Phoenix bankruptcy/ownership Part XVIII: Is that a pale horse in the distance?

[GSC2k2*]

AS an aside, the sturm und drang of the PSE motion to exclude the expert reports of the NHL was rather comprehensively responded to by the NHL:

http://docs.bmcgroup.com/phoenixcoyotes/docs/azb_2-09-bk-9488_954_0.pdf

In essence, they had already received most of the stuff, they had known for a while that the NHL was preparing expert reports, the experts only got a fraction of the documents that the PSE discovery request had asked for (knocking out the suggestion that the NHL's claims regarding the onerous nature of the PSE requests were misleading) and Zimbalist himself stated in his filed response after reading the NHL reports that the information DID NOT change his opinion( thereby destroying any claim that the nondisclosure was prejudicial, which is a necessary precondition for sanctions, BTW - oopsie).

 

[nye]

I think it's clear that both bidders are trying to purchase this asset on the cheap and make a huge profit. (although in the leagues case its offered 100% of the proceeds to creditors so the league wouldn't make a profit, but it does wet the apatite of a JR) The league tacks on $40m then they better hope they get someone willing to pay that freight once this team gets flipped to a new owner. Not sure JR or Ice Edge want to pay $180-$190m for this team, frankly it's not worth that much at this time at this location.

To go further. It is worth some small loss to the NHL to see that secured creditors like M. Dell get their money back. The league as a whole does not want individual franchises dealing with the fallout from stiffing a lender of last (or any) resort.

If they pay $140MM today and absorb losses of $30 to $50MM more before a sale is complete, they will already be selling it for less than they paid if they do indeed find a buyer to keep it in Glendale. Even a buyer for KC would likely not turn a profit.

The judge hectoring the NHL to bid more is both comical and sad.

 

[vyktor]

According to the link I read in the other thread the 'no sale' option that Baum discussed would have the team either liquidated or operated by a trustee with the league footing the bill. If he went with the trustee option wouldn't that give the league time to shop the team. How would that differ in intended effect from the league's proposal?

Is this Baum's way out of a controversial decision.

 

[Call of the loonie]

They would not do so because there are a number of motions currently being argued before the court (all the ones argued today and tomorrow). Those motions MUST be argued and decisions issued thereon before Baum J. can make a final determination. That is required as a procedural matter.

As a tactical matter commercially, there would be no percentage in making such a bid at this time. It invites a counter-bid and provides time to the other bidder to consider their strategy more fully.

I find it interesting that some on here regarded the JB offer to the City as a master stroke of some kind. Most experienced commercial negotiators would find it amateurish to increase one's bid at that time (before the auction), to be frank about it. Even if the City were interested in selling its claim, it would have no incentive to accept it at that time before the scheduled final bidding time on Friday afternoon. Making a bid that early essentially gives away a significant amount of leverage to the City. The City now knows it has a fish on the hook. If JB is prepared to offer $50 mil, there is a fairly high probability that he will offer more (whether it is a lot more or a little more is not really the point).

As a matter of commercial strategy, in bidding situations, the only circumstance in which one makes a bid BEFORE an auction is if one is going to make a truly preemptive bid - in effect, the proverbial bid that one cannot refuse. Unless you are going to get an agreement by making an offer at that early preemptive moment, there is simply no percentage in it. It is a wasted bid.

So would it be likely that the NHL (and PSE) has an 11th hour bid primed and ready?

 

[nye]

According to the link I read in the other thread the 'no sale' option that Baum discussed would have the team either liquidated or operated by a trustee with the league footing the bill. If he went with the trustee option wouldn't that give the league time to shop the team. How would that differ in intended effect from the league's proposal?

Is this Baum's way out of a controversial decision.

What if the league says 'enough'?

 

[Crazy_Ike]

1. Once again. He was going to sign an agreement to keep the team in pittsburgh if the Capri/Plan B came about.

Balsillie wants a team in Hamilton and has no interest in a team anywhere else. Presented with being locked into keeping the team in Pittsburgh even if the lease became favorable he refused to sign.

2. so the economy had no factor? no help from the government/nhl for Arenas? Why do you consider there to be no hope?

I'm sorry but when no one wants to own the team and it has nowhere to play in an absurdly undersized market, that is called no hope to me. You might be interested to know that Aubut asked for help from the government, and was rejected.

Of course, things change and nowadays they might be viable. But then? Not a chance. The arena could have sold out every game, it wouldn't have mattered. It was too small, with too few boxes, and QC then had no real corporate heavyweights to push money into the team. Too small. It was barely bigger than Saskatoon.

