The Stanley Cup final started Wednesday night, which can mean only one thing – feverish negotiations are once again under way to keep the Phoenix Coyotes from moving.
Yes, for the fifth consecutive year, ever since former owner Jerry Moyes put the team in bankruptcy in May, 2009, the Coyotes’ fight for survival is competing with the NHL playoffs for attention. Only this time, even if the conditional deal reached between the NHL and a group called Renaissance Sports & Entertainment led by two Canadians, George Gosbee and Anthony LeBlanc, succeeds in getting an arena lease with the suburban City of Glendale in the next few weeks, the Coyotes may have only five more years left in Arizona.
NHL commissioner Gary Bettman said Wednesday “we’re still focused on making it work for the Coyotes to stay in Arizona,” but he also gave the impression at his Cup final press conference the team could move as soon as this summer. As always, it depends on Glendale coughing up millions of taxpayer dollars in arena-management fees to the Coyotes. Bettman implied the NHL governors want this decided by their annual meeting on June 27 but no firm deadline is in place, although Glendale needs a decision by then because its new fiscal year starts July 1.
Council has already passed a tentative budget for the 2013-14 fiscal year that sets aside $6-million (all currency U.S.) for an arena management fee plus $500,000 for arena improvements. But do not be surprised if Gosbee and LeBlanc somehow wind up with $10-million or more in subsidies, oh, sorry, management fees, at least in the short-term, on their arena lease.
Aside from Bettman, none of the principals were responding to requests for comment Wednesday. But your agent did manage to confirm the terms of the sale between NHL and Renaissance.
In broad terms, the sale price is $170-million. The NHL will also provide Renaissance with a loan of $85-million, with interest-only payments in the first five years. Renaissance will provide $45-million and Fortress Investment Group LLC will loan Renaissance $120-million, at the usual high interest to risky ventures and the right to convert debt to equity in the franchise. If the name sounds familiar, that’s because Fortress has been a large Coyotes creditor in the past.
That brings the total capital raised to $250-million, which gives Renaissance an $80-million cushion over the purchase price. This, presumably, will be used to offset the chronic annual losses, which have run higher than $40-million. But with Bettman tossing in perks like a guaranteed maximum share of the NHL’s revenue-sharing plan, even if the Coyotes don’t meet the growth targets, those losses could get down to $20-million or less.
However, even though LeBlanc (in many previous conversations) is sincere in his belief the Coyotes can somehow survive in the desert, despite all evidence to the contrary, a cynic cannot help but see how this could end in a move to Seattle, Las Vegas, Kansas City or maybe even Quebec City in five years or so.
The $250-million raised just happens to be somewhere close to the amount the NHL has blown on the Coyotes since buying them out of bankruptcy in October. Since the NHL already owns the team, it does not actually have to hand over the $85-million loan and then take it back as part of the sale.
For five years, all Renaissance has to do is pay the interest on the $85-million, as it is really money the NHL has already spent paying the Coyotes losses, probably through its line of credit. You can also be sure Renaissance will negotiate an escape clause of, say five years, in its lease with Glendale if revenue does not hit a certain figure.
Then, if attendance at Coyotes games follows its usual pattern, the team will be on the move in five years. By that time, Seattle or Las Vegas could have its arena situation sorted out. Then someone could be soaked for a hefty expansion fee for Quebec City and maybe even the Greater Toronto Area and, voila, a new look for a 32-team league could be worked out all at the same time.
Renaissance, if it keeps the franchise, will now have to start paying the principal on that $85-million. It could also serve as the relocation fee, since the Winnipeg Jets already established a rough precedent by paying $170-million for the Atlanta Thrashers with about $60-million going to the NHL as a relocation fee.
The only catch is in this case the $85-million will have to be repaid to the NHL’s lender. That leaves Bettman the unpleasant task of explaining to the owners just where the relocation fee went.
But he has five years to think of something.