Phoenix XXIV: How many twists does the scriptwriter have left?

[Koss]

You saying TNSE would tell the NHL to go **** themselves if the price was $210M? Seriously? Are you saying that?

Because if you are, a franchise in Winnipeg is DOA.

I actually hope they leave the franchise in Phoenix now just to watch all the egos get destroyed as the franchise goes bankrupt for a second time in the next 5 years.

 

[OthmarAmmann]

On a serious note, GWI definitely interfered. It's just a matter of if they were entitled to do so. They were not a party to the contract, and they acted in a way to disrupt the contract.

As I said, whether they are entitled to send the letter is likely dependent on case law in AZ that no one (or few people) really can comment on here, so we don't really know the answer.

Just my opinion, but I think it gets murkier when one of the parties is a governmental organization.

I actually hope they leave the franchise in Phoenix now just to watch all the egos get destroyed as the franchise goes bankrupt for a second time in the next 5 years.

x2 except I'm more interested in seeing Glendale implode on debt.

 

[bleuet]

GWI is saying investors : We think the deal is unconstitional, we could sue if deal goes on.

GWI is not god, investors can do whatever they want, believe or not believe GWI.

Looks like they believe GWI. Where is the GWI's fault?

Its not GWI's fault is investors trust them more than CoG.

 

[MountainHawk]

GWI is saying investors : We think the deal is unconstitional, we could sue if deal goes on.

GWI is not god, investors can do whatever they want, believe or not believe GWI.

Looks like they believe GWI. Where is the GWI's fault?

Its not GWI's fault is investors trust them more than CoG.

And the question is if it is legal for GWI to do that. It may not be, but we will find out if COG does follow through with the lawsuit.

 

[Retail1LO*]

And the question is if it is legal for GWI to do that. It may not be, but we will find out if COG does follow through with the lawsuit.

The question is, whether or not it's legal for a group of individuals to look out for the best interest of the tax payers?

 

[GSC2k2*]

I would presume that their board of directors would have liability insurance.

Thay may, or they may not. It is a non-profit entity, IIRC.

Liability insurance also contains significant exclusions, so it depends on how any pleading would be stated. If there are accusations of dishonesty or bad faith, coverage in any potential liability policy might be denied. Again, we will have to wait and see.

 

[MountainHawk]

The question is, whether or not it's legal for a group of individuals to look out for the best interest of the tax payers?

in the method GWI chose. They could have sued when the lease was voted on, had the same effect on the bonds, and there is no doubt that is ok.

Instead, they chose to send a letter, and the question is if that is permissible.

 

[GSC2k2*]

Huh??? If Hulsizer is acquiring the parking revenue rights from the NHL now, and the COG is simply purchasing the revenue rights for the next 30 years, don't the rights revert back to Hulsizer or the owner of the Team and arena manager at that point in time? This is where the logic starts to fall apart, in my view. If the rights to parking on the city land is a portable asset, that is owned by the arena manager not the COG, then why would you assume that these rights automatically revert back to the COG simply because they own the parking lots themselves?

Do you not recall that we had this discussion a while back when I wrote a series of detailed posts on a variety of Coyote issues? Doesn't "perpetuity" ring a bell?

The rights were held by the developer, not by the CoG, when they were granted to the arena manager/team (I forget which one of the arena manager or team, and it matters not anyway). IF there is no team/arena manager, then they would have reverted back to the developer (Ellman). The rights that the arena manager/team owns and is going to transfer at closing are not limited to the term of the lease.

At the end of the lease, one of two things happens: (1) the parties negotiate a new lease, and the CoG continues to retain the parking rights; or (2) the parties do not renegotiate the lease, in which case the rights would not revert back to the City, but to the original disposition under the MUDA.

 

[GSC2k2*]

This isn't going to go on for years. They are going to present the evidence that GWI interfered with a business transaction, and if they can prove it even when all evidence is considering in a light favorable to GWI, then a summary judgment will be issued against GWI, and this could happen in a matter of days. If that fails, the suit may go on, but the team will move unless some large institutional investors steps up to buy the bonds very quickly, despite the risk.

Ah, I dunno about that.

 

[Whileee]

Do you not recall that we had this discussion a while back when I wrote a series of detailed posts on a variety of Coyote issues? Doesn't "perpetuity" ring a bell?

The rights were held by the developer, not by the CoG, when they were granted to the arena manager/team (I forget which one of the arena manager or team, and it matters not anyway). IF there is no team/arena manager, then they would have reverted back to the developer (Ellman). The rights that the arena manager/team owns and is going to transfer at closing are not limited to the term of the lease.