3. I knew when GB became commish, the way you answered made it sound like he was not in office when minny moved. So Minnesota moved after GB came in to office. But he couldnt do nothing about it of course.

You seem to have this view of commissioner as some sort of god. Bettman had barely been hired when the North Stars moved, if he even had been. The deals were already done. Was he supposed to just snap his fingers and make everyone jump?

And it was another arena situation, why was Minnesota not hopeless?

You don't know the difference between Minneapolis/St. Paul and Quebec City? Or of the Xcel Energy Center vs Le Colisee?

Winnipeg was pulling in attendance not much lower then Minny and Quebec was pulling in higher attendance. NHL didnt fight to keep any of these teams in town, They all went to the highest bidder no matter if relocation was in the works and all because of arenas/no hope for the future. Yet Minnesota has a team and are doing quite well. You dont think if the NHL was going to give Winnipeg or Quebec a team an arena would not be built?

Maybe they would *now*. Then? Both asked. Both were denied. So, guess the answer is a resounding "no".

There wasn't a "fight" to keep those in town. There was a "desperate search for anyone to buy them". They found no one. They looked. For years, in Winnipeg's case. Never found a soul with the money and willingness to do it.

5. The didnt get a "local bidder" the Lemieux Group kept the ownership instead of selling because there were no local bidders.

Semantics. The current owner is a local option and you know it.

And the same group was thinking about relocation and most likely would have been granted it.

They were posturing for it. Relocation was not approved and you have no basis to say it "would have been granted". League documents indicate that threats to relocate were expressly for the purpose of leverage.

So there were no local bidders and relocation was being considered, just not for JB.

Incorrect. Still.

 

[kdb209]

"Is that a pale horse in the distance?" ????

I don't get the reference, and apparently neither does Google - for "pale horse in the distance" all it returns is this thread and a piece of Xena fan fiction.

Since the powers that be have disapproved of posting twitter feeds here for copyright reasons - here are my usual chronological twitter archives of HKYFN and brahmresnik:

HKYFAN: http://docs.google.com/View?id=ddnc33qm_0c79hv4gp
brahmresnick: http://docs.google.com/View?id=ddnc33qm_1rc5kgxhr

 

[XX]

"Is that a pale horse in the distance?" ????

Not a religious man? Ever study religion at all?

http://en.wikipedia.org/wiki/Four_Horsemen_of_the_Apocalypse

 

[Crazy_Ike]

According to the link I read in the other thread the 'no sale' option that Baum discussed would have the team either liquidated or operated by a trustee with the league footing the bill. If he went with the trustee option wouldn't that give the league time to shop the team. How would that differ in intended effect from the league's proposal?

It doesn't, really. In a very weird way it would be the NHL's best option outside of them winning outright. It would, in effect, be like an owner stepped up temporarily.

We'd still need to hear if the NHL's constitution holds up legally to know the end result.

 

[nye]

The NHL is going to pay for an entire season of losses with further delay, and the possibility of liquidation in the cards?

Baum may be making a mistake treating Bettman and the BoG as having just fallen off a turnip truck.

There certainly would be limits beyond which the NHL will not go.

Keeping JB around as a prop for this auction has tested them, I am sure.

 

[Crazy_Ike]

So would it be likely that the NHL (and PSE) has an 11th hour bid primed and ready?

Well regardless of whether the NHL did before, they need to amend their bid to more clearly address creditors so they'll need to put a new bid in in any event.

Remember, however, that the NHL isn't really trying to "outbid Balsillie". They are trying to satisfy the creditors to cover their bases, but their real money is on the constitution being upheld, either tomorrow or, more likely, in appeals.

 

[KevFu]

Who the NHL/GB has "fought for" and hasn't is virtually irrelevant in this case.

#1 - In some capacity, they fought for everyone.
#2 - The similarities/differences in how much/how hard/how effective the fight was for each team that moved/didn't move is not based on intended location (Hamilton vs South) location of team (USA vs Canada); ownership (current or potential), etc.

It is based almost exclusively on TIME. The first four (QUE, WIN, HAR, MIN), they fought for all with no effectiveness; since, they have fought for everyone (EDM, OTT, BUF, PIT, NASH, FLA, TB, PHX, NYI) and no team has moved since.

