Sunday, June 27, 2010

Don Maloney's Encore Performance

Last year, Don Maloney was voted General Manager of the year in the National Hockey League. This year he may have an even tougher job holding together the Phoenix Coyotes.

Maloney built the Coyotes hugely successful 2009-10 team primarily through deft trading and smart shopping in the free agent bargain aisle. While a few pre Maloney draft picks are impacting the team at the NHL level, the club hasn’t gotten a lot of help from more recent drafts. Hopefully that help is on the way because the budget constraints of league ownership will likely force the Yotes’ into more than desired roster turnover for the 2010-11 season.

Only a handful of people – Don Maloney, Gary Bettman, Bill Daly and a handful of NHL Governors know what the Coyotes actual player budget is for 2010-11. Since Maloney said it was an increase over last year (and we are pretty sure it was in the $44MM neighborhood last time around) I’m thinking it is in the neighborhood of $47.4. That’s midway between the cap floor ($43.4) and the cap midpoint ($51.4) And if it’s not that high, owners in waiting Anthony LeBlanc and Daryl Jones may be chewing on the NHL to loosen up the budget pocketbook a little so the Coyotes can try to keep one or two of their highly valued UFAs.

It’s not the end of the world. Even with new owners, it is likely the Coyotes will have a self imposed budget until revenue streams improve. And with a number of young players seemingly ready to challenge for NHL jobs, the budget should be manageable. Unfortunately the margin for error is not great.

Maloney is doing everything he can to stretch his checkbook. He’s already signed four restricted free agents – Adrian Aucoin, Scottie Upshall, Taylor Pyatt and Woltek Wolski. Wolski got a big contract (2 years at $3.8MM) worthy of his status as the team’s most skilled forward. Pyatt and Aucoin both accepted backloaded two year deals to help the payroll logjam and Upshall is in on a one year contract. In a perfect world the Coyotes would have liked to lock Upshall up for a longer tern but with the uncertainty of ownership and Upshall coming back from ACL surgery, it was the best deal for all concerned. The downside is that he will be an unrestricted free agent next June and may be in line for a much larger contract.

Think of it as Maloney’s version of “buy now, pay later”.

That good news has somewhat obscured the pressing issues facing the Yotes. The team has four unrestricted free agents – Matthew Lombardi, Zbynek Michalek, Lee Stempniak and Derek Morris – and all are free to sign with any team in the league on July 1st.

Michalek was always the least likely to return to Phoenix. The 27 year old defenseman has been one of the Coyotes strongest players and best values since joining the team in a trade with the Minnesota Wild. He’s in line for a whopping raise from his current $1.25MM wage to something in the $3.5 – 4MM neighborhood and will command a 4-5 year term. That’s a lot of money for a defensive defenseman. With the Coyotes depth on defense and the need to open spots for younger players, it’s unlikely he can be fit into the budget going forward. It has been widely speculated that Z will join his kid brother in Ottawa. Don’t be surprised to see his rights swapped to another NHL team in advance of the July 1 UFA marketplace.

I’ve always felt Lee Stempniak would not stay in Phoenix. A playoff rental, he took Upshall’s place on the forward lines. Stempniak has been a streaky player throughout his career, best illustrated by his 14 goals in 18 regular season games after joining the team and then being zipped in the 7 game playoff series. Thanks for your service Lee, but unless the price drops to bargain levels, he won’t be back.

If Michalek does leave, it increases the chances Derek Morris will return. I thought there was only room for one of Morris or Aucoin on the backline but Derek is a favorite of team management and a permanent Valley resident. The hard reality of the market place is that he will have to accept less money for the privilege but I don’t think there will be much of a market for his services. He may end up with a team friendly contract similar to Aucoin.

And finally, Matt Lombardi is the fourth unrestricted free agent of note. Lombardi, who came from Calgary in Maloney’s signature trade (along with the pick that turned into Brandon Gormely), is the free agent who seemed most likely to resign with the team. Losing him will hurt.

