There was good news and bad news for the NHL and fans of the Phoenix Coyotes on Thursday.
The good news is that George Gosbee, a well-connected Calgary investment banker, joined the group put together by Anthony LeBlanc that is trying to buy the Phoenix Coyotes from the NHL. Gosbee, 43, is the co-owner of AltaCorp Capital Inc., an investment bank he founded with Alberta Treasury Branches. Just as important is the fact Gosbee travels in the same circles as influential Calgary Flames owner Murray Edwards (they started their financial careers at the same Alberta investment bank) and he is pals with Edmonton Oilers owner Daryl Katz, always a plus in the clubby NHL.
But the bad news – and there is always bad news where the perpetually indigent Coyotes are concerned – is that while Gosbee is a big hockey fan, he is not crazy. According to a source familiar with the discussions between LeBlanc’s group and the NHL, this deal is going to be the same as all the previous failed attempts to buy the Coyotes – it will depend on a sweetheart arena lease from the suburban city of Glendale.
First, the prospective buyers have to cut a deal with the NHL, which is still demanding a ridiculous $170-million (all currency U.S.) for the club, due to the fact it has poured more than $200-million down this sinkhole. Then the group has to negotiate an arena lease with Glendale, although any sale will be conditional on procuring a lease that is satisfactory to the new team owners.
The trouble is, Glendale is almost in the same desperate financial shape as the Coyotes. Even if the city did not have a new mayor and three new councillors who were all elected on promises of financial belt-tightening, it still does not have the money to hand out any more deals such as the ones in which the NHL scooped up $25-million (all currency U.S.) a year from the city of 250,000 to help cover the annual losses after it bought the Coyotes out of bankruptcy in October, 2009.
However, both Glendale and the NHL face time pressures to resolve this farce in the next couple of months, which is why there is much speculation the Coyotes could be on the move to Quebec or Seattle. This gives rise to hopes among the LeBlanc-Gosbee group that it can negotiate a lease that will pay them enough, at least in the first few years, to come close enough to breaking even.
NHL commissioner Gary Bettman and deputy commissioner Bill Daly have to resolve where the Coyotes will play next season in time to draw up the schedule. While there have been reports this needs to be done before the playoffs start at the end of the month, Bettman has shown in the past he can drag things out until late June.
But make no mistake, the league is desperate to sell. Without that cushy $25-million from Glendale this season, the league is taking a financial pounding from the Coyotes, as they once again sit at the bottom of the revenue rankings in a lockout-shortened season.
And don’t think the increased revenue sharing in the new collective agreement helps. There may be more money to share but there are more mouths to feed. The NHL allowed large-market teams to be eligible for the plan, which means the likes of the Anaheim Ducks, San Jose Sharks and New York Islanders have their hands out, too.
Thus it is possible the league would be willing to take back a mortgage on the Coyotes with the prospective owners. The group may only have to put 25 per cent down ($42.5-million), for example, on an interest-only mortgage, where you only make payments on the interest, not the principal.
This would allow the ownership group to preserve as much of its capital as possible to pay its share of the annual losses, which are routinely more than $30-million. It would also allow the NHL to save face by claiming it did not lower its asking price when the actual effect of such a mortgage is a healthy discount.
On the lease side, Glendale needs to get its budget for the 2014 fiscal year in place by the end of May. At least some of the latest group of buyers are hoping the city will cough up a decent annual lease payment – say between $11-million and $15-million – when it is explained to the new councillors that it will cost them at least $10-million a year to keep the arena open without an NHL team. And that is not counting the debt service on the $230-million or so the city has already sunk into the arena and the team.