At the end of the lease, one of two things happens: (1) the parties negotiate a new lease, and the CoG continues to retain the parking rights; or (2) the parties do not renegotiate the lease, in which case the rights would not revert back to the City, but to the original disposition under the MUDA.

Right... so, the assertion that the COG is acquiring an asset which they will continue to own beyond 30 years ("in perpetuity") is not necessarily the case. In fact, at the end of 30 years Hulsizer or the arena manager could renegotiate the lease and sell the parking revenue rights to the city again (for another $100 or $200 million, or whatever the "market value" is). In that case, what asset does the COG actually have at the end of this 30 year lease for their $100 million?

 

[bleuet]

Where is the fault in sending a letter?

Again, investors chose to believe GWI! Open somebody's eyes is a fault?

One more, the guy who made the parking revenue studies is getting problem and maybe made fraud in the past. This is GWI's fault?

Any Glendale citizen could ask an injunction againts the city on GWI argumentation. The city could sue the citizen for 500M$?

 

[GSC2k2*]

First of all, as I stated several pages & a thread or 2 back, why didnt the COG seek this remedy much earlier as it was blatantly clear to one & all that both sides positions were entrenched & intractable?. I couldnt understand why they didnt go after GW for Tortious Interference on the letters of 31/01/11 at a minimum. They pulled the trigger on the Bond Issue & watched their Credit Rating drop; the letters inflaming an already nervous muni bond market, the interest rate spiking (Hulsizer fanning the flames) with the potential of an increase in costs rising to as much as $100M+.

K, as much as people love to heap derision on the CoG, and though some of it may be deserved, it may very well be that there have been earlier communications between the parties which may have led the parties to believe that GWI's intentions were not so abundantly clear.

IF Scruggs' allegations that Clint Bolick assured the CoG that they were okay with the deal are true, then it may be a case where GWI did not act in good faith and deliberately misled CoG. I suspect that there is a considerable amount of discussion and correspondence between CoG and GWI that has taken place in the background of which we are not aware.

The last thing in the World the NHL would need or want would be litigation of anykind, something they have made abundantly clear, and I can only speculate but it would appear to me that the deal is dead. The league is keeping quiet, allowing Glendale to save face, try and exact its pound of flesh from its protagonist & move on. Now, before committing completely to such speculation, I think its important to take a deep breath & a step back, wait & see what the COG actually does, because this is one poster who gave up long ago trying to guess what they might or might not do. Total schizoids'. Why they didnt run to the Underwriters on December 15th, 2010 at 9am I just dont know. They've had months upon months to iron this thing out & yet here we are at Zero Hour with itchy fingers hovering over the Red Button. The NHL doesnt need this, nor do the fans. Total amateurs.

I would suggest that, when things are being done in public which do not seem to make sense, there are often good reasons hiding in the reeds. The media never knows everything (and often only know what certain people want them to know).

As an aside, I do wonder why GWI has only published three documents, out of the reams of documents that GWI has provided. If you look at their document download numbers on their website, there are significant gaps. I wonder why that is.

 

[GSC2k2*]

Right... so, the assertion that the COG is acquiring an asset which they will continue to own beyond 30 years ("in perpetuity") is not necessarily the case. In fact, at the end of 30 years Hulsizer or the arena manager could renegotiate the lease and sell the parking revenue rights to the city again (for another $100 or $200 million, or whatever the "market value" is). In that case, what asset does the COG actually have at the end of this 30 year lease for their $100 million?

Hence my previosu point in the post to which you responded: if the team makes it to the end of the lease thirty years hence, there is a strong likelihood that they will renew - not an assurance, as you correctly assert, but a strong likelihood.

 

[Koss]

So I guess you have to ask yourself what GWI's motive is. Are they bias and hate professional hockey in the desert, or do they only want to protect the taxpayer from bad decisions made by gov't bodies.

 

[GSC2k2*]

I am touched that you would pay heed to my quip.

Hey, it was a good one. Myself, I am never too interested in arguing pure legalities. I can do it of course, but in my job my role is to use my legal training and apply it to the purpose of doing business (both in terms of compliance and in terms of facilitating the conduct of business).

Might I suggest a second location at the corner of Haight and Ashbury?

Groovy, baby. That is a happenin' place.

According to the COG, since Walker was the only one to make it to the offering memorandum.

IS that why you think Walker is in there and not Hocking? Hardly. Walker is in there and Hocking is not because the inclusion in a bond offering was part of Walker's mandate - not Hocking's. As I am sure you know, inclusion in a bond offering imposes certain risks of liability on consultants. You don't put a report in a Final Statement or OM just because you want to. You need to retain a consultant for that express purpose. That is what CoG did. IT is not at all a comment on the veracity of Hocking's calculations any more than the number of pages is a comment on veracity of the two reports.

