The Phoenix Coyotes are expected to lose between $25- and $35-million (all currency U.S.) this year and with his primary business under financial duress, owner Jerry Moyes may not be able to cover the hockey team's losses any longer.
That leaves him three choices:
- Renegotiate the Coyotes' arena lease to effectively put the city of Glendale into the position covering some of the losses;
- Put the franchise into bankruptcy;
- Turn the keys over to the NHL, forcing commissioner Gary Bettman to find a new owner.
Moyes, 63, took his company, Swift Transportation, private in May 2007 with debt financing of $2.74-billion. One of the largest truck carriers in the U.S., Swift immediately ran into a financial hurricane of rising fuel prices and a falling economy.
In June, Moody's Investors Service changed its outlook on the company to "negative" from stable. By late November, the junk bonds issued to finance Moyes' takeover were trading at 18 cents on the dollar, and bank debt is now trading at 43.5 cents on the dollar, according to Eiad Asbahi, the managing partner of Prescience Investment Group in New York.
Asbahi's report on the company also shows that Swift loaned $560-million to Moyes as part of the takeover. He guaranteed the loan personally.
"Calculating back from the value of its debt, Swift's liabilities now exceed its assets by anywhere from $1-billion to $1.5-billion (all currency U.S.)," Asbahi said.
Asbahi said the only way Moyes may be able to avoid seeking bankruptcy protection for Swift is by exchanging some of its corporate bonds for equity in company.
As Swift Transportation is the foundation of Moyes' business interests and is thought to have provided him the cash to cover the hockey team's losses, the Coyotes' survival in Phoenix is in doubt.
A request to interview Moyes for this report was refused by a Swift spokesman, who said the owner does not do interviews.
After an encouraging spike at the gate for the first five Coyotes home games this season, the crowds declined and overall attendance fell slightly under last season's average. Having missed the playoffs for five consecutive years, the franchise has assembled a talented young team under head coach Wayne Gretzky. But the average ticket price of $31 ranks 29th out of 30 NHL teams and as with all NHL franchises, the lack of TV money compromises the balance sheet.
"This team has to win," NHPA executive director Paul Kelly said, following a recent visit to Phoenix. "If you just look at the numbers on a page, you would say, 'Back up the truck and pull them out of there.' But if they get some home (playoff) dates and qualify for their full share of revenue sharing. ...."
The Coyotes signed a 30-year lease with the city of Glendale, Ariz., when they moved into Jobing.com arena in December, 2003. Terms impose a large financial penalty for breaking the lease. However, if the team is placed into bankruptcy protection, or Chapter 11, the lease could be broken under U.S. law. Without the lease, the team could more easily be sold and relocated.
Moyes could reduce his losses by renegotiating the lease with Glendale — in effect, placing the city in position of subsidizing the team. This was done in Nashville when a local group bought the Predators from Craig Leipold a year ago.
But two sources said Moyes is so eager to unload the Coyotes that he approached his former partner Steve Ellman about buying the team back. "The answer was short and emphatic," one of the sources said of Ellman's refusal.