#4 - In virtually all instances of potential relocation, one of the main issues is the arena (MIN, HAR, PIT, NYI). Occasionally, it's lack of local owner (PHX, NASH, EDM). And sometimes both (WIN, QUE).

Note the teams which moved and why.
Note the teams that didn't and why.

In Phoenix, the lease sucks, but the arena exists and the city is somewhat willing to make concessions. This issue is all ownership.

In all cases of teams struggling to find owners and teams having serious financial hardship which put the future of the team in doubt, the league has stepped in and provided some aid. EDM, BUF, OTT, PIT, NAS, NYI (three times), FLA, TB, etc, etc.... and virtually all of those teams remain

The NHL has basically fought in some capacity for everyone facing issues to remain in their city, and the willingness and intensity has virtually increased as each year goes by.

Discussing it now is borderline pointless: The league is fighting and will so for the next team, and the teams after that, and after that, etc.

 

[GSC2k2*]

So would it be likely that the NHL (and PSE) has an 11th hour bid primed and ready?

If they know what they are doing, they do. I am pretty sure that the NHL, advised by one of the preeminent law firms of the world, and run by some sharp negotiators, know what they are doing. As for the other guys, well, they already lobbed in an ineffective and premature overbid. YMMV.

 

[LadyStanley]

so to put it bluntly, the entity in charge of approving bidders, cannot approve themselves as their bid is deficient

Not exactly. The NHL approves the bidders. Judge Baum approves the bids.

 

[nye]

If they know what they are doing, they do. I am pretty sure that the NHL, advised by one of the preeminent law firms of the world, and run by some sharp negotiators, know what they are doing. As for the other guys, well, they already lobbed in an ineffective and premature overbid. YMMV.

Do you think the NHL will increase their bid?

 

[Call of the loonie]

Well regardless of whether the NHL did before, they need to amend their bid to more clearly address creditors so they'll need to put a new bid in in any event.

Remember, however, that the NHL isn't really trying to "outbid Balsillie". They are trying to satisfy the creditors to cover their bases, but their real money is on the constitution being upheld, either tomorrow or, more likely, in appeals.

True, they aren't bidding against Balsillie. I don't think the judge has any intentions of giving the team to PSE. But he's using them to hopefully make the NHL bid a little easier to sell to the creditors.

 

[Jaym3000]

If they know what they are doing, they do. I am pretty sure that the NHL, advised by one of the preeminent law firms of the world, and run by some sharp negotiators, know what they are doing. As for the other guys, well, they already lobbed in an ineffective and premature overbid. YMMV.

Yes once again NHL law firm is preeminent and JB's law firm is a piece of crap - give us all a break - JB's council is every bit as good as the NHL's - from what I saw Kessler did a great job today. We will see where all of this ends, but your one sided views are quite tiring. We will also see where JB's bid ends up.

 

[GSC2k2*]

Just to Remind Everyone ...

One thing that we discussed about fifteen threads ago, but which has become obscured by the passage of time, is the fact that JB's offer of $212.5 million (let's dispense with the fictional $242.5 million bid, since the City has rejected the offer at this time) is in fact not worth $212.5 million at all.

http://docs.bmcgroup.com/phoenixcoyotes/docs/azb_2-09-bk-9488_809_5.pdf

http://docs.bmcgroup.com/phoenixcoyotes/docs/azb_2-09-bk-9488_809_6.pdf

If you will read section 3.1 of the PSE Asset Purchase Agreement, you will note that the consideration is reduced by "the amount, if any, by which the NHL Accounts (a defined term in the APA) are offset or otherwise not collectible up to a maximum reduction of $25,000,000".

As is well known and as is documented (and not disputed by anyone) in the court filings, the NHL advanced monies to the Coyotes from November to February in respect of their revenue sharing, TV distributions and other league-shared monies. Those are the "NHL Accounts" monies (described in schedule 2.2 in the second pdf document above). After that, the league then loaned a further $12-13 million up to the bankruptcy filings (and has loaned a bunch more as the DIP financing party).

In laymen's terms, Moyes used up all of his advances on next year's revenue sharing distributions, before he started borrowing from the NHL. JB's offer has always taken that into account (and properly so, since they would normally get that money due next year)

Accordingly, the JB offer has always been $187.5 million, not $212.5 million.

Courtesy of the latest filing which reminded me of that old long-forgotten point.

http://docs.bmcgroup.com/phoenixcoyotes/docs/azb_2-09-bk-9488_955_0.pdf

 

[GSC2k2*]

Do you think the NHL will increase their bid?

