Status of Coyotes

Yesterday the NHL, Moyes, and the other creditors were in court before bankruptcy judge Redfield T. Baum and they have apparently come to an arrangement that will see the NHL purchase the Coyotes.  The intention of the NHL is to secure the Coyotes and then quickly flip them to another potential owner interested in keeping the team in Phoenix.  The most talked about potential buyer is a group called Ice Edge Holdings which had previously expressed interest in purchasing the team but was not able to come to an agreement with the City of Glendale and possibly other creditors in time to put in a bid during the bankruptcy process.

Azcentral.com conducted an interview with Daryl Jones of Ice Edge in regards to the situation.  Two things he said deserve some consideration.

Any new buyer is going to need some help, and I don’t mean concessions. You need help from the NHL to draw fans, and Glendale on a grassroots level.

Interesting that he said “I don’t mean concessions” which I read to mean concessions from the city. I don’t buy this. I believe this is a publicity statement because everyone agrees that the Coyotes cannot operate under the current lease arrangement and the NHL is purchasing the Coyotes only committing to keep the current lease through the end of this season. Essentially the existing lease agreement is going to be torn up at the end of this season and anyone purchasing the Coyotes with the intent of keeping them in Glendale will only do so with a different lease arrangement. Ice Edge, or any other ownership group, will have the ultimate bargaining power with the City: let us play here for next to nothing, or we will leave. Daryl Jones can call it something other than ‘concessions’ but the only way the team stays in Glendale is under a new, and much cheaper, lease arrangement that will see less net flow of money from the team to Glendale.

No we’re not going to do that. I know other parties have tried to do that. We quite frankly don’t have a backup plan. Our plan is to make it work in Phoenix. In our opinion, it’s the wrong way to approach the partnership with Glendale – a “we’ll try it but if it doesn’t work out we’re going to leave.

That statement is just plain stupid. No one, and I mean no one, will be willing to put $140 million into a relatively risky investment without a backup plan. They may not state it publicly but I can guarantee you they have discussed a backup plan. The guys behind Ice Edge Holdings Inc. are investors looking to make a profit, not mega rich guys looking for a hobby to spend their money on. They view this as a way to get into the NHL on the cheap. If an NHL franchise in say Kansas City is worth $200 million and they purchase the Coyotes for $140 million, that gives them a $60 million cushion to work with. If they can get a much better lease arrangement with the City of Glendale and get some additional revenue from playing a handful of games in Saskatoon they could theoretically test the Coyotes market for say 3 years before they eat up that $60 million. From an investment standpoint, they don’t start losing money until they go beyond the $200 million point. If anyone thinks that Ice Edge Holdings hasn’t discussed this you are fooling yourself. Even the NHL didn’t want to buy the team without an out clause in their conditions to purchase the team.

There is also some talk that Gary Bettman is continuing discussions with a Toronto group that is interested in purchasing the Coyotes and keeping them in Phoenix. Again, my skepticism remains the same. I just can’t imagine anyone without any specific ties to the Phoenix area being willing to purchase the Coyotes and be committed to keeping the team in Phoenix long term. No one will put that much money at risk without at least some assurances that if it doesn’t work out in a few years they can move the franchise. Publicly they may state otherwise, but most assuredly they will be looking at an out.

Since we are on the topic of the Phoenix Coyotes, Gary Bettman conducted and interview on Coyotes TV in which he said something completely ridiculous in regards to the Coyotes franchise.

The vital signs with everything that this franchise has been through are actually pretty good.

Here is the reality of it all. They held an opening night promotion selling all tickets at $25 or less and they managed to sell out the arena. Since then they have average just under 9,000 tickets sold per game (with fewer fans bothering to show up). Barring a completely unexpected change of fan interest the Coyotes will not reach an average of 14,000 fans per game which will see their revenue share allotment cut back by 25%, or nearly $4 million and if they don’t reach that level again next year it will be cut back even more. That makes a dire situation look even worse. Now, I am not sure of Bettman’s definition of ‘pretty good’ is, but I would not call those pretty good vital signs.