The National Hockey League asked a federal judge to halt most court action in the bankruptcy case of the Phoenix Coyotes until deciding who controls the team.
The Coyotes and the NHL agreed to defer until May 19 the most contentious part of the bankruptcy case, the proposed sale to Jim Balsillie, co-chief executive of Research In Motion Ltd. Balsillie and the Coyotes are requesting permission to complete a sale by the end of June in order to allow the team to play in Canada for the 2009-10 season.
“Frankly, there isn’t enough time between now and the end of 2009 to go through the process of a relocation,” NHL attorney Anthony W. Clark said today in court in Phoenix.
The league wants Chief Judge Redfield T. Baum to prevent Coyotes owner Jerry Moyes from exercising any day-to-day oversight of the team. After Moyes’s decision to put the Coyotes into bankruptcy on May 5, the NHL issued a statement claiming that it removed him from “all positions of authority to act for or on behalf of the Club.”
The league had planned to appear before Baum as the owner of the team. In court papers, Moyes disputed league claims that he had been removed. Clark said he was representing the NHL and didn’t say he spoke for the owner of the Coyotes.
‘Home Territory’
The Coyotes sued the NHL in bankruptcy court today, claiming the league is conspiring to prevent a move in order to protect the Toronto Maple Leafs. Under league rules, which the Coyotes claim violate U.S. antitrust laws, the team couldn’t move to Hamilton, Ontario, because that would put it within the Maple Leafs’ “home territory.”
League rules have repeatedly withstood legal challenges, NHL Deputy Commissioner William L. Daly said in an interview today. The league isn’t conspiring to protect the Maple Leafs, he said. He said the anti-trust claims use old legal theories that have been rejected in the past.
“You would think it was written 40 years ago,” he said.
Minority owner Wayne Gretzky, the NHL’s all-time leading scorer, has run the team’s hockey operations since 2001 and has been head coach the past four seasons.
Until the question of who controls the team is settled by Baum, the NHL agreed to loan the Coyotes $2 million to keep operating, Clark said.
‘Substantial Harm’
Going forward with legal motions related to the proposed sale and the Coyotes’ request to borrow money from Balsillie “would inflict substantial harm” on the Coyotes and the NHL, the league said in court papers.
League Deputy Commissioner William L. Daly said no professional sports team has ever used bankruptcy to move against the wishes of the other owners. Allowing that to happen here could jeopardize the tradition of joint action that allows the league to be successful, Daly said.
Moyes, founder and chief executive of Phoenix-based Swift Transportation Co., gained control of the team in 2006. In court records, Moyes said he has spent $380 million on the Coyotes, including loaning money to the team to pay its players and other expenses.
“I’m going to be lucky to get $100 million out of this,” Moyes said.
The team moved to Phoenix from Winnipeg, Canada, in the mid-1990s and has not made a profit since at least 2005, according to court documents. The company has lost at least $73 million since 2005.
Secured Lenders
Moyes is owed about $92 million by the team, a debt that isn’t guaranteed by any collateral, which means he may be repaid only if the company’s secured lenders are repaid $75 million.
Balsillie, a triathlete who graduated from Harvard Business School in 1989, failed in previous attempts to move the NHL’s Nashville Predators and Pittsburgh Penguins to Canada.
The Coyotes have proposed holding an auction at which Balsillie’s offer of more than $200 million would be the opening bid. Should no other bids come in, he would automatically win.
Baum agreed to hold a hearing later this month to decide whether to allow the auction.
The case is Dewey Ranch Hockey, LLC, 09-09488, U.S. Bankruptcy Court, District of Arizona (Phoenix).
(Source: Bloomberg)
