Wednesday, August 5, 2009

Ed And John

An article in the Phoenix New Times has raised questions about the cozy relationship between Glendale City Manager Ed Beasley and potential Coyotes investor John Kaites.

The article notes that Beasley's calendar reveals he held "repeated meetings with both Kaites and (Jerry) Reinsdorf over the past year." Kaites and Beasley had "no fewer than four scheduled meetings or conference calls in August and September 2008, which is right about the time the Coyotes' ownership began asking City Hall for help."

While there is no reason to dispute the facts here, there is a context that appears to be missing. No matter when Jerry Moyes and Jeff Shumway started asking Glendale for help with the team, there is no question that long before August of 2008 the team was being quietly shopped. Ed Beasley would certainly have been aware of this. And as the Manager of a city with a lot of skin in the game, it makes all of the sense in the world that Beasley would be tapping into his client base to find possible ownership solutions for the team.

Bankruptcy Court Judge Redfield T. "Tom" Baum yesterday allowed Coyotes Owner Jerry Moyes to "have his lawyer question" Bulls and White Sox Chair Jerry Reinsdorf and Arizona attorney John Kaites about "possible collusion with Glendale officials or the NHL" in their bid to acquire the Coyotes, according to David Shoalts of the Tornoto Globe & Mail.

Is it collusion or collaboration? I think the latter.

Later today or tomorrow we will learn whether Judge Tom will allow Jim Balsillie to participate in any auction for the Coyotes. Balsillie, you may remember, was unanimously voted down by the NHL Governors as a potential owner last week. While there probably won't be any lawsuits over the initial judgement, down the line there will be legal ramifications. And they won't be pretty.

I spoke to a bankruptcy attorney this weekend about the way that bids for the Coyotes are being constructed. In both the Reinsdorf-Kaites-Tavares and Ice Edge bids, the great majority of the bid is the assumption of existing debt. I was told that this is not unusual and in fact it is the way most bankruptcies are adjudicated. Both organizations need to demonstrate the wherewithal to pay back the debt (and in this case that starts with the inherent value of the franchise) and will need operating capital going forward. But no cash assumptions are hardly a novelty.

More later today as the dogfight in the desert rolls on.

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