While Lombardi is a not to be confused with a number one center, he’s an excellent player who brings great speed, versatility and energy to the team. He’s a good penalty killer and scored a number of key goals last year. And he's also a part of the young veteran core that really carried the team last year.

Players with similar skills and results have gotten free agent contracts in the $3.25MM range for 3-4 years. It would seem that kind of deal could fit under the current constraints. Unless the bidding becomes prohibitive I expect Maloney will be in on Lombardi.

The Coyotes have in house replacements available but organization depth will clearly be affected. Kyle Turris, who showed signs of fulfilling his immense promise in the second half of last season, could step in for Lombardi. Don Maloney commented on NHL radio during the draft that he thought Turris would be in the NHL this year. Last year’s first draft pick, Oliver Ekman-Larsson is likely to secure a position on defense. Upshall’s return will mitigate the loss of Stempniak. If Kurt Sauer can return from post concussion syndrome, he could step in nicely for Michalek.

Free agent additions? Don’t expect much. Unless a goalscorer becomes available at bargain prices, the Coyotes seem pretty set. They have a ton of role players and need to work some younger blood into the lineup.

Trades? Not likely. Jim Vandermeer’s contract eats up an inordinate amount of cap space and he could be moved in a deal similar to the David Hale/Todd Fedoruk/Radim Vrbata trade last year. One possibility is the Coyotes regular trading partner the New York Rangers. The Rangers need a team to take Donald Brashear off their hands. Brashear is heading to the KHL but still carries a $1.4MM cap hit because he signed his contract over the age of 35. The Coyotes can accommodate the cap hit as long as no cash goes out. Vandermeer would fill a need as a 6th/7th defenseman in New York and the Rangers have plenty of money to buy him out or bury the contract in the minors. That additional wiggle room could make the difference between the Yotes’ keeping a few of their UFAs.

It will be an interesting few days but most of the Coyotes business will probably be outbound this week. It’s a shame because some very big contributors may not be here next year. But in a salary cap world, especially one muddled even more by the team’s ongoing financial uncertainty, you get the feeling that the reigning GM of the year has one or two big time performances up his sleeve. Hope he saved his greatest hits for the encore.

Tuesday, June 1, 2010

Sometimes, "The Check is in the Mail", Doesn't Quite Cut It.

It went something like this. The City if Glendale took a deep breath and voted to meet the National Hockey League’s demand for $25MM in guarantees to cover any losses the Coyotes incur in 2010-11. The City, expecting to make a deal with either the Jerry Reinsdorf group or Ice Edge Holdings, nodded and smiled, saying it was likely the money would never be needed.

And so they lived happily ever after, right?

Not quite. The NHL had a slightly different view of the proceedings. Partly because of the large number of NHL teams opening in Europe (including the Coyotes) this year and partly because other teams (desperately) need a schedule in hand to sell tickets; the NHL wants to publish the 2010-11 schedule in late June, three weeks earlier than usual. And if the Coyotes were to be slotted in Arizona and not some other far away city, the league wanted to see the money. Now.

As others have reported, the league was ready to pull the plug on the Coyotes. Ready as in a 5PM deadline or we’re going to Winnipeg…or Kansas City…or somewhere, anywhere else. NHL Deputy Commissioner Bill Daly was in town to collect and he wasn’t leaving without a check. The alternative? There wasn’t one. Daly was here to foreclose. The patience of the NHL has clearly been stretched by the Coyotes predicament.

And for once, the Canadian media wasn’t engaging in sensationalism. It was dead nuts serious. I heard the story as it was happening but was waiting to learn more from the Brahm Resnick’s of the world. After all, they have better sources than I do, don’t they?

But once again, Glendale produced. As in $25MM borrowed from a very large ($400MM+) capital expenditures fund held by the city. And you thought all local governments were broke.

