't some of the owners of other struggling franchises not request the NHL to step in a buy a portion of their team at a high value, and sell it to another investor at a lower value (if need be)? The NHL wants to stay in all of the current markets, but I doubt that the rest of the owners on the Board of Governors will be keen to directly subsidize the cost of a franchise by a new owner. Besides, if the NHL was willing to give a discount why wouldn't they have done so for their favored owner Reinsdorf when he was negotiating his MOU with Glendale? His purchase price was $168 million, and it was the City of Glendale (via CFD) that was expected to subsidize the purchase price, not the NHL.

 

[Whileee]

I'm pretty sure a reporter did ask for (b) and was given statements for the account for July and August. Ofcourse the first withdrawl could only have been made in Sept.

(d) is sort of answered in the escrow document. It stipualtes that if a sale was done prior to Sept 1 the losses incurred over the summer could be covered by the sale price. Since no sale was consumated I don't see how the COG has any means to obtain loss coverage. Unless they make the new buyer pay $25 million as a part of the lease?

That is what Glendale claimed all along. First, "this is just an insurance policy" and won't be needed because the new owner will be in place by September. Second, if there are any losses paid from the escrow, they will be reimbursed by the new owner.

Now that they have an agreement in principle with a new owner and they have alluded to the $25 million, I think it would be reasonable to check back with Glendale city council to confirm that the new owner will be covering the operating losses this year.

 

[RECCE]

Where we stand -
1. On Jan 1, the NHL can entertain consummate relocation offers.

Emphasis mine.
Just a slight correction to that, the NHL could entertain any offers throughout for a "Glendale sale" or "Non Glendale sale" just so long as it wasn't consummated

 

[leer2006]

Where we stand -
1. On Jan 1, the NHL can entertain relocation offers.
2. Hulsizer put 25 million dollars up as a deposit on the team.
3. Scruggs, aside from being an idiot, has stated that there is an agreement between COG and Hulsizer in principle.
4. Scruggs said that it is now up to the NHL.

That much is out there.

What I think is going on is that Hulsizer and the NHL are in some pretty stressful negotiations. Hulsizer might be strongarming the NHL to lower the sales price as he knows that the NHL really does want the team to stay in Phoenix.

I don't believe I have seen anything anywhere that states the $25m deposited by Hulsizer was a deposit on the team.
The sole purpose of this money was to prove intent to the COG.
The only money offer for the Yote's to this point has been TNSE.
Deposit or not.
And I still have not seen any real figures for what this man is worth just that his company was worth aprox. $1b before the recesion hit.
Whats it woth now ? 1/2 that? What does that put his net worth at? How much liquid assets does he have?
Maybe it's just me but I just don't see it happening.

 

[cbcwpg]

I would be somewhat surprised if the NHL is able to make any concessions on the price, though. If they did, then why wouldn't some of the owners of other struggling franchises not request the NHL to step in a buy a portion of their team at a high value, and sell it to another investor at a lower value (if need be)?

Its one thing for me as an owner of team-x to sell it to you for whatever amount we agree upon. That is a private business transaction and we are both happy.

For the NHL to lower the sale price of a team, when that price has been generally widely known, has the NHL going down a slipperly slope IMO. The last thing the NHL wants to do is devalue a franchise and have it known to all, certainly not those owners losing money who might be thinking about selling themselves.

There could be some other team out there for sale right now for $180 million, but everyone is waiting to see what happens in PHX. And if I'm that owner trying to sell for $180 million, and PHX gets sold for say $100 million, I'm not going to be to happy about it.

 

[Whileee]

I don't believe I have seen anything anywhere that states the $25m deposited by Hulsizer was a deposit on the team.
The sole purpose of this money was to prove intent to the COG.
The only money offer for the Yote's to this point has been TNSE.
Deposit or not.
And I still have not seen any real figures for what this man is worth just that his company was worth aprox. $1b before the recesion hit.
Whats it woth now ? 1/2 that? What does that put his net worth at? How much liquid assets does he have?
Maybe it's just me but I just don't see it happening.

Here's what the revised statement from the City of Glendale said...

