Balsillie Bid "Highest and Best," Auction September 10th

((HT: GlobeSports/Shoalts))

Jim Balsillie’s $212.5-million (all currency U.S.) bid for the Phoenix Coyotes survived more attacks from the National Hockey League and the city of Glendale Monday thanks to a U.S. bankruptcy court judge who declared it the “highest and best” of the three offers for the team.

Judge Redfield T. Baum also kept in the game a bid from a group of Canadian and American businessmen known as Ice Edge Holdings LLC when he agreed to postpone the auction sale for bidders who want to keep the Coyotes in suburban Glendale, Ariz., from Wednesday to Sept. 10.

Both of the local Glendale bidders – Ice Edge and Chicago White Sox owner Jerry Reinsdorf – wanted more time to negotiate a new arena lease with the city and new deals with creditors. The sale will now be held on the same day as an auction for Mr. Balsillie and any other bidder seeking to relocate the team if neither of the Glendale bids are accepted. His offer is conditional on moving the team to Hamilton.

The judge said he will rule on what will happen with the relocation auction by Wednesday, musing in the hearing that he might hold one auction for all bids. The judge also recognized the legal fight over the team will probably get even nastier, saying lawsuits are likely to follow from the losing parties on Sept. 10.

The NHL formally rejected Mr. Balsillie as an owner last week but could be overruled by the court.

“We … note that the judge acknowledged the fact that Jim Balsillie’s bid is ‘the highest and best’ bid for the Phoenix Coyotes,” said Bill Walker, a spokesman for Mr. Balsillie. “We agree. That is the reason why the court is not ruling out the relocation auction despite the NHL’s request for it to do so.”

The NHL, which earlier in the day charged that Mr. Balsillie, the co-CEO of Research In Motion Ltd., “lacks the good character and integrity required” by the league’s constitution and bylaws, declined to comment. NHL deputy commissioner Bill Daly said there would be no comment until Judge Baum rules on the relocation auction.

Both the Reinsdorf bid ($148-million) and Ice Edge’s ($150-million) involve relatively little cash for the creditors and are conditional on negotiating new deals with the team’s creditors and a new arena lease with Glendale.

Mr. Balsillie received another boost yesterday when a lawyer for the Coyotes’ largest creditor said it was only interested in being paid in full and in cash. A lawyer for SOF Investments, a fund owned by computer tycoon Michael Dell, told Judge Baum that only Mr. Balsillie’s bid would do that, although the fund had issues with all three bids. Lawyers for SOF Investments reserved the right to agree to any of the bids if negotiations with either Mr. Reindsorf or Ice Edge produced an acceptable result.

The City of Glendale and the NHL started throwing punches even before the emergency hearing began. The city asked the court to find Coyotes owner Jerry Moyes and his lawyers in contempt of court for disclosing confidential information and the NHL launched its attack on Mr. Balsillie in court filings.

However, shortly after the hearing began, Judge Baum waved off the demand to find Mr. Moyes and his lawyers in contempt. He later called on the lawyers for all parties to meet and discuss the situation.

As a result of Mr. Moyes revealing some of the concessions the Reinsdorf group is seeking from the city – a demand for subsidies of $23-million a year from 2010 until 2014 and $15-million a year after that plus an escape and relocation clause – lawyers for Glendale claimed that attempts to negotiate a lease with Mr. Reinsdorf and Ice Edge were badly damaged.

The declaration said Mr. Reinsdorf threatened to withdraw his bid after he learned that the concessions he was demanding from Glendale city officials were revealed in a court filing last Friday by Mr. Moyes and his lawyers.

“Glendale is absolutely outraged that Moyes and the Jennings Strouss firm would intentionally disclose confidential information produced in discovery and willfully violate the court’s confidentiality order,” the document said.

Glendale city manager Ed Beasley, who is leading the negotiations with Mr. Reinsdorf, said in a declaration filed with the court that efforts to agree on a new lease were “severely compromised.”

The Moyes filing said the $23-million subsidy was to be raised by creating a special district around the Jobing.com Arena and the neighbouring Westgate City Center in Glendale. There would be “voluntary” surcharges to retail sales in the district, as high as 11.5 per cent, although no details were given as to how this would be accomplished.

The Arizona Cardinals made it known on the weekend they are not happy with the idea of the surcharges. The NFL team’s stadium would be in the special district and team president Michael Bidwell was quoted in local media reports as saying it was not fair that Cardinal fans should have to pay for the Coyotes’ problems.

In addition, if the surcharges failed to raise the required amount, the city itself would have to pay the Coyotes. The Coyotes would also get the right to move after 2014 if the team operated at a net cash loss (it lost more than $60-million in the 2008-09 season) and the city refused to pay it $15-million per year. The document also said Glendale officials had so far refused to agree to the demands.

Daryl Jones, one of the leaders of the Ice Edge group, said they are not seeking the same kind of subsidies from Glendale, nor do they want an escape clause to let them move the team.

“We aren’t looking for concessions,” Mr. Jones said in an e-mail message. “We are looking for an enhanced long-term partnership with the city. We have also not contemplated an escape clause.”