Thursday, May 7, 2009

Balsillie and the latest Saga

So, I'm sure everyone has heard by now about Jim Balsillie's latest pitch to buy himself an NHL team. Unlike the last two, this time he has been explicit in the requirements that he be able to move the franchise to Southern Ontario. Balsillie has played this last offer incredibly well, and it has Bettman fuming. In his last two offers, Bettman has stepped in to ensure that Balsillie does not get his team.

Here is why this offer is so well done. With the Phoenix offer, Balsillie waited until the Coyotes petitioned for bankruptcy protection. By doing this, the lion share of the decision making now ends up in a bankruptcy court instead of the NHL headquarters. Bettman is now challenging this, not surprisingly. But, he is challenging whether the owner of the Coyotes legally can put the team into bankruptcy. This makes sense, since the NHL will lose a lot of control over the fate of the Coyotes if the bankruptcy proceeds.

What the bankruptcy court is most concerned with is how the Coyotes' creditors (secured and unsecured) can get the biggest share of their money owed. To do this, the assets are put into auction and go to the highest bidder. Balsillie, with his $212 million USD offer, is the highest bidder and it is unlikely the competing bid that Bettman likes will match it. However, with the situation in the courts, Bettman can not go to the Coyotes owner and persuade him to take the lower bid (as what happened in Nashville). The bankruptcy court will not allow that. So, there are a couple things that can happen that would work out negatively for Balsillie:

1. The bankruptcy court finds that it can not force the Coyotes to relocate legally, which voids his offer to purchase.
2. A new ownership group bids $217 million USD or more. The Coyotes owner would be mandated to take the highest bid in bankruptcy.

Of course, Balsillie needs 2/3 of the NHL governors to approve him as an owner. This is far from a slam dunk, since MLSE and Buffalo would surely vote no. As would the handful of GM's that Bettman has in his pocket. However, with the economy in the states some owners have become increasingly concerned about falling franchise values. $212 million USD is an overpayment for the Coyotes, which would help in bringing franchise values of places like Anaheim, Nashville, San Jose, Atlanta, Columbus and Florida up into the $200 million mark. This is great for those owners. It has little impact on the Leafs, Rangers, Flyers, Canadiens, and Red Wings since their values are well over the $212 million mark. The vote will be interesting.

Good luck to Balsillie on this one. Canada deserves another NHL team.

Cheers.

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