The End Game

The drama of the battle between the NHL and the Phoenix Coyotes/Jim Balsillie contingent continues to unfold in Judge Redfield Baum's bankruptcy court. Both sides have been ordered to mediation to determine who actually has control of the team, and whether Jerry Moyes could rightfully put the club into bankruptcy. There are a number of legal questions involved in this case that will be determined by the judge, and one could be precedent setting, not only for the NHL, but for other professional sports leagues. That question is the one raised by Balsillie's attorneys and claims that the NHL has violated federal anti-trust provisions by not allowing the franchise to move. Courts have traditionally stayed away from this issue, allowing professional sports leagues to run under their agreed upon rules without consideration of anti-trust provisions. Should Balsillie prevail in this argument, the sports world, not just the NHL would potentially be turned upside down as any disgruntled franchise owner could pick up their franchise and move to a more favorable locale. The seriousness of this aspect of the case has drawn the attention of the other professional sports leagues, as lawyers for the NFL, NBA, and MLB have all filed friend of the court briefs in support of the NHL.

The legal wrangling is going to continue for some time before a final disposition of this issue from the court. There will be a tremendous amount of speculation as to the leanings of Judge Baum and argument over the strategy of each side in this case. I am not an attorney and I will leave those arguments to ones better versed in the legal issues that are present in the case before Judge Baum. What I as a hockey fan am trying to understand is the end game- what is Balsillie trying to accomplish? I have some thoughts- purely speculative and just the View's opinion- about what is at play here.

In my opinion, what Balsillie has bid on in his offer for the Coyotes is NOT the entity that is in the bankruptcy proceedings right now. Balsillie has bid $212.5MM for a franchise that can be relocated, and as currently constituted, this is not the case with the Coyotes. The bankruptcy filing by current owner Jerry Moyes served to put Balsillie's bid front and center before the court, and it was a "stalking horse" bid- one that was so far in front of other potential bidders that it would not be matched. Balsillie will not get the Board of Governors to agree on the relocation of the Coyotes to southern Ontario at this time, maybe never, because the owners would then forgo the lucrative expansion fees that a franchise in that market would generate. So the end game for Balsillie is to get the court, through the alchemy of the bankruptcy process, to reconstitute the Coyotes into an entity that can be moved. This is his side door about which he spoke, and that side door would be opened by Judge Baum with an favorable ruling to Balsillie on his anti-trust claim. Otherwise, Balsillie's bid would fall flat as his relocation contingency becomes moot. This is the pivotal issue around which this case hinges.

On my May 7th post, "Follow the Money", I speculated that Balsillie may be trying to avoid ownership of a an NHL franchise in southern Ontario via expansion so as to not have the obligation of paying the expansion fee to the NHL (that fee, in turn is re-distributed to each owner on a 1/30th share basis). It has been estimated that the expansion fee for a franchise in southern Ontario will be in the $300MM range. A bid for the Coyotes of $212.5MM, should it be accepted, would save Balsillie $87.5MM. I do believe that the NHL will expand to southern Ontario. So does Balsillie. He is just trying to come into that market on the cheap.

By conspiring with Moyes to put the Coyotes into bankruptcy, providing $17MM in Debtor In Posession financing, and claiming violation of U.S. anti-trust laws, Balsillie has not only tried to step through a side door, he has kicked it down. Perhaps this is a tacit admission by Balsillie that he would have a most difficult time getting approved as an owner by the Board of Governors. And this is his end game- ownership, under his terms, without their approval.