Basing the transaction on its entirety is adding multiples of very expensive components. Costing as much as the peril they are trying to avoid.

IMO people keep forgetting that there are two calculations that are relevant here. THe first is the calculation of consideration for purposes of compliance with the Gift CLause - the legalities equation, if you will. THe other, and IMO more important calculation, is the overall impact of the transaction, including those indirect benefits that are not eligible for Gift Clause consideration, and the debt service which similarly is irrelevant for gift clause consideration. Until someone demonstrates to me that the calcs on those indirect benefits prepared by CoG's experts (whose boots are on the ground) are incorrect, I have no reason to doubt them. Neither did Ellman, who contractually agreed to them and consequently had big money at stake on their accuracy.

I am starting to believe we are all masochists.

Speak it, brother. Even I grow weary.

 

[pepty]

Question for the lawyers. What role of the GWI board member who is the wife of the Diamondbacks' owner might play in the Glendale lawsuit? Could (or is) Glendale argue that GWI is acting as an agent of the Diamondbacks and is acting in an uncompetitive manner by chilling the bond sale (but not actually filing a suit against)?

That certainly seems to be the question.Pehaps Goldwater are not really the disinterested observers they claim to be.

http://diamondhacks.blogspot.com/2011/02/more-whispers-from-kendrick.html

Mod edit: Blogger looks at GWI history with Diamondback owner wife on board, as the Diamondbacks received perhaps $100m in city subsidiaries.

 

[GSC2k2*]

Sorry, but "matter of days"? Have you ever heard the term "billable hours"? We are talking lawyers here. When has a lawyer ( sorry GS ) ever wanted to rush a case?

Hey, billable hours are part of my past (except when I have to scrutinize the bills of our outside counsel every month).

THat said, lawyers do things in a rush all the time. For certain types of remedies (ie, injunctions, other types of applications), time is absolutely critical. You would be surprised how quickly things can happen - we have obtained orders in a matter of hours for certan proceedings.

 

[HamiltonFan]

There were calcs in the BK documents, but they were the original $500M LD calculations and the basis for same. I think some of this came from a poster's review of CoG budget documents. I looked at them as well, and concluded that one could not readily calculate the team-and-arena-generated funds, because they were not sufficiently segregated. Other posters decided that they could, in order to build a case that they were way low.



See, there is the begging-the-question fallacy rearing its head right there. You are assuming that Walker is "a reasonable estimate" and Hocking is unreasonable. Says who?

Back when that was discussed during my hiatus, no one came up with a better rationale for rejecting Hocking other than the following irrelevant/incorrect arguments:

- Walker is a better report because it is longer (irrelevant);

- Walker is a better report because they have been doing it longer (incorrect and irrelevant);

- Walker is a better report because hocking has been on retainer to CoG for various projects over the years (irrelevant);

- Walker is a better report because Hocking has been sued on a similar project (irrelevant, and whooooo boy, you should see what I have in hand about THAT issue; it deserves its own post IMO ).

- how the heck can parking generate that much revenue, anyway??!? It's just PARKING!

You can see what I think of the "analysis" that was done on this Board to reach that piece of conventional wisdom. Yet you assume that Walker is the "reasonable report".



I have no connection to the Coyotes, either. Hockey will go on either way. I am interested in the business machinations. Regarding the management fee that has people worked up, which is purely a cost-reimbursable contract anyway, there is no valid comparison to other pure arena management contracts, and I can only assume that people keep raising it because they do not understand that point. THis is a transaction with multiple components, many of which have no place in a standard arena management contract. Here, the arena manager is also a rent-paying tenant. THe arena manager is also producing 500-600,000 attendees by its own business. THe arena manager is committing to run its own business in the arena for thirty years.

Both CF and I are in full agreement that the trasnaction has to be evaluated on its entirety, rather than being broken down into components as you suggest.



I'm with you there, Tommy. This is not about legailities. This is politics. GWI is a political entity, notwithstanding this nonsense that people want to believe about them being a "watchdog". They are a GOP entity pursuing GOP policies and directives. It may evolve into a lawsuit, but it is about politics, not taxpayer protection And that is fine - let's just stop deluding ourselves about any high-minded motives.

Try this one on for size:

Walker is a better report because... even those ignorant buffoons at the COG were too embarassed to include the Hocking report in their prospectus for the bond sale.