So what got us to this latest crisis?

One can reasonably assume that there is some friction between the Jerry Reinsdorf group and Glendale. After all, they have a Memorandum of Understanding, with The City. That usually is the precursor to a formal lease. But for whatever reason, we’re not getting from station to station very easily here. Our guess is that the City is doing everything possible to build a lease that insulates themselves against legal action from the Goldwater Institute. And we’re also guessing that Team Reinsdorf is driving a very hard bargain. After all, this ain’t a blue sky sale. So both sides continue to negotiate, posture and talk. Hopefully.

And by calling Ice Edge Holdings and asking if they would still like to talk about the Coyotes, Glendale City manager Ed Beasley clearly wasn’t above putting some pressure on the Reinsdorf group. The good folks at Ice Edge said sure (well maybe) we’ll get back in this thing. With of course a guarantee of exclusivity. When you’ve been ditched once, a fairly firm pre nuptial is usually recommended.

But alas, there’s no exclusivity for Ice Edge and the assumption is that Team Reinsdorf is still in play. John Kaites was joined at the hip to Daly at the recent Glendale Council meeting and we’ve heard he’s been involved not only in negotiations but also staying close to the Coyotes decision making process. So that would indicate it’s a when, not if for the Reinsdorf Group to take control of the franchise.

Meanwhile, Ice Edge quietly remains on the sidelines. We say quietly because the very glib (at least on Twitter) Daryl Jones has been quiet lately. That may be a good thing. If the Ice Edge talks with Glendale are “taking a nap” (not my words, those of that well known unnamed source) then I expect they will either fade from the scene or get a wakeup call soon. Perhaps they already have. Apparently though, and to the chagrin of many local hockey fans, they are the fallback plan.

What we do know is that the Coyotes will play in Glendale next year. They may or may not be the Arizona Coyotes (they certainly would be by 2011) but there will be hockey here next year. Season ticket invoices have been mailed, the NHL schedule is going to be released in three weeks (and did someone say that the Coyotes are going to open at home Saturday October 16th against a certain despised Western Conference team?) and we can turn our attention to hockey again.

Aside from the risky nature of the investment, it’s been asked of me and others how any deal for the Coyotes can work right now. Here are four important things to consider.

Bank financing is starting to thaw. The money spigot isn’t exactly running wide open yet but business conditions are improving. Banks are lending. And that’s a good thing. Heck, even Basha’s has lined up $210MM to try and turn that battleship around. Sports teams used to be able to get money easily. A return to the go-go days is unlikely but a liquid money supply is important to making this deal work.

Secondly, for any group trying to buy a team, this is a clean slate and a fresh start. No old bills, no lose financial ends and no legal fights with past and former owners. It’s a clean deal. Unlike say, the Atlanta Thrashers, where the team owners have spent most of the franchises existence in court suing each other. In business, clean deals are good. Don’t underestimate the importance of a fresh start.

Next, there’s the Coyotes organization. On the playing side, it’s in pretty good shape. A roster loaded with value, a farm system with significant assets and a great management and coaching team in place. And on the business side, it’s basically a shell that new owners can staff as they see fit.

And finally, there’s the small matter of what happened at the end of the season. 8 straight sellouts including all four playoff games. New sponsors coming on for the playoffs. A point in time where the Coyotes actually dominated sports talk radio. OK, nobody dominates KTAR other than the house teams but there even were days (hours?) when they actually sounded more like their worthy competitors. Heck, even Dave Byrnes talked about hockey a few times. Anyone who was watching closely knows this isn’t a doomed team that plays 50 miles out of town. Quite the contrary, I’d say.

All good things and all essential for the success of new ownership.

Of course, all of these things mean little if the new owners cannot build an organization that wins on and off the ice. There’s not a large margin of error for the new owners, whoever they turn out to be. And for the City of Glendale, there’s really no margin of error left. They have to, no make that need to, get new owners in here right now to rebuild the front office, make sure Don Maloney has a competitive budget to retain key players and get a staff on the streets selling tickets and advertising.

