Jim Balsillie's bid to buy the Phoenix Coyotes and move them to Southern Ontario appeared to take a hit late Friday when representatives for the biggest creditor in the bankruptcy case said they backed the NHL's offer to take over the club.
SOF Investments, the lead secured creditor in the case, and the creditors' committee both came out in support of the league's bid to take over the financially strapped club.
SOF would get all its money under both bids but fears the litigation that would ensue if Balsillie won the auction over the objections of the league.
"Frankly, we believe there's less legal risk in accepting the NHL bid," said Steven Abramowitz, attorney for SOF Investments. "For that reason, we strongly prefer the NHL bid."
Paul Sala, the creditors' committee attorney, said some 99 percent of creditors would get paid.
"It's not perfect," Sala said, "but from the committee's standpoint we support the NHL's position."
The comments came at the end of two-day proceedings in front of Judge Redfield T. Baum in Phoenix.
Balsillie, the co-CEO of Research In Motion Ltd., maker of the BlackBerry smartphone, has increased his offer to buy the Coyotes to $242.5 million US. He also agreed Friday to pick up an additional $11 million in debt.
The process began in early May when Balsillie agreed to buy the franchise out of bankruptcy from Coyotes owner Jerry Moyes and move it to Hamilton, Ont.
"All I was looking for was a level playing field, a chance to really have a fair shot at buying a team," Balsillie said outside the Phoenix courthouse on Friday. "I think we got it here today."
The NHL is offering a bid of $140 million US. The league only made a bid after two groups that had expressed interest in the Coyotes decided not to participate in the auction.
While the NHL bid involves less money overall — particularly to Moyes — it wouldn't uproot the club. Relocation of the club could possibly set a legal precedent.
NHL commissioner Gary Bettman was questioned on the stand Friday on why he didn't mention the league's bid for the Coyotes in an Aug. 20 deposition.
Bettman said the decision to put in a bid came a few days later, over a 24-hour period.
Bettman was accused by Balsillie attorney Jeffrey Kessler of knowing a potential bid was a possibility when the league's board of governors rejected Balsillie as a potential owner in late July by a vote of 26-0.
Baum said he will need several days to make a decision after receiving written versions of the bids on Tuesday.