The fact that you would even attempt to defend such an utterly preposterous position should perhaps cause one to wonder about..... well, I won't say it.

 

[CGG]

I'm sure some of the eager lawyers on here can poke holes in the following, but here's how I see it, with about a 0% chance of COG winning.

(1) COG basically has to prove the deal is legal or they get no further. For that, a declarative judgement is needed, and COG as the plaintiff will have a much harder time winning that than they would as the defendent if GWI were to sue them.

(2) Assuming they get that, COG now has to prove that GWI did interfere. That GWI, specifically the letters they sent potential investors, were the absolute only reason the bond sale didn't go through. This is a bit awkward - usually anyone about to invest $100 million in bonds would do some due diligence. Would they on their own not know about the GWI's existence and interest in the case and the questions that the Institute raises without having read the letters? COG basically has to argue that everyone who might have even thought about buying the bonds got a letter in the mail, and had no way of knowing the potential legal issues otherwise. It's a bit of a stretch I must say.

(3) Then we get to the point of whehter GWI had the right to do what they did in writing the letters. As far as I know, writing a letter isn't a tortious offense. Was there anything illegal / incorrect / immoral in the letters? Did they actually say the deal was illegal or that they would sue? No on all counts. I think GWI gets off here just saying that nothing they said was inaccurate. COG would have to prove that the only point of the letters was to stop the bond sale, and that GWI either believed the deal was legit and/or had no plans on actually suing.

(4) Next hurdle, the COG has to show damages. Their own certified documents in the bond issue show that the city would be losing money over the life of the bond issue. Therefore, what are the damages?

(5) The action can only be limited to the bond issue, IMO. GWI did nothing to "interfere" with the lease contract between COG and MH. Therefore, damages relating to the Coyotes leaving are completely irrelevant. If they actually win the lawsuit, anything should be limited to the higher cost of the next alternative to bond financing - loansharking, Money Mart, etc.

 

[Ciao]

You apparently completely missed the discussion we had on this in the last thread Mork. For shame . . . Now, its likely too little, too late, and quite possibly completely disingenuous posturing.

Sorry, Killion. Most of these posts are pretty interesting, but I normally only read them when my sinus is acting up and I can't do much else. Last week, that's been two days off work but the sinus is getting better and I can't keep up with HFBoards now.

As for too little, too late: yes, I think so too.

 

[Whileee]

Hence my previosu point in the post to which you responded: if the team makes it to the end of the lease thirty years hence, there is a strong likelihood that they will renew - not an assurance, as you correctly assert, but a strong likelihood.

In which case the COG does not, in fact, continue to have an asset after 30 years for which they have paid $100 million. My understanding of your point on this issue is that for the $100 million, the COG does not only receive the revenue for the term of the lease, but also retains a durable asset thereafter. Logically, if the parking rights belong to the arena manager, that is not the case.

I must say that I am a bit surprised that you have chosen not to re-engage on the issue of the "arena management fee". Can I take this as an indication that you agree with my interpretation that Coyotes Team costs are indeed included as eligible expenses for which Hulsizer can claim his fee, even if the rest of the arena operations break even or even make a profit?

Regarding Hocking vs. Walker and the parking analyses... Beyond the actual parameters, in which case I think that Hocking has used overly optimistic assumptions as I have explained, I think we do well not to ignore both the timing and collateral evidence that casts some doubt about Hocking's analysis. Three city councilors (including Martinez, who supports the deal) have been quoted publicly as saying that the $100 million figure was the "transaction cost" required by Hulsizer, and the figures presented to them by city administration were from Hocking, which showed that the city could recoup that amount over 30 years. What is suspicious about Hocking's analysis is not only that it justified the required transaction cost, but also that it was completed 3 weeks after the Walker study. Since the COG had already paid for Walker's study, and had received a professional and credible projection, why wasn't the agreement with Hulsizer based on Walker's assessment? I think it is not illogical to propose the hypothesis that Hulsizer's demand for the parking was $100 million, and the COG needed an analysis that justified that lest they be clearly in violation of the gift clause. The COG's administration compounded this by neglecting to make councilors aware of Walker's study before they voted on the lease. (By the way, previously I worked for several years in government, involving many government analyses and negotiations on large projects, and I can tell you that any civil servant that withheld that sort of information from elected officials before they had to take a decision would have been fired on the spot... no questions asked). In any case, when the COG couldn't get Hulsizer to reduce the transaction cost, they asked Hocking to do another analysis. That his figures essentially matched the $100 million naturally raised some eyebrows, particularly since Hocking has been on an $8000 per month retainer by the COG. You can say that this is irrelevant as much as you like, but I expect that many an observer would find this to be not only odd process, but somewhat suspicious.

