Monday, September 7, 2009

The Coyote Saga Drags On

As much as things change in Coyotes Ugly, they really stay remarkably the same. Here are my takes on the last few days developments...

What are we to make of Judge Tom's court?

Not a lot new here.

When a bankruptcy is contentious, a judge will often send the competing interests a signal that they should negotiate among themselves by dragging his/her feet. This one is a mess. And Judge Tom is making it uncomfortable for everyone by reserving judgement, reading and researching and generally taking his sweet old time before issuing any judgements in the Coyotes case.

This type of behavior is common by judges in major bankruptcy proceedings. The Judge wants the sides to work things out. By keeping all options on the table, he increases pressure on all sides to make a deal.

Sooner or later, the Judge is going to have to make a decision. Someone will lose leverage and all hell is going to break loose. If Judge Tom allows Balsillie to bid in the auction, the NHL will immediately ask for a stay in the 9th District Court of Appeals to stop the auction. I spoke with a bankruptcy attorney yesterday who told me there is no mechanism for an accelerated hearing under these circumstances so any stay could delay the auction for a long time. And if Balsillie is booted from the auction, he doesn't have much of a legal leg to stand on but Moyes does. How aggressive and quickly he would act is certainly something to watch. Keep in mind he has lost a lot of money and stands to lose a lot more.

Brahm Resnick reported that Gary Bettman and Earl Scudder (Moyes Attorney) had a hallway conversation outside of Judge Tom's court. It would also make sense that there have been other back channel conversations. The prolonged bankruptcy action has sucked an awful lot of air out of the franchise and it is in everyone's best interests to end this circus soon.

Looking back on Judge Tom's ruling from June, it's clear to me he has a healthy respect for franchise law. I just can't imagine he is going to throw the rules of franchising and all professional sports leagues out on their collective ear. And I think that judgement is probably being waived in Earl Scudder's face by the NHL right now as an incentive to negotiate with the league.

The NHL is standing on principle. The Moyes/Balsillie bid is based on money. In these cases money is often more easily compromised than principle.

Meanwhile Balsillie sweetens the pot.

Late yesterday we learned that Balsillie is trying to negotiate a release with the City of Glendale that would give the COG (up to) a $50MM payment to release the Coyotes from any lease obligations. Breaking the offer down, it's an increase of $30MM to his base $212.5MM offer -- with the additional $20MM coming directly out of and money that would be paid to Jerry Moyes. And $10MM of the offer is contingent on the NHL relocation fee (if we ever got that far)being below $15MM -- something that is never going to happen.

So the real offer is $232.5MM with the likelihood of $40MM going to COG.

This was inevitable. Balsillie wants to negotiate everything. By putting a price on the offer, he is trying to goad Glendale into a negotiation. Let's say that they come back to him and say, "OK, we'll release you from the lease for $120MM". His next step? Offer a compromise at $95MM.

This is how the guy operates.

The real risk with Balsillie is that once you agree to put a price on something, he will pay it. He has (close to) unlimited funds. That is why the NHL has been so slow to talk about a relocation or indemnification fee. Give him a firm price and it is game over.

Unless the Glendale City Council wants to take the money and fold their hand, this dog won't hunt.


Consider this. Under Balsillie's new offer, Moyes is down to a possible $60MM recovery. Perhaps the NHL will strengthen their offer by $5-10MM. See the gap narrowing?

See the negotiation ongoing.

How About Some Hockey Stuff? The Coyotes Sign Taylor Pyatt.

Nice role player who has never played to his size or potential. Another GMDM value signing. Given the Coyotes internal budget, probably the last addition to the team unless there's a trade that sends salary back the other way.

Pyatt suffered a horrific personal tragedy last spring when his fiance was killed in an automobile accident. He came back and played for the 'Nucks in the playoffs but was not signed to a new contract.

He'll give the team experience and stability on the left side.

Oh, and by the way, who is going to coach the Coyotes this year?

This question hasn't changed since I left town. It's either Wayne of Ulf.

One of my spies told me that the team website briefly posted a story that announced Ulf Samuelsson as the team's new coach. It was quickly pulled.

Now this could have been a web site party crasher at work or a just in case story (sort of like an obituary) that is prepared in anticipation of an event happening. On the other hand, it may be fact.

If it ain't Wayne, it's almost certainly going to be Ulf. Be prepared. The Coyotes PR team certainly is. And if Samuelsson is named as the team's coach, the biggest intrigue will be whether it is an interim or permanent appointment.

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