((HT: David Shoalts/GlobeSports))Shoalts, once again, updates the horrific circumstances with the Phoenix Coyotes and their lack of a solvent owner at present.
The Phoenix Coyotes will likely survive at least one more season in the desert after NHL commissioner Gary Bettman recently received majority approval from the league's governors to negotiate an increase on the NHL's line of credit by almost three-fold to $190-million (all currency U.S.).
While the move is not specifically aimed at the Coyotes, it does mean the NHL would have the necessary funds to continue paying for the operation of the struggling franchise – which it began doing last fall, after owner Jerry Moyes became unable or unwilling to pay for its losses. It is thought the Coyotes could lose as much as $35-million this year.
An NHL governor, who requested to not be identified, said Bettman got approval to boost the line of credit with New York-based Citibank NA by $125-million from its existing limit of $65-million, although not all governors were in favour of the move.
Bettman still has not worked out the increase with the bank, but is expected to do so in the near future. The increase follows similar actions by other professional sports leagues in recent months.
Leagues are able to negotiate better terms with the banks than individual teams, sources say, which makes cash available in a tight lending market in case some franchises run into trouble.
The NBA, for example, recently increased its line of credit to $200-million.
A source close to the NHL's board of governors said the Coyotes owe the league between $8-million and $10-million. The rest of the club's debt, most of which is held by a New York hedge fund, is thought to be about $80-million.
It is estimated the league advanced as much as $30-million to the team during the 2008-09 season, but most of that was in the form of advances on the Coyotes' portion of the NHL's revenue-sharing money, plus league television, merchandise and other revenues. The club will also get about $6.3-million from the players' escrow account as a rebate on their salaries because league revenues did not match projections.
There was some speculation the Coyotes, whose attendance is among the lowest in the NHL, would miss a full portion of revenue sharing (which could be as much as $15-million) because the team's growth in average attendance this season would not match or exceed the league's rate.
But one NHL owner said the preliminary numbers show the Coyotes had enough growth in paid attendance to get a full share. Other sources have said the Coyotes bought their own tickets to help hit the target, which is not against league rules under certain conditions.
NHL deputy commissioner Bill Daly declined to comment. However, a league source confirmed the governors' approval of a credit expansion, but added the NHL still does not intend to pay the Coyotes' bills for another season.
The problem is, according to sources in the NHL and the investment banking community, the Coyotes franchise is still nowhere close to being sold, despite rumours of interested parties. The latest talk, according to one league source, concerns a group from the Phoenix and Tucson, Arizona, area, although the identity of the principals is unknown.
Several potential buyers with deep pockets have looked at the club at Bettman's request, but all declined after seeing at the Coyotes' financial numbers. It is estimated Moyes has lost more than $250-million on the team since he bought it in 2001.
Despite the losses and lack of interest in owning the franchise as long as it is tied to an arena in the remote suburb of Glendale, one NHL owner said there is little risk in advancing more money to the Coyotes.
The NHL has the absolute right to revoke a franchise at any time, which supersedes agreements such as the Coyotes' arena lease, which calls for enormous financial penalties if the team leaves before it expires in 2033.
“Even if the league has to pump $40-million into the team, there is still no risk,” the owner said. “It would be an absolute last resort, but the NHL could get its money back by revoking the franchise, selling it and moving it to another city.”
Several NHL and investment banking sources say the only way Bettman could sell the Coyotes is to get the City of Glendale to rewrite the lease to include an escape clause after at least two seasons. Glendale officials are willing to increase the annual subsidy of the club, but are resisting an escape clause because the city took on $180-million in debt to build the arena and losing the major tenant would be devastating.
“It's so messy to move with the long-term lease and the debt,” one banking source said, adding no one can predict the outcome. “It's a mess. Anyone who tells you what's going on there … well, it's all over the place.”
The latest group to take a pass on the Coyotes is Sports Properties Acquisition Corp., an investment fund operated by a group of powerful businessmen and former politicians. Andrew Murstein, a New York businessman whose family owns Medallion Financial Corp., a publicly traded investment company, is one of the principals of Sports Properties, along with former New York governor Mario Cuomo and former U.S. congressman Jack Kemp.
Sports Properties is an investment fund created for the purpose of buying sports properties by selling shares. It has raised $216-million, and its declared purpose is to buy one franchise for between $250-million and $1-billion. The fund tried and failed to buy baseball's Chicago Cubs.
Murstein, who could not be reached for comment, has said they are looking at franchises in various sports. One source said Murstein would only be interested in the Coyotes at a price in the neighbourhood of $125-million and if Glendale granted an escape clause.
Those of us at OSG HQ know full well that the Dogs are set to be in Arizona for the short term. That decision is completely apart from the amount of financial success. Wayne Gretzky has stated publicly that his interest in the franchise, currently, will be in Arizona and Arizona alone. Gretzky has also said in separate interviews that a second franchise would work in the Greater Toronto Area ((GTA)).
We're not connecting the dots here. But it's clear that a good, young team would be better suited in a better environment where they're not hemorrhaging money.
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