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September 8, 2009
Balsillie's new bid no
laughing matter
[Pittsburgh, PA] -- I haven't stopped
laughing since I read last week's court filings in the Phoenix Coyotes
bankruptcy hearings, in which the NHL essentially admitted a franchise
in Hamilton would be worth $101 to $195 million MORE than the one in
Phoenix.
Jim Balsillie's increased bid to $242
million makes him the only serious player in this Mel Brook's-like
farce.
No, I don't find the NHL's $101 million relocation value ridiculous.
The hearty laugh emanating from the depths of my sarcasm-singed-soul
is spawned by the obvious follow up question: Why is the NHL fighting
so hard to stop a $100 million franchise upgrade?
Balsillie's legal team first filed papers stating the relocation fee,
based on value differential, should rest somewhere between $12 million
and $20 million. Obviously underwhelming numbers, but Balsillie could
not have planned a better response from the NHL. The NHL, in its
strenuous bid to keep Jimmy Richkid from their tree house, committed a
huge blunder by giving a workable relocation figure, nearly one
hundred million dollars.
Balsillie's team sensed blood in the water, thus the increased offer.
What will they do if Balsillie accepts a relocation figure close to
their number, than his? It's quite possible. Do not forget, Judge T.
Baum's responsibility is not to award a lost puppy to the best home,
but to get the most money for the creditors. The new $242 million
offer puts high pressure on Baum to award the franchise to the
Blackberry magnate, and also puts downward pressure on the relocation
fee -- after all, Ballsillie's offering much more than the franchise
is worth.
To summarize, is upping the ante by using money which would
undoubtedly be requested by the NHL for relocation. He is
simultaneously increasing the money available to unsecured creditors
like the city of Glendale, while decreasing the money available to the
Gary Bettman led NHL.
Brilliant.
While the skillful manipulation of the system by Balsillie's team in
on display, the NHL has done little to shed its clumsy image. Both
sides know the real numbers and values of a team in Hamilton. While
the league could declare southern Ontario an expansion area, thus
placing the region off limits or at least setting a verifiable cost,
the league is losing its battle for the Coyotes by hiding the
expansion intention-- to the detriment of every owner's wallet.
Everyone knows the NHL would expand to southern Ontario, or at least
should, once matters of territorial rights are settled with the
Toronto Maple Leafs and Buffalo Sabres. A value placed on expansion
would allow the NHL to show a certifiable business loss if the team
were relocated to Hamilton by Balsillie and not by NHL growth.
In short, by officially declaring its expansion plans, Commissioner
Gary Bettman could effectively negate Balsillie's increased bid,
allowing the NHL to buy the Coyotes at a discounted rate. Once the NHL
owns the team, it may choose a preferable owner, make a profit on the
sale of the team and charge for relocation if a profitable deal with
the City of Glendale cannot be reached. (Perhaps allow Winnipeg
investors to relocate back to the 'Peg?) Plus collect the expansion
fee of in excess of one hundred million dollars when a team is placed
in Ontario—at the discretion of the NHL.
That's what shrewd business people would do.
Instead, the NHL has unintentionally opened the door to the Balsille
bid. By comparison, the Maple Leafs are valued at $332,000,000, per
Forbes Magazine. If Baum awards Balsillie the Coyotes for $242
million, then negotiate a workable relocation fee—maybe $50 million—Balsillie
wins.
About $300 million for a Hamilton franchise? If I were the Balsillie
team, I would pounce on that.
One may laugh at the situation because of the amazing level of
confinement created by the NHL's inability to set a course for the
future of the league. They are confined to a negative fight, in which
victory means the loss of millions of dollars as they operate the
Coyotes franchise while attempting to keep the team in an
unsustainable, non-hockey market.
Only the NHL could snatch such defeat from the jaws of victory.
This is the same league that allows a group to "rent to own" the Tampa
Bay Lightning. The same league that has had at least four criminals
acquire teams over the last 25 years (Bruce McNall-LA Kings, Boots Del
Baggio-Nashville, Peter Pocklington-Edmonton, John Spano-NYI). The
message is clear: Criminals are OK, just not that Balsillie fellow.
I laugh because every day the Coyotes bankruptcy hearings go forward,
the greater chance the NHL has of losing -- and losing big.
What will the owners say if the Coyotes
move to Hamilton and all they have in the bank account is a third of
its overall value, instead of big expansion fees?
Every dollar not gained by the league is ultimately lost by the
players and owners, thus refusing a Hamilton team for 2010 will cost
all parties millions of dollars. If the Coyotes and other
under-performing teams are still in place when collective bargaining
negotiations begin, perhaps the players will have an opinion on losing
tens of millions.
If it comes to that, the new CBA meetings will be no laughing matter.
Daniel Kingerski, host of The Fourth Period Radio Show,
is the Pittsburgh Correspondent for
The Fourth Period Magazine and a Columnist for TheFourthPeriod.com.
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