NHL commmissioner Gary Bettman.TODD KOROL
NHL commissioner Gary Bettman painted a picture of hundreds of millions of dollars in new U.S. television revenue and an expansion fee for a second team in southern Ontario as part of his pitch to prospective team owners, including Jerry Reinsdorf, according to two sources.
In recent months, the commissioner has had a remarkable streak of success in finding new owners for ailing franchises, from Jeffrey Vinik (Tampa Bay Lightning) to Cliff Viner and Stu Siegel (Florida Panthers) to Reinsdorf, the Chicago White Sox owner who has been enticed to at least take a second look at buying the Phoenix Coyotes.
Bettman and deputy commissioner Bill Daly have also been talking to Canadian billionaire David Thomson about a backup plan to send the Coyotes back to Winnipeg if the sale to either Reinsdorf or the Ice Edge Holdings group of businessmen falls apart.
Through it all, the sources said, the pitch from Bettman was that all of the NHL's U.S. television contracts are up in June, 2011. The current deals with Versus and NBC bring in about $75-million (U.S.) per year, combined. But, the sources said, prospective owners have been told the new contracts, presumably cashing in on the NHL's exposure through the Olympics in part, could bring in more than double that, and when added with the money from the Canadian networks, there could be as much as $500-million for the league and its 30 teams to split up.
Farther down the road, the sources said, is the enticement of an expansion fee of as much as $400-million for a second team in Southern Ontario, probably in north Toronto, which is being dangled to show prospective owners an NHL team is a good investment. But, a third source said, Bettman will have to get the Toronto Maple Leafs' co-operation, which would make this a more long-term prospect.
Neither Bettman nor Daly could be reached for comment.
In the meantime, the waiting game continued on separate arena lease proposals from Reinsdorf and Ice Edge. The proposals were shown to Glendale City Council in an executive session on Tuesday, but Daryl Jones, the chief operating officer of Ice Edge, said he has not heard anything from the city. Jones declined to comment further.
Several sources, including one NHL governor, said Bettman is in a tight spot with the Coyotes. He promised the league's owners they will not have to cover the NHL's involvement with the Coyotes.
The league paid $140-million to buy the team in a U.S. bankruptcy court and had to cover $20-million in losses this season, plus legal costs.
However, neither Reinsdorf nor Ice Edge are interested in the league's asking price of $160-million. And the city is not in a position, financially or legally, to grant huge subsidies (which Reinsdorf demanded in his first attempt to buy the team) to either prospective owner.
If a sale cannot be completed by June 30, when the NHL can legally break the arena lease with Glendale, then the Coyotes can be sold to someone like Thomson and moved.
Reinsdorf was wooed again when Ice Edge ran into trouble securing financing for its purchase. He had an additional reason for taking an interest in the Coyotes - he has real-estate investments in Glendale.
A couple of sources said Ice Edge hoped to get the money to buy the Coyotes from a billion-dollar bond issue that was supposed to pay for a development called Main Street Glendale that is to be built around the spring-training facility the city built for the White Sox, Reinsdorf's baseball team, and the Los Angeles Dodgers.
The $1.2-billion bond offering, orchestrated by a company owned by two local businessmen, Bob Banovac and Danny Hendon, was to be done through the La Paz County Industrial Development Authority. Under Arizona law, small communities can act as conduits for issuing bonds for any development in the state in return for a fee. The idea is to raise private rather than public capital to spur development.
But due to the recession, no one could be found to buy the bonds and the La Paz deal has stalled. Another attempt to put a $900-million bond deal together through a small community called El Mirage, which was also said to include financing for the Coyotes, also fell through.
Further complicating matters is that HB Equities, the company owned by Banovac and Hendon, which is supposed to build the Main Street development, defaulted on a $100-million promissory note in January. Then, in February, Hendon and his car-wash company wound up in bankruptcy court due to unhappy creditors.
Jones declined to comment about the bond issue but he insists financing is not a problem for Ice Edge. Pat Day, a Phoenix lawyer who handled the bond deal for La Paz, said financing for the Coyotes was never included in the preliminary applications, but they "were mentioned from time to time."
Just where the money goes in bond deals, Day said, is not spelled out until final approval from the community and the state is needed. But the La Paz and El Mirage deals never made it that far, although Day thinks Ice Edge could have received the financing it wanted if someone willing to buy the bonds could have been found.
"Oh, I don't think so," Day said when asked if he would have been surprised to see Ice Edge become part of the deal. "And I think, frankly, they probably would have been approved. But getting approval is the easy part. Getting somebody to fund it is the hard part."
The collapse of the bond deals plus the potential of seeing the Coyotes move to another city poses a big headache for Glendale. The city borrowed $200-million to build the baseball facility and was counting on revenue from the Main Street development, which is also supposed to house the headquarters for USA Basketball, to repay the loan.
Glendale is already dipping into a reserve fund to make the payments. Once the reserve fund runs out in 2014, the city will face annual debt payments of $16-million. Glendale borrowed $180-million to build the Coyotes' arena, with tax revenue from the development around Jobing.com Arena going to pay those bills, but revenues have not always met projections since the arena opened in 2003.