As the City and the prospective buyer work toward finalizing documents, in a show of good faith, the prospective buyer has deposited $25 million dollars into escrow. This shows the City has met the NHL deadline for finding a qualified buyer, who will keep the team here, a requirement to release the City’s $25 million currently in escrow.

So, the $25 million was deposited "into escrow". It isn't clear what that means in relation to the operating loss escrow.

It was deposited as a "show of good faith". This language was changed specifically after the first statement, so I am assuming that the prospective owner wanted this language. It does not sound like it was a deposit for purchase per se. My interpretation is that the CoG requested this, either to replace temporarily the money that they had in escrow, or to somehow convince the NHL that they had a live ownership prospect while requesting the NHL to defer withdrawing anything from the operating loss escrow for the time being. That is pure speculation, but I note that the amount referenced was $25 million and the date of this news release was right at the time when the NHL could have made its first withdrawal from escrow.

I have no idea how this means that the City "met the NHL deadline" for finding a qualified buyer. Which deadline are they referring to? December 31?

How was this a "requirement to release the City's $25 million currently in escrow"? I don't see anything like that in the agreement between the NHL and CoG.

 

[cheswick]

Here's what the revised statement from the City of Glendale said...

As the City and the prospective buyer work toward finalizing documents, in a show of good faith, the prospective buyer has deposited $25 million dollars into escrow. This shows the City has met the NHL deadline for finding a qualified buyer, who will keep the team here, a requirement to release the City’s $25 million currently in escrow.

So, the $25 million was deposited "into escrow". It isn't clear what that means in relation to the operating loss escrow.

It was deposited as a "show of good faith". This language was changed specifically after the first statement, so I am assuming that the prospective owner wanted this language. It does not sound like it was a deposit for purchase per se. My interpretation is that the CoG requested this, either to replace temporarily the money that they had in escrow, or to somehow convince the NHL that they had a live ownership prospect while requesting the NHL to defer withdrawing anything from the operating loss escrow for the time being. That is pure speculation, but I note that the amount referenced was $25 million and the date of this news release was right at the time when the NHL could have made its first withdrawal from escrow.

I have no idea how this means that the City "met the NHL deadline" for finding a qualified buyer. Which deadline are they referring to? December 31?

How was this a "requirement to release the City's $25 million currently in escrow"? I don't see anything like that in the agreement between the NHL and CoG.

To me that seems like they just didn't bother to fix it from the original BS statement. Shows how in disarray the whole operation is over there. In no place in teh excrow agreement does it say that the COG will be off the hook for covering losses by finding a "qualified buyer". The agreement says the NHL has absolute right to approve or not any prospective owner.

 

[peter sullivan]

How was this a "requirement to release the City's $25 million currently in escrow"? I don't see anything like that in the agreement between the NHL and CoG.

i dont understand what the word 'release' means....release it so the NHL can draw from it or release it so they dont have to use it.

both seem odd.

 

[peter sullivan]

Emphasis mine.
Just a slight correction to that, the NHL could entertain any offers throughout for a "Glendale sale" or "Non Glendale sale" just so long as it wasn't consummated

man, the COG must have held their noses when the signed that bad boy....we can talk to anyone, give them any information they want and even reach a deal with them (we just cant sign it) and there is noting you can do about it....and for this right we will charge you the low low price of $25m.

 

[Whileee]

man, the COG must have held their noses when the signed that bad boy....we can talk to anyone, give them any information they want and even reach a deal with them (we just cant sign it) and there is noting you can do about it....and for this right we will charge you the low low price of $25m.

But, in fairness I think it is clear that if a suitable owner is found to keep the team in Glendale, and a lease can be worked out, then the NHL would be happy to forego any option to relocate, notwithstanding any agreement they might have reached with potential owners elsewhere. I continue to believe that the NHL will only give up on Phoenix/Glendale if a suitable owner isn't found, and they will give as much time as they feel that they can to that end. As contemplated in the agreement, I think they would extend negotiations well past December 31 for a local sale if there was real progress being made.

 

[Dado]

This transaction is done once a month on the 15th.

Tomorrow?