Interesting sidebar – I had friends from Toronto visit during the playoffs. They couldn’t believe the arena location was an issue and loved the entire experience. “Feels like a hockey town to me”, said my friend.

Yeah, it did feel like a hockey town, even if it was just a month. But what a glorious thought it is that this could be a hockey town for a long, long time. And what a feeling it would be.

Monday, May 10, 2010

I Wish I Knew...

...what was going in with the City of Glendale. It seems like there are a lot of normally talkative people who are very quiet right now.

After strong indications that Ice Edge Holdings would get an exclusive negotiating window to close the Coyotes deal, talks between the City and IEH broke off today. Among the nuggets that have floated out was that the City had spoken to Ice Edge's bank to confirm that they had the financing available to close the deal. That certainly sounds serious. Monitoring Daryl Jones' tweets today, there are apparently multiple reasons that led to the latest twist in the road.

Tomorrow night, the Glendale City Council meets. They pretty much have to accept the resolution to cover the team's losses next year or the NHL will start making noise about moving the team. A logical man senses that the Council must accept that and already have a tacit agreement in place to do exactly that. If they are simply going to throw in the towel, it makes no sense to send away the one buyer who really seems to want the team.

Glendale's managers and councilors must know something we don't know. Tomorrow night, they will have to show their cards. A wise poker player knows what everyone has in ther hands before they make their move. Let's hope we are not looking at a full house being trumped by four aces.

Sunday, May 9, 2010

Making Sense of This Nonsense

A lot can happen in a week.

On Monday night, NHL Commissioner Gary Bettman addressed the media in Chicago prior to the Hawks game with the Canucks. Most important nugget to Arizona hockey fans? A quote from his holiness that a deal to sell the Phoenix Coyotes to a group headed by Jerry Reinsdorf would be beneficial to the franchise and the league.

"It will be great for this league and that franchise if Jerry is able, with his partners, to consummate that transaction," Bettman said Monday night before Game 2 of the Western Conference semifinals between the Vancouver Canucks and Blackhawks.

And we all lived happily ever after. Right?

Not quite.

Like many sound bites, it faded quickly. The seemingly never ending ownership saga took some new and quite unexpected turns in the past 72 hours. First we heard from the well connected Darren Dreger that Ice Edge, the enthusiastic group of young businessmen, had gotten a call from the City of Glendale inviting them back to the dance. And then we learned that the NHL had asked (told may be more like it) Glendale to guarantee any losses the team might suffer in 2010-11 if new ownership could not be completed by the start of the league season (July 1st).

So what to make of all of this?

Well, we’ve done a little digging and will try to add some context to what is going on.

The NHL is running out of patience with the City of Glendale. The league is facing a June 30th deadline on which they will void the Jobing.Com Arena lease and send it back the Moyes estate if new owners are in place. They are also in the process of drawing the 2010-11 schedule and need to start firming up where this team will be playing next year. Typically the schedule is completed by the first week of July.

The NHL has been extremely patient with Glendale, the bidders and the process but now they are bringing the issue to a head. They have asked the City to guarantee any losses the team has if new owners are not in place by July 1. In effect, they will commit the team here for at least another year but they will not fund the losses.

The message to Glendale is clear – agree to fund the losses if they can’t make a deal with an owner or get a deal done with a buyer the league will approve. And fast. Even though both groups have been vetted by the NHL, there’s still a little matter of finalizing financing and getting the other team owners to approve the sale. Nothing is certain until the Board of Governors approves the transaction.

Let's clarify one important point. The league’s objective is not to have Glendale become the owner or the bankroll the team for an entire season. No one expects a government entity to cover the teams losses from city funds. Even in good times, that dog doesn’t hunt. What the league does want is assurances that Glendale won’t drag this dance on and the best way to do that is to apply significant economic pressure on the city.

