Jerry Reinsdorf, the Chicago sports entrepreneur whom the NHL was counting on to keep the Phoenix Coyotes away from Canadian billionaire Jim Balsillie, has dropped his $148-million (all currency U.S.) bid for the club, just as the NHL announced it has filed one of its own.
The dramatic turn of events came down late last night as the newest twist in a drama that began when the Coyotes were put into bankruptcy protection nearly four months ago.
The Reinsdorf bid, which had been endorsed by both the NHL and the Coyotes' largest creditor, SOF Investments, fell apart when negotiations with the City of Glendale could not secure the necessary subsidies to make the club viable in Jobing.com Arena.
It had earlier been reported that Reinsdorf was looking for $23-million in local subsidies annually, a figure that touched a nerve with local politicians and taxpayers.
Reinsdorf blamed the breakdown on Coyotes owner Jerry Moyes, who entered into a deal to sell the club to Balsillie for $212.5-million, the same day it was put into bankruptcy protection on May 5.
"We have faced an organized publicity effort designed to provide negative and misleading information," a statement released by Reinsdorf said.
Enter the NHL, which suddenly found itself facing the possibility that Balsillie could be the only bidder for the Coyotes with just 16 days until a court-ordered auction on Sept. 10.
The only other bid is from a group known as Ice Edge Holdings LLC, which officially lodged its candidacy on Tuesday night. The group has pledged $150-million and plans to play some Coyotes "home" games in Saskatoon.
The NHL's plan is to buy the Coyotes out of the auction, then work toward selling them to a third party that would keep it in Phoenix, at least for the time being. Gaining control of the club through the auction would allow the NHL to place the Coyotes in the hands of an owner it wants, without the interference of a bankruptcy court. It would also allow the league to cut Balsillie out of the process.
The league has not said how much it will bid for the club and, as of last evening, the bid had not appeared on the Arizona bankruptcy court website.
"We believe this step was necessary at this time in order to best preserve and maximize the value of the club asset for benefit of the club's creditors and for the community of Glendale," NHL deputy commissioner Bill Daly said in a statement. "The bankruptcy petition and subsequent events have been incredibly damaging to the club's business, and the sooner the club can be extricated from the bankruptcy process, the sooner club personnel can begin to restore the team's vitality and local fan base.
"In the event the league's bid proceeds forward and ultimately is the one approved by the court, we intend to conduct an orderly sale process to a third-party buyer outside of bankruptcy."
The biggest question left to be resolved is whether Balsillie will be allowed to bid against the NHL when the auction takes place.
The NHL has unanimously rejected Balsillie as a potential owner and has argued the league's decisions on who owns its clubs and where they play cannot be overridden by a bankruptcy court.
The NHL's bid for the Coyotes has undermined its claim in a sworn affidavit in June that there were several potential buyers willing to operate the Coyotes in Phoenix. Among those cited were Toronto Argonauts co-owners Howard Sokolowski and David Cynamon, from whom no bid has surfaced.
Balsillie's team was caught off guard by the turn of events but remains focused on its end goal.
"This obviously comes as a surprise but we look forward with interest to seeing what the NHL's bid is," Balsillie spokesperson Bill Walker said. "What we've said since Day 1 when we launched our bid is all we ask for is the opportunity to get into an auction where all the bids can come forward on a level playing field and may the best bid win."
Balsillie's side has argued in documents filed this week that the team can still be relocated to Hamilton in time for the 2009-10 season.