Murky Details Around Phoenix Coyotes Bankuptcy

More details have emerged surrounding the bankruptcy filing by the Phoenix Coyotes on Tuesday. The NHL appears to be caught off guard by the bankruptcy petition and for good reason. It is believed that the league may have taken over operations of the team earlier in the year.

A statement from a Glendale city spokesman has come to light that would indicate that the NHL had assumed control of the Coyotes when the team was given a loan by the league to pay overdue rent expenses. That would mean that owner and managing partner Jerry Moyes may not have had the authority to file for bankruptcy without league consent. Since the filing, the NHL have removed Moyes from control of the franchise and now the league are completely in charge of the Coyotes franchise.

The original bankruptcy filing also included a proposed sale to PSE Sports & Entertainment, LP, a group that features RIM C.E.O. Jim Balsillie. It seems odd that a bankruptcy court would allow a company to file for bankruptcy with a sale in place. The only thing needed for a sale of a team to go through is for the league to approve it. Now, both the league and the courts have to approve the sale due to the bankruptcy filing. Not to mention that the sale has to be run by the city of Glendale. The Coyotes’ arena rental contract with guarantees the city $400 million that they would have been owed in rent if the team stayed for the duration of the contract. That payment is contingent on the courts allowing Balsillie to buy the team on the condition that he could move it. That would be huge legal mess for all sports leagues because then the courts would effectively remove authority from the leagues to control the locations of their franchises.

Interestingly, Balsillie told reporters that he made the offer after the bankruptcy filing. The Coyotes seem to already know that this is the best offer they will get. This says to me that the offer was made or negotiations had started before the bankruptcy filing. Also, as mentioned above, the filing did mention that the offer was in place before the filing was made. All this could cause the bankruptcy and sales proceedings to be tied up in courts until close to the PSE imposed deadline of June 30. In the time between now and the NHL Board of Governors meeting to approve a potential sale, PSE would have to have all the ground works for a franchise in place for the sale to be approved. That means that PSE would have to disclose where the franchise will be located, the arena the team would play in would have to be up to NHL standards, a provisional management team would have to be in place, and a whole host of other things need to be taken care of to ensure that a franchise can get off the ground in a new location this fall.

This story isn’t going away anytime soon. Well, Balsillie isn’t going away anytime soon. Maybe if he keeps going at attempting to buy a team, the NHL will just give up and let him have one. But it looks like all the legal red tape could tie off Balsillie’s chances at landing the Coyotes.

UPDATE: NHL Commissioner Gary Bettman tells CNBC that NHL will investigate whether or not the Phoenix Coyotes owner Jerry Moyes had the authority to file for Chapter 11. He also said he believes that the Coyotes will play in Phoenix next season. Like I said, this story isn’t going anywhere soon.

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