And Glendale seems to have gotten the message. The proposal the Council will vote on funds any losses from the special district that will accompany the sale of the team. It’s the same mechanism that will generate more income from ticket surcharges, parking fees and some incremental taxes on the Westgate development to help new owners. And I’m guessing that the City fathers and mothers have already worked out what this means behind closed doors.

Now, about those new owners. At some point, the Team Reinsdorf and/or someone at the City of Glendale realized that the sweetheart deal cut to save the team might be very difficult to pull off. I don’t know who got cool feet first but it’s clear that someone flinched enough that the City decided to call Ice Edge and see if they had made other prom plans. Right now no one is confirming or denying the Reinsdorf deal is officially off but it’s seems shaky enough that Elaine Scruggs and Ed Beasley will likely be getting their ring back this week.

This of course, now brings Ice Edge back into the picture. For those of us who have communicated with the Ice Edge group formally or informally and the many Coyotes fans who have hung on every word of this soap opera, that’s good news. The perception is that these are good guys, they love hockey and as I have told you on several occasions, they have money. These are not the Little Sisters of the Poor trying to buy a hockey team.

And to Ice Edge’s credit, they are also applying some pretty big pressure to Glendale. You want a deal? Then we want to be your exclusive dance partner. When someone jilts you, paybacks can be a bear. Sometime in the next day or two (or perhaps already) it appears they will be getting an exclusive agreement that effectively means the Reinsdorf bid is off the table. And all of Glendale’s chips will now be squarely on their shoulders.

While the Reinsdorf brand may have the bigger reputation and the unabashed support of the Commissioner, I’m an Ice Edge guy. I just think these guys have the energy, acumen and enthusiasm to pull it off. They want to make money but they don’t seem to be in it just for the money. I like their style.

The drama resume on Tuesday. The Glendale Council will vote on the short term proposal to mollify the NHL. Once that proposal is passed, the negotiations with Ice Edge and the NHL will likely be at warp speed.

And if all this fails, we’ll all have a lot to talk about on Wednesday. Much of which won’t be good.

On a separate note I want to thank all of you who have called, written tweeted or texted me supporting the Western Hockey Exchange. I haven’t been able to write as much as I would like lately but I’ll try to stay on top of things in the next few days.

Thursday, April 1, 2010

Glendale's Got (Skin In The) Game

The ball, or shall we say the puck, is in Glendale’s end of the ice. And time is running out.

From day one, we have contended both here and on our frequent calls to sports talk radio that sooner or later, Glendale will have to come forward with lease accommodations or the Coyotes will leave town. Now it’s not only playoff talk that’s heating up. The negotiations to sell the Coyotes have reached a critical stage. Expect news, perhaps big news, in the next few days.

There is a lot of pressure on the Glendale City Council. The Coyotes have become the hot team in town in recent weeks, with their tremendous regular season culminating in a playoff spot. What’s more, as long predicted, the city is responding to the team. Crowds are building. It seems like Coyotes players are everywhere on radio and television. Even chronically disinterested sportscasters like Dave Byrnes and Bob Kemp are starting to pay attention.

The Glendale City Council heard proposals from both groups on Tuesday. No action was taken. There’s been talk that the City is stalling to let Jerry Reinsdorf’s group further their negotiations but little solid proof that is the case. Reinsdorf’s insistence on some kind of an out clause could be a deal breaker for the city.

And while the Coyotes future is the most time sensitive issue, there are a lot of moving parts in Glendale right now. And most of them are moving in the wrong direction. The city continues to fight the Tohono O'odham Indian Nation over their plans to build a casino a mile north of Westgate. Construction has not yet started on the USA basketball development center. And the city’s Main Street development, which is intended to pay for much of the City’s Camelback Ranch debt, has been delayed by financing issues.