 

[Faltorvo]

K, as much as people love to heap derision on the CoG, and though some of it may be deserved, it may very well be that there have been earlier communications between the parties which may have led the parties to believe that GWI's intentions were not so abundantly clear.

IF Scruggs' allegations that Clint Bolick assured the CoG that they were okay with the deal are true, then it may be a case where GWI did not act in good faith and deliberately misled CoG. I suspect that there is a considerable amount of discussion and correspondence between CoG and GWI that has taken place in the background of which we are not aware.



I would suggest that, when things are being done in public which do not seem to make sense, there are often good reasons hiding in the reeds. The media never knows everything (and often only know what certain people want them to know).

As an aside, I do wonder why GWI has only published three documents, out of the reams of documents that GWI has provided. If you look at their document download numbers on their website, there are significant gaps. I wonder why that is.

When or where did Scruggs allege that Clint Bolick assured the COG that they were ok with the deal?

IIRC, Scruggs stated that CB said had all the documents needed to come to a conclusion on the deal.

Do you have a link to where she said what you are alluding to?

 

[bleuet]

Now 1:50 left in the third, GWI leads by 6.

 

[GSC2k2*]

ROFL This has to be the most idiotic thing I've ever heard in this idiotic saga.

Not even close. Nothing will ever touch the foolish and doomed-to-fail scheme hatched in the first place by Messrs. Balsillie and Rodier.

1. How could Glendale ever prove losses? Especially in the hundreds of millions? There is absolutely no way to project losses of any sort in any way concrete enough for a judge to entertain it for more than a millisecond.

That is the most straightforward part of their action (should one proceed). The range of interest rates for A1 issues in the bond market is well established, particularly when the potential plaintiff CoG is a wsell0-established issuer with a history of rates achieved in the market that can be compared to other issuers.

That ignores the high degree of likelihood that CoG has indications of the interest rates that the issue will cost at this time (otherwise, MH would have no basis of suggesting the incremental interest cost, as he stated last week).

THat is the LEAST of their concerns.

2. How the hell can Glendale sue GW and ask, "Oh, by the way, Mr. Judge, could you also tell us that our deal here is legal? Y'know, right after you tell GW to write us that billion-dollar check?"

THey do that by asking for declaratory relief. That is available under the AZ court system (I have confirmed it with an AZ-qualified litigator). It is available in many jurisdictions, BTW.

3. Why would Glendale want to push this into the courts at this point? It would take weeks if not months to get this before a court. And I would bet that GW would immediately counter-sue, which would make the whole situation even messier.

I don't think this Glendale suit thing is anything but complete and utter ********. But if the city is stupid enough to try and sue GW, that will mark the end of the Coyotes in Arizona. No way would the NHL stick around for any sort of court battle here.

Maybe, but ask yourself this:

If CoG plans to request a declaration that their lease transaction is legal, why would they do that unless they plan to sign the lease? What good would such a declaration be if they were not going to sign, and the NHL were backing away?

 

[Whileee]

Maybe, but ask yourself this:

If CoG plans to request a declaration that their lease transaction is legal, why would they do that unless they plan to sign the lease? What good would such a declaration be if they were not going to sign, and the NHL were backing away?

I think that a few things are settling in. First, the COG does not appear prepared or able to sell the bonds and thereafter to sign the lease without removing the legal cloud inherent in the GWI's challenge to the legality of the deal. They have tried a public relations offensive, along with other methods of cajoling the GWI, which appear to have hardened the positions, not softened them. Therefore, I believe that they are left with only the option of forcing the GWI out of the mix. Perhaps they believe that the threat of legal action will do so, and will wait to see if the GWI blinks under that threat. If not, perhaps they could take the GWI to court. In that case, I can't see how the NHL will be assured that this will be resolved before they must make a decision before next year. Remember, this is not just about who will ultimately win legally, but to definitively remove the legal threat very quickly. Even if the COG gets a court to rule in their favour fairly quickly, I expect that the GWI would appeal, so this would then indicate to the potential bond purchasers that the legal uncertainty would not go away soon.

In the meantime, I have a hypothesis that the NHL is going to wait as long as possible in Phoenix because they also have grave concerns about Atlanta. They could perhaps stomach losing either Phoenix or Atlanta, but I think that Bettman will try to do anything possible to ensure that he does not lose both markets in the same year. If Phoenix does fall through, I think Atlanta can expect Herculean efforts from the NHL to preserve the market. If Phoenix is resolved, then I am less certain that the NHL would go all out to preserve Atlanta.