Phoenix Coyotes fans can thank the NHL lockout for keeping their team in the suburban City of Glendale for another five years.
Calgary financier George Gosbee, the key to the money behind the new Coyotes owners, said Wednesday he was pitched many times on becoming part of a bid for the NHL’s worst financial disaster. But he never seriously considered it until the players and owners agreed to divide the league’s hockey-related revenue 50/50, down from 57 per cent for the players in the previous collective agreement, which was the biggest issue in the lockout which ended in January.
Gosbee, 43, is a friend of Daryl Jones, who was one of the partners, along with Anthony LeBlanc, in what was known as Ice Edge Holdings, which made one of the failed bids for the Coyotes. When LeBlanc jumped in after Greg Jamison’s ownership bid failed in January, he and Jones courted Gosbee again “but it didn’t attract me until the collective agreement.”
“That’s when the business model made sense,” Gosbee said over the phone from Calgary, where he and his fellow investors were enjoying the Stampede. “There is more of a fair revenue-sharing agreement. Phoenix doesn’t need 14,000 people in the seats. It’s more of an NFL model.
“And we’re looking at a new local TV contract, a new food-and-beverage contract and the local economy is recovering. Things started to add up and it became a pretty good investment.”
Gosbee plans to be an active owner. He will serve as the club’s chairman, LeBlanc will run the business side, with Don Maloney remaining as the general manager on the hockey side. But he won’t be able to get to Glendale for a bit, Gosbee said, as he is still dealing with the complete loss of his Calgary home in the recent flood.
Gosbee and his partners scored another revenue boost when NHL commissioner Gary Bettman decreed the Coyotes would always receive a full share of the league’s revenue-sharing plan, which is as much as $20-million (all currency U.S.) a year. Every other NHL club has to meet revenue and ticket-sales targets or its share is docked. Add the $15-million a year to manage Jobing.com Arena in a 15-year lease coughed up by Glendale, and Gosbee could see the possibility of at least breaking even.
Breaking even on a club that routinely lost more than $30-million a year. Gosbee managed to convince a group of his Canadian and American friends in the oil and financial fields to sign up as well.
Among the 10 primary investors who make up Renaissance Sports and Entertainment, the company that spawned IceArizona, which made the $170-million purchase from the NHL, are people who have done many deals with Gosbee over the years.
The other partners are: Scott Saxberg, president of Crescent Point Energy Corp.; Craig Stewart, chairman of RMP Energy Inc.; Dave Duckett, president of Plains Midstream Canada; Peter Kagan, managing director of New York-based Warburg Pincus LLC; Bob Gwin, an executive with Anadarko Petroleum Corp. in Houston; George Fink, chairman of Bonterra Energy Corp.; and Bill Dutton, a retired Calgary oil man who is a descendant of the legendary Norman (Red) Dutton, a player, coach and owner in the NHL who served as its president in the 1940s.
However, despite the blue-chip list of investors, the group has just $45-million in equity in the Coyotes. It does have about $245-million raised, but most of it is borrowed, with the NHL lending $80-million and $120-million coming from Fortress Investment Group LLC.
While an NHL source said Gosbee is responsible for $35-million of the $45-million, with the other nine partners in for much smaller amounts, he said it is divided evenly among the group – although it does have two tiers of investors. He also said there is still considerable risk for the partners.
“I think people still confuse equity with not having risk,” Gosbee said. “We have significant risk with the fact we were able to leverage and borrow some cash. What also makes this unique is we will have $70[-million] to $80-million in cash on Day 1 to turn around the operation.”
This does not mean the Coyotes will spend to the salary cap, although Maloney will have a little more money. Gosbee pointed to the four-year, $22-million free-agent contract handed to centre Mike Ribeiro as an example.
But this still adds up as a five-year, make-or-break deal for the Coyotes to survive in the desert.
Gosbee and his partners have an escape clause from their lease after five years or a cumulative $50-million in losses. At the same time, they do not have to pay the principal on the NHL loan until five years has passed. That just happens to be the time period when arenas in Seattle, Quebec City and perhaps Las Vegas will be ready.
But Gosbee points out he and several of his partners already have homes in Arizona and did not get into this to move the team.
“We’re not focusing on that,” he said. “The five-year window is just so that if it is not working, we need to look at our options. As owners, we want to remain.”
But it is an enormous risk because much of the plan depends on Phoenix-area hockey fans coughing up more money in the form of parking and ticket surcharges. That is a challenge for a team that consistently ranks at the bottom in revenue and attendance among the NHL’s 30 teams.
“Based on the stability of ownership, we will attract more fans, more season-ticket holders and more sponsors,” Gosbee said. “We know there is more revenue to make up for the losses going forward.”