NHL Won't Get Investors with Latest Coyotes Feud

Steve ThompsonAnalyst IIIMarch 11, 2010

GLENDALE, AZ - MARCH 06:  Bobby Ryan #9 of the Anaheim Ducks battles for a loose puck with Sami Lepisto #18 of the Phoenix Coyotes during the third period of the NHL game at Jobing.com Arena on March 6, 2010 in Glendale, Arizona. The Coyotes defeated the Ducks 4-0. (Photo by Christian Petersen/Getty Images)
Christian Petersen/Getty Images

The NHL must be content to keep losing money—the projected loss this year is $20 million—in the sinkhole it calls the Phoenix Coyotes.

In the latest development—currently not mentioned on the NHL's official Web site—the league wants to sue the team's old owner, Jerry Moyes, for $61 million to recoup some of the losses incurred by the team.

That sum is broken into sections: $30 million for violating a league agreement by refusing to fund the Coyotes obligations; $10 million for violating his duty to the league; $10 million in punitive damages; and $11.6 million to cover amounts the NHL paid to Coyotes creditors.

Naturally, Moyes plans to countersue.

In reviving a dormant conflict, the NHL doesn't seem to be worried about what effect this new lawsuit might have on investors.

Currently, the only bidder for the team who wants to keep it in Phoenix—as long as the Coyotes can play some of their regular season games in Saskatoon, Ice Edge—is negotiating with the City of Glendale to work out an agreement so that the team can turn a profit for the first time ever.

The team has never made any money since it left Winnipeg. And thanks to ownership uncertainty, the unpopularity of hockey in a new market, and the bad teams that have been iced, the Coyotes lead the league for the worst attendance, with an average of 11,296 fans—a figure probably inflated by ticket deals and other promotional gimmicks.

It is not stated publicly, of course, but the latest lawsuit was probably launched to see if the NHL could get any more out of Moyes—and also in revenge for him putting the team into bankruptcy and then trying to sell it to "outlaw" Jim Balsillie, who planned to move the team to Hamilton, Ontario.

Moyes estimated that he ended up losing more than $300 million in his years of ownership, and he said he was trying to scrape up what he could by selling to Balsillie, who was willing to pay $240 million—$100 million more than what the NHL eventually paid for the team.

The NHL had better hope that Ice Edge can work out a pact—or else it might end up owning the money-losing Coyotes forever, because this latest feud can't be attractive to any potential investors.

Would any investor want to join a league in which a partner incurs huge losses—and it then tries to prevent him from saving himself?

Would any investor want a join a league in which a partner is forced to lose an additional $100 million as the result of a court settlement?

Would any investor want to join a league in which, even after an unfavorable settlement is imposed on a partner losing money, the league seeks further funds in revenge?

More specifically, would any investor want to buy a team and keep it in a city where it has never made one penny?

When Moyes put the team into bankruptcy and tried to sell to Balsillie, there was only one counterbid—by the owner of the Chicago White Sox of MLB, who soon dropped out—and the incomplete bid by Ice Edge, which wants to play at least five home games in faraway Saskatoon.

That forced the NHL into making its own bid to buy the Coyotes, who obviously weren't being regarded as a hot commodity by investors.

The latest lawsuit shouldn't increase the appetite for hockey in the desert.

If Ice Edge fails to reach an agreement and withdraws its bid, the NHL is left with three choices:

  • Continue to run the team indefinitely, probably incurring further huge losses, in the hope that some investor will buy the team and keep it in Phoenix.
  • Face the humiliation of folding the team—something that has only occurred once since the Great Depression, when Cleveland merged with Minnesota in the 1970s.
  • Sell the team to an investor who will be allowed to move the franchise. It might be a way of rewarding Quebec if it can scrape up $400 million to build a new arena.

Hartford also claims it wants the Whalers back and is willing to consider a new facility of NHL size.  But so far, it is only the mayor that is talking.

Then there's always Kansas City, Houston, Las Vegas, or maybe Oklahoma City—all markets that the NHL would love to have franchises in, but are as questionable as Phoenix.

What if—horrors!—"minor-league" Hamilton makes another attempt?

One would think that the NHL has wasted enough money in trying to save a perpetual money-loser and try to make the best deal possible.

One would think that the league has spent and wasted enough money on lawyers and legal costs to save a franchise that has a horrible arena lease—and where the majority of the population is indifferent, at best, to the sport of hockey.

One would think that the NHL would take action that would make the Coyotes attractive to investors.

Instead, it has opened up Phase Two of the war in the desert—which has no end in sight.


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