Tuesday, May 5, 2009
Is Balsillie's Play A "Game of Chicken?"
((HT: Globesports/Gordon and Shoalts))
Sean Gordon and David Shoalts of the Globe and mail caught up with Research in Motion/Blackberry founder Jim Balsillie Tuesday night.
He's excited about his bid to buy the Phoenix Coyotes.
The NHL...? Not so much...
According to a source close to the deal, Balsillie ((pictured with Ottawa Senators owner Eugene Melnyk, thanks Mike Cassese/Reuters)) plans to lean on his sterling business reputation and play the public opinion card strongly; the first burblings of the strategy showed up in the form of a new website in support of a seventh Canadian NHL team.
At the same time, the source indicated there was no prior agreement or consultation between Balsillie and league commissioner Gary Bettman — who was said to be incensed at news of the proposed deal — although there are suggestions other owners and the players' union could support moving the team. And Balsillie is reportedly determined not to play by Bettman's rules, so just to be on the safe side, he has also pulled what appear to be some canny legal manoeuvres.
According to court documents and statements issued by the Coyotes and Balsillie's Delaware-based holding company, the co-founder of Research In Motion has posted $17-million (all figures U.S.) in debtor-in-possession financing to keep the team afloat during bankruptcy proceedings.
That puts Balsillie at the head of the line when it comes to creditors, ahead of the NHL — which has been bankrolling the cash-hemorrhaging team for months — and the team's bankers.
Balsillie addressed a hastily assembled news conference Tuesday night at the Metro Toronto Convention Centre — confused staff complained no one had booked the room where he was scheduled to speak after a black-tie dinner marking his induction into the Canadian Business Hall of Fame.
"A condition of the offer is that we get permission to move the team to the unserved market of Southern Ontario," said a tuxedo-clad and clearly enthused Balsillie. "I just got told we've been overwhelmingly flooded with thousands and thousands of people registering in the last hour [on the website].
"I'm clearly just a passionate hockey fan. I don't have to tell anyone here it's the greatest game in the whole wide world."
Balsillie wouldn't comment on the NHL's response, insisting it was a matter for the courts, and when asked if the league's position amounted to a declaration of war, Balsillie thanked everyone and left the room.
A former NHL owner was more forthcoming, calling it "a game of chicken" whose winner will be chosen by an Arizona bankruptcy judge.
Sources say Balsillie quietly contacted municipal officials in Hamilton, Ontario, about 10 days ago to sound them out over whether they would be interested in reviving a 2004 deal for lease rights to the Copps Coliseum and Hamilton Place.
City officials indicated they would leap at the chance, the source added.
News of the bankruptcy and the shock offer to buy the team stunned several owners —"Holy shit!" was the response offered by two of those contacted by The Globe — including one of the teams that could oppose a relocation to the Hamilton region.
"This is a complete surprise, you still need league approval for all this stuff, so I don't know what to say," said Buffalo Sabres minority owner Larry Quinn.
Though it's hoped Balsillie's offer, worth $212.5-million and conditional on moving the team, will be accepted by June 30 — much depends on whether a U.S. bankruptcy court approves the arrangement — it's not clear the team will take the ice in Ontario any time soon.
Beyond the immediate hurdles that the NHL is vowing to throw in front of the bid, there will likely be court fights to follow on the Coyotes' arena lease, whether the team can be moved, and on compensation owed to regional competitors such as the Toronto Maple Leafs — who have long argued they hold exclusive rights on the market —and the Sabres.
Either way, Bettman's sway over the owners, many of whom have been quietly courted by Balsillie, will be tested in what is shaping up to be a contest of wills.
An NHL governor who spoke on condition of anonymity revealed some of the animus some owners feel toward Balsillie, whose ham-fisted attempts to move the Penguins and the Predators to the Toronto region earned him no friends among Bettman and his coterie of allies.
The governor pointed out that franchises are granted by the league, which could just as easily revoke them — although that would surely form the basis of a nasty and lengthy lawsuit.
"Balsillie tends to do things like this. The game last night [on Monday between the Penguins and Washington Capitals] was amazing, it's too bad this has to follow on the heels of that," the governor said.
Then there's a statement issued Tuesday night quoting Moyes: "The procedure is in place for other parties to offer more, particularly if the City of Glendale provides financial incentives to keep the team in Glendale."
Those incentives, say hockey sources, would likely have to amount to $20-million per year to make the team viable.
More evocative, then, is a subsequent passage of the release: "overbids must exceed the PSE proposal by $5-million and must be fully funded at closing without a financing contingency."
Given the league has had no success flogging the team to a succession of local and out-of-state suitors — who could have picked up the team for nothing as long as they were prepared to assume $180-million in liabilities — a last-minute bid from a white knight seems unlikely.
As Moyes put it, "I have a duty to seek a transaction that will return the most in sale proceeds to the secured and unsecured creditors. No other proposal to acquire the team provided nearly as much payment to the creditors as that offered by [Balsillie]."
The proposed deal announced yesterday would pay out roughly $80-million to SOF Investments L.P. — a private equity fund with links to computer magnate Michael Dell — and $35-million to the NHL. Another $97.5-million would be distributed among unsecured creditors.
And there are many.
According to a court filing, Moyes is the largest unsecured creditor, having put $103,867,531 into the team (he will forfeit the claim if the deal goes through). The Coyotes owe tens of millions more to charter jet companies, insurers, team broadcasters, and the Glendale, Arizona, water authority, among others.
Stephen Brunt offers up a dead-on column for the Globe and Mail:
"...So here we are … with an owner who has no other options, in a league fighting multiple fires, with a process that is now in the hands of the courts. A more-than-fair offer is on the table, one that will help prop up franchise values, will solve a huge problem, will save millions in bailout money and will instantly transform a have-not franchise into a have.
Think maybe Jim Balsillie has talked to some of those other owners over the past few months? Think maybe they've come to understand he's not the bogeyman, that he might be the best and only alternative right now?
And when the commissioner calls them to the barricades for what would be a protracted, expensive legal battle to keep Balsillie out of the league and to keep him from moving the club (he certainly meets all of the criteria they've laid out in their bylaws), think they're ready to follow him blindly into battle one more time?
He won the lockout — and look at what that fine, fail-safe labour agreement delivered. He beat back Balsillie twice, and how did that fix anything? He said not so long ago that Phoenix would be just fine. How did that work out?
By all accounts, the commissioner was apoplectic last night. It seems he may have good reason.
In chess, it's called being put in "check."
Bettman has already proved himself a grandmaster of the game. But even the best of them eventually meet their match..."
Those of us here at OSG HQ agree with Brunt and can't wait for the next gambit by either side of the table.