Sunday, May 17, 2009

Does Bankruptcy Void The Lease?

Had an interesting conversation with a bankruptcy attorney today.

Asked about the Coyotes lease with Glendale and learned that if (big if) the Coyotes (read Moyes ownership) are allowed to enter bankruptcy the lease can definitely be broken.

There is one (big) exception.

If the mere act of placing the team into bankruptcy violated the lease, the judge would not necessarily void the lease. In fact, if the lease was written with that possibility in mind, the odds are excellent that the lease and the subsequent large penalty to break the lease would be intact.

My contact suggested that Moyes might have been a lot better off if he and other non secured creditors had placed the team into bankruptcy. Of course, under those circumstances, none of the non secured creditors could expect much of a payment.

This will be a busy week with lots of court decisions, the potential for a quick knockout punch by the NHL and perhaps the first real signs of new ownership emerging.

And isn't it amazing that this is the most attention hockey has ever received in May in Phoenix.

1 comment:

  1. I have also read that many franchises are including wording in their lease agreements to safeguard themselves from a bankruptcy causing them to lose their tenant. If you research the Penguins - this is what happened there - they had the proper phrases that highly protect the city. I can only imagine that the city of Glendale would have done the same.