NHL Keeping Coyotes Afloat

((HT: Arizona Republic/Craig Harris))

The National Hockey League has loaned money to the Phoenix Coyotes ((fans pictured, thanks Arizona Republic)) to keep the financially troubled franchise operating, but if the team fails to pay its debt the league can take it over, according to the agreement.

The day after the team agreed to loan terms February 24 with the NHL, it paid Glendale nearly $351,000 in overdue arena rent payments that dated to late summer 2008. The money also likely was used to meet player payroll.

The loan, for an unknown amount, gives the NHL more control over the future of the Coyotes - including the possible relocation of the team. The Coyotes have never made money since owner Jerry Moyes became an investor in 2001, and annual financial losses have exceeded $20 million during his tenure. Moyes, also owner of trucking giant Swift Transportation Co., is looking for new investors in the team.He declined to comment.

Although Moyes has continued to bail out the team with his personal fortune or by obtaining loans, the team made the playoffs just once, making it challenging to generate money from local TV and radio contracts and ticket sales.

This season, the Coyotes had the third-worst average home attendance (14,875) in the 30-team NHL with a modest payroll of roughly $43 million, just above the NHL-mandated $40.7 million minimum per team. Teams cannot spend more than $56.7 million.

The Coyotes also were forced to lay off 18 employees or about 10 percent of its staff earlier this year.

The unspecified NHL financing came nearly a month after NHL Commissioner Gary Bettman publicly said the team was "not on life support" and called formal loans to the team "wildly exaggerated" speculation.

The NHL, which also advanced funds to the Coyotes that they were to receive later in the year, declined to comment.

To get money from the league, the team pledged all of its assets, including its management agreement of Jobing.com Arena in Glendale, as collateral, according to financial records filed with Maricopa County Recorder's Office. Glendale officials had no comment.

The league's investment ultimately could give the NHL leverage to move the team, according to one sports business expert.

"It could be part of a procedural move to take control of the franchise under certain circumstances other than the team going bankrupt on its own and having additional negative public relations for the organization," said David Carter, executive director of the USC Sports Business Institute.

Carter, who has provided financial advice to sports organizations, said leagues, including the National Basketball Association, provide financial support for teams that are unable to meet payroll.

Carter added that the NHL investment also gives the league leverage to put the team into a receivership - a form of bankruptcy to reorganize with a court-appointed trustee.

Public records do not indicate how much money the NHL loaned the Coyotes. The team already had borrowed at least $57.5 million since December 2003 from affiliates of MSD Capital, records show.

MSD Capital is a New York-based private investment firm that oversees the capital of computer entrepreneur Michael Dell and his family. Dell Financial Services of Austin, Texas, also is a major lender to the National Hockey League.

A spokesman for MSD declined to comment on loans provided to the Coyotes.

To secure numerous loans from affiliates of MSD Capital, the Coyotes in 2007 pledged all of its assets to the investment firm. The assets were used in the NHL loan and the MSD Capital affiliates agreed to take a "junior" or second position for its loans, records show.

That means if Moyes finds new investors in the team the NHL would be repaid first and MSD Capital would be paid from any remaining proceeds. Unsecured creditors then would be paid.

When Moyes, who eventually became majority owner, bought the team in 2001 with developer Steve Ellman and team coach Wayne Gretzky they paid about $125 million. The team is valued at $143 million by Forbes, the financial magazine that estimates values for all professional sports teams.