Now it doesn’t take a genius to figure out that a) the fate of the Coyotes, b) the construction of the basketball center and c) the lack of the Main Street development to pay for Camelback Ranch all have the potential to be revenue drains on the city. Big revenue drains. At a time where cities are scrambling to keep police and firemen on the street, it’s a litany of issues that Glendale doesn’t need.

The financial issues of car wash entrepreneur Danny Hendon haven’t helped either. Hendon had signed on to the Ice Edge group as an investor and was one of the lead players in financing the Main Street development. He and his money are occupied right now reorganizing his core businesses in bankruptcy court.

Of all of Glendale’s issues, only one, the proposed Tohono O'odham casino, is a potential revenue generator.

I believe the ultimate solution to all of these problems may in some way include revenue from the proposed Indian casino in Glendale. That's how Pittsburgh solved their arena problem. I could never understand why Glendale would not embrace a project that would create jobs and add excitement to the 101 corridor but I do know that money is the mother’s milk of politics. A revenue stream from a proposed casino could be the key to getting all of these disparate projects off the ground. I don’t know what form that may take but I do know the Tribe would certainly like to get building and be good local citizens. This may be their ticket to play in Glendale.

The relative quiet about the casino issue plus the clandestine nature of the Coyote negotiations suggest to me something big is going on. I wouldn’t be surprised if the NHL was briefed about negotiations when Gary Bettman and Bill Daly met with Glendale City officials two weeks ago. Glendale knows they must act to keep the team. They may in fact have already settled on a backup plan (i.e. the favored Coyotes offer) if a bigger deal cannot be struck. Remember, we are talking about politicians. They know that voters are in a firing mood right now. They want to settle this issue quickly and with the greatest possible benefit to Glendale.

The NHL has a lot of clout to wield. The “news” that the NHL can void the Glendale lease at the end of June is not a surprise to anyone who read the court filings last year. The league can’t (and won’t) carry the team forever. But here’s another one you may not have heard – the concert business at Arena is controlled by AEG, a major player in the NHL. AEG owns the Los Angeles Kings and Staples Center. Healthy concert revenue is the one bright spot in the arena’s business plan. Pull the plug on that relationship and Glendale has a building on their hands destined to become a very large warehouse. AEG has a nice fallback in the US Air Center if they ever decided to move their concert business.

Perhaps the most interesting morsel over the last few days came with Ice Edge hiring former Arizona Attorney General Grant Woods to finalize a new lease agreement with the city of Glendale. Woods is a skilled and experienced politician. He’s also highly respected around town. His presence on the Ice Edge team may neutralize any advantage that lobbyist John Kaites provided to the Reinsdorf group. Remember one thing about Ice Edge -- they are very serious.

And remember what we have previously told you. An NHL team executive told me that Ice Edge has the money to do the deal. “Plenty of money” was the exact quote. And from what we’ve read, they apparently have financing lined up from international powerhouse Deutsch Bank to finance the ongoing operation.

Winnipeg? I love the enthusiasm of hockey fans and I truly regret their loss but Winnipeg isn’t the NHL’s first choice to gain a new team. People seem to forget that the Jets were not particularly profitable either. Exactly three years out of 17 in the NHL. They left Winnipeg for a reason. The NHL has serious concerns about the ability of Winnipeg and Quebec City to return to the NHL because both cities do not have enough industry to produce the corporate support and sponsorships necessary for profitability. A second Toronto area team is far more likely to be added.

So as the off-ice issues continue to play out, we finally get to experience a playoff hockey game at the Job. That will be an extraordinary sight. We do know that the upper levels of the arena are essentially sold out for the first round of the playoffs and total ticket sales are around 12,000 per game. Once the dates are finalized and an opponent is known, I expect the demand for tickets will explode. We’ll be back with more insight on the playoffs once we know who the Coyotes will be playing.

And we’ll be watching the off-ice battles with the same tense anticipation.