Almost everything the Phoenix Coyotes own or earn is pledged as collateral to SOF Investments LP of New York, according to financial documents obtained by The Globe and Mail.
Two NHL governors say the financial situation is distressed to the point that the Coyotes have had to draw on advances from the league to meet a $42.4-million (all currency U.S.) annual player payroll and operational expenses. The advances are made from anticipated NHL broadcast rights, merchandise sales and revenue sharing.
It is not known exactly how much money the Coyotes have received from the NHL. The game schedule is at the halfway point, which could mean, under NHL bylaws, the club cannot have received more than half of the money it expects from shared revenue. NHL deputy commissioner Bill Daly said the Coyotes have not yet received as much as half of their expected share of the NHL revenue, which could come to $22-million.
In return for the advances, the Coyotes need the NHL's approval for any major player or financial transactions, according to sources. Daly wrote in an e-mail message yesterday that the arrangement "is not as much 'approval' as it is 'consulting.' "
Earlier this week, the Coyotes laid off 18 employees, about 10 per cent of the club's front-office staff. The employees worked in ticket sales, game operations, administration, public relations and community relations. Daly said the NHL was "aware" of the layoffs before they were announced, but he did not say whether the league recommended them.
With the club's losses again expected to exceed $30-million this season, it is practically impossible to find new investors or someone to buy the team from Jerry Moyes, whose trucking company is also in serious financial trouble. Unless the franchise declares bankruptcy, it is locked into a 30-year lease at Jobing.com Arena with the city of Glendale, on the western outskirts of Phoenix.
The uniform commercial code financing statements obtained by The Globe show that, starting on Dec. 29, 2003 — only two days after the Coyotes played their first game at newly constructed Jobing.com Arena — the franchise signed over almost all assets and revenue to SOF, its primary lender at the time.
More documents show that SOF tightened its grip on the club as the Coyotes borrowed more money. The loans now total about $80-million and will expire on Dec. 29, 2013, under current terms, according to a source.
The timing of some documents suggest the Coyotes increased their loan from SOF in January of 2007 in order to pay off another loan, to a New York hedge fund, Fortress Credit Opportunities LP.
Assets signed over to SOF Investments include the rights to the franchise, all equipment, inventory, all government licences, trademarks, logos, copyrights and insurance policies.
Further, all revenue is pledged to SOF, except $2.5-million annually in arena-naming rights, $1.50 a ticket owed to the city of Glendale (for paying $180-million toward the $220-million arena) and $9 a ticket for "all NHL hockey events" to the club. Other revenue includes NHL broadcasting rights, any share of future expansion or relocation fees, revenue sharing, merchandise sales, concessions, sponsorship contracts and practice facility rentals.
The $9 cut from ticket sales does not go far. Through 21 home games, the Coyotes ranked 26th among the NHL's 30 teams in attendance with an announced average crowd of 14,789 a game.
The Coyotes received a reported $15-million in revenue sharing last season from the NHL's wealthiest clubs, the most of any franchise that qualified for the handout.
