Civic officials in Glendale, Ariz., have filed legal papers to try to block any attempt to move the Phoenix Coyotes to Hamilton.
In a court filing last night, the suburb of Phoenix argues the club's 30-year lease to use the Jobing.com Arena contains a clause that prevents relocation. And, it signalled its determination to fight to keep the team in Phoenix. The city "does intend to take appropriate action to vigorously and fully enforce such requirement as necessary," the filing said.
The city noted that it objects to majority owner Jerry Moyes's move to put the club into Chapter 11 bankruptcy protection and propose a sale to Canadian billionaire Jim Balsillie for $212.5-million (all currency U.S).
The proposed sale "is based on the false premise that the [Coyotes]are legally capable of relocating the Phoenix Coyotes hockey team," the city argued. It also wants all potential bidders for the club put on notice that the club "may be prohibited from relocating."
Glendale is in a difficult position over the arena because it could be on the hook for millions of dollars if the club is moved.
The city issued roughly $180-million worth of bonds in 2003 to pay for construction of the building. The Coyotes manage the facility through a separate company called Arena Management and pay the city about $2.4-million annually in total fees. However, the Coyotes have argued that Arena Management is insolvent and lost more than $20-million in three years.
While the city claims the lease includes an early termination penalty of $700-million, the Coyotes are unlikely to be able to pay anywhere near that amount even if the terms of the lease are enforced by the bankruptcy court judge. In a recent report, bond rating agency Moody's said it is monitoring the situation and noted that if the team does move, it would "add to the budgetary pressure the city is experiencing as a result of the recession."
Legal experts say Glendale faces a tough battle. Under Chapter 11 proceedings, insolvent companies can usually walk away from most obligations and reorganize or sell assets. Balsillie's offer does not include the arena and it is conditional on moving the team to Hamilton. If it is approved, the arena lease would likely be scrapped, experts say.
The NHL has also objected to the Chapter 11 filing and the proposed sale to Balsillie. The NHL has said that it was close to deal with Jerry Reinsdorf, owner of the Chicago White Sox and Chicago Bulls, which would keep the Coyotes in Phoenix.