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Phoenix Coyotes Bankruptcy: Real or Imagined?

2009 May 6
by Victor Matheson

Yesterday the NHL’s Phoenix Coyotes filed for bankruptcy. The Coyotes had reportedly lost $90 million over the past 3 seasons, and with credit scarce in today’s roiling markets, there is every reason to believe that the team is in deep financial trouble. In addition, Phoenix has been particularly hard hit by the current recession with housing prices in the area falling to less than half of their peak in June 2006 and an unemployment rate more than double that of just 18 short months ago.

However, all may not be as it appears in Phoenix. The current owner has received a bid of $212.5 milllion from Jim Balsillie, co-CEO of BlackBerry maker Research In Motion, contingent on the team moving to southern Ontario, a move that the league normally might block. By filing bankruptcy, current Coyotes owner Jerry Moyes may simply be trying to enlist the court’s help in forcing the league to accept the move to satisfy creditors. Ironically, the NHL itself is one of the team’s largest creditors.

This would not be the first time an owner attempted to enlist the courts to prevail over a league’s franchise location wishes. Al Davis successfully sued the NFL for the right to move the Oakland Raiders to Los Angeles in the 1980s. Many observers also believe the the ill-fated USFL’s attempt to form a rival football league an subsequent antitrust lawsuit against the NFL during the same time period was a backdoor attempt to force an eventual merger between the NFL and the upstart league in order to get a handful of expansion franchises on the cheap.

Several comments: first, it’s not clear at all that a bankruptcy court can force an unrelated party like the NHL to do anything just to help the creditors of the Coyotes. Second, it’s also unclear why the NHL would want to force a team to remain in an unprofitable market when it seems clear that fan demand in Ontario could easily support another franchise in the area. Finally, while the Canadian jurisdiction may confound a simple answer, it’s also not clear why Balsille and Moyes don’t think that they would ultimately be successful in court in their bid to move the franchise even without the league’s approval.

(Thanks to my student Shane McAdam for the heads up.)

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