A courtroom tussle over ownership of the National Hockey League's Phoenix Coyotes team threatens to deprive the NHL of something most sports leagues hold dear -- the right to decide who can own a team, and where it may relocate.
Canadian billionaire James Balsillie, co-CEO of BlackBerry maker Research in Motion Ltd, upped the ante late on Monday by raising his bid for the bankrupt team by $30 million to $242.5 million. That would be almost $100 million higher than the next-highest offer of $150 million by Ice Edge Holdings, which includes current Coyotes coach and part owner Wayne Gretzky.
Balsillie wants to move the team to southern Ontario in Canada, against the NHL's wishes.
"I would be fairly surprised now if (NHL officials) don't raise the bid," a sports banker said of the league's $140 million offer made last month.
"They're fighting to preserve the rules of the game," said the banker, who asked not to be identified because his firm has done work with the NHL.
Analysts called Balsillie's sweetened bid strategic.
Balsillie's bid puts pressure on Judge Redfield Baum of the U.S. Bankruptcy Court in Phoenix, who is looking to maximize the return on the team, analysts said. It also includes an offer of up to $50 million for the city of Glendale, Arizona, for the loss of the team's home games under a long-term lease.
"There will be significant pressure on the court to mandate that it take the highest and best offer," said Tim Turek, managing director with BBK Ltd, a Southfield, Michigan, firm that specializes in corporate restructuring.
"The court may have no choice but to award him the deal," Turek said of Balsillie's offer.
Baum still must decide whether to include Balsillie's bid in the two-day auction set to start on Thursday. Last month, NHL owners rejected Balsillie's ownership application.
The NHL and a spokesman for Balsillie declined to comment.
COURT POWERS
Last month, the NHL entered the auction process with a $140 million offer in a bid to shift control of the sale process away from the bankruptcy court. The NHL wants the team to stay in Arizona, but has only guaranteed one more year in Glendale.
In court, the North American sports league, which has 30 teams, also promised to send any profits from a later sale of the money-losing team to a lineup of creditors that includes an investment firm controlled by Dell Inc CEO Michael Dell.
Bankruptcy judges have extraordinary powers, including throwing out contracts that could hurt the value of an asset like the Coyotes, analysts said.
"It would be uncharted territory for a judge to approve a bid over the league's wishes, but if the dollar differential is large enough, he may," said Paul Rubin, a partner in Herrick, Feinstein LLP's bankruptcy department.
NHL officials have vowed in court to appeal a Balsillie victory if it occurs, arguing that the league has the right to control whom teams are sold to and where they play.
Otherwise, the NHL risks allowing a precedent that could open the door to any team filing for bankruptcy and moving where it chooses, analysts said. The NHL has repeatedly said the May bankruptcy filing was a way to skirt league rules on ownership and relocation.
In the end, several analysts question why the NHL would not reach an out-of-court settlement with Balsillie to avoid such a scenario. Most call that outcome unlikely, however, due to the animosity between the league and Balsillie.
"That was and still remains the most viable option," said Marc Ganis, president of Sportscorp Ltd, a Chicago sports business consulting firm. "If ever there was a screaming need for court-ordered mediation, where maybe cooler heads can prevail, this would be it."
(Source: Reuters)