Hard to predict. It is a feel thing in part, and it will depend on what happens and the temperature of the judge as they assess it.

Yes once again NHL law firm is preeminent and JB's law firm is a piece of crap - give us all a break - JB's council is every bit as good as the NHL's - from what I saw Kessler did a great job today. We will see where all of this ends, but your one sided views are quite tiring. We will also see where JB's bid ends up.

From what you SAW?? You were in PHO today?

I suggest that you reread my post. In no way did I denigrate JB's current counsel. Dewey and Leboeuf are a fine firm. A slight cut below Skadden IMO, but then you could probably say that about every other US law firm. Dewey are excellent. Is that "two-sided" enough for you? I am not too sure why you so desperately see a need for me (but no one else, including you) to be "two-sided". The pro-JB side is represented here in spades. They need no assistance from me. Some of them are veritable posting factories. I provide balance to their views.

As an aside, you may want to read the twittering from some that noted Kessler's seemingly continuous mistakign of the NHL for the NFL and his blundering with respect to the league in which the Washington Nationals play. I am sure he had his moments, though. He is a highly respected counsel. I have no doubt that JB and Rodier are getting good advice at this point. As to whether they are following it ...

 

[Jaym3000]

Hard to predict. It is a feel thing in part, and it will depend on what happens and the temperature of the judge as they assess it.

Or perhaps it depends on how the other BOG members feel about borrowing money for this. Quite simply I think this would be over immediately if the NHL just matched JB's bid - why wouldn't they just do that and put it all to bed? Maybe there is another reason.

 

[Crazy_Ike]

Or perhaps it depends on how the other BOG members feel about borrowing money for this. Quite simply I think this would be over immediately if the NHL just matched JB's bid - why wouldn't they just do that and put it all to bed? Maybe there is another reason.

Of course there's another reason - the NHL bid (or any local bid) doesn't have to satisfy (or at least address) COG as a creditor, while any relocation bid does.

All this time, you never understood why the local bids can be competitive with Balsillie's bid while being far lower?

Btw the league will get every penny it spends on this back when it sells the franchise. There's no real risk to the league in that regard.

 

[Jaym3000]

Of course there's another reason - the NHL bid (or any local bid) doesn't have to satisfy (or at least address) COG as a creditor, while any relocation bid does.

All this time, you never understood why the local bids can be competitive with Balsillie's bid while being far lower?

Btw the league will get every penny it spends on this back when it sells the franchise. There's no real risk to the league in that regard.

Of course they will get all of their money back and this will have no effect on fans anywhere and the NHL is healthy in alll markets. To you and GC the NHL does no wrong - to many others we don't follow so blindly. All I said is that this could go away if the NHL ups its bid - this isn't the time to be cheap is it? Up it 80M and its over and like you said they get their money back right? But they aren't doing that are they?

 

[bbud]

It doesn't, really. In a very weird way it would be the NHL's best option outside of them winning outright. It would, in effect, be like an owner stepped up temporarily.

We'd still need to hear if the NHL's constitution holds up legally to know the end result.

Not if creditors want to cash out it could force liquidation its more dangerous as far as my basic look at US BK law maybe others can shed more light but what i read says it isnt a safer way to remedy this by any means

 

[KevFu]

I guess if you are not from a place like Winnipeg it is quite easy to dismiss it so simply.

I meant no disrespect to WIN, HAR, QUE, (or MIN, NASH, PIT, etc)...

what I meant was:
The level of which the NHL is fighting, and the justification of it is a relatively separate issue. The classic argument of how hard the NHL has fought for various teams is more of a "Bettman the Anti-Christ" thread topic (and I'm not arguing for or against that).

The fact is: The NHL IS fighting and will continue to do so.
Previous potential relocation fights do not serve as "precedent" like law, but as "learning opportunities" for the league to see how to better fight in the future.

Each battle the league enters is probably going to be its most intense to date. Each will use the lessons from before, and each designed to:
A - retain local ownership / preserve the existing markets
B - put them in the most financially favorable position possible with regard to a new arena/lease (as in, "hey city, build them an arena!").
C - protect their right to decide the markets.

Each previous fight had different issues, but virtually all were fought from those three tenets.

 

[Crazy_Ike]

And even Bettman has said recently that if the league had had the infrastructure it has today set up back then, they probably could have saved at least Winnipeg.

Just one of those things people should learn about how the league "works", the actual inside workings. Bettman does not control the hockey world by decree.