Canadian billionaire Jim Balsillie's bid to buy the Phoenix Coyotes and relocate the NHL team to Hamilton was rejected Monday by an Arizona bankruptcy judge.
Balsillie, the co-CEO of Research In Motion Ltd., maker of the BlackBerry smartphone, imposed a June 29 deadline to complete the sale — hoping to speed up the process and have the team ready to play in Hamilton for the 2009-10 season.
But in a ruling handed down Monday, Judge Redfield T. Baum said, "This court is unconvinced that it should order that the NHL must decide the relocation application to meet the June 29 deadline."
"Simply put, the court does not think there is sufficient time for all of these issues to be fairly presented to the court given that deadline," Baum said in the 21-page document. "The motion is denied, without prejudice."
The ruling is perceived as a victory of sorts for the NHL, which protested that Balsillie's bid was structured in such a way that he buy the team and move it to Hamilton without proper league consent.
"We're pleased the Court recognized the validity of League rules and our ability to apply them in a reasonable fashion," NHL deputy commissioner Bill Daly said in a statement.
One of the most pressing issues in the complex, time-sensitive case was the matter of relocation and a proposed relocation fee to be negotiated with the NHL, rumoured to be as much as $100 million US.
The league maintained that it would not discuss a relocation fee until the sale of the Coyotes and their subsequent move to Hamilton were approved by the NHL board of governors.
Balsillie argued any failure to allow the team to move to Hamilton was a violation of antitrust law, but Baum ruled otherwise.
"This court can not find that antitrust law as applicable non-bankruptcy law permits the sale free and clear of the relocation rights of the NHL," Baum said, adding "it is not an antitrust violation for professional sports leagues to have terms and conditions on relocations of its members."
If the NHL had rejected Balsillie's application, Baum had scheduled a June 22 hearing to rule on whether the team could be moved to remove it from bankruptcy and hold a court-supervised auction.
But Monday's ruling effectively nullified a June 22 auction and other related deadlines, and forced Balsillie to extend an olive branch to the NHL.
"The court still controls the sale process," Balsillie spokesman Bill Walker said in a statement. "As a result, we look forward to hearing from the NHL soon on its view of our relocation application and an appropriate relocation fee, so as to allow the court to determine if that fee is reasonable.
"We still think there is enough time for the NHL to approve Mr. Balsillie's application and move the team to Hamilton by September. The court invited mediation on these issues and Mr. Balsillie is willing to participate in such mediation if the NHL is also willing to do so."
"There is still a window of opportunity here," Mayor Fred Eisenberger told the Hamilton Spectator. "The issue is still very much alive.
"It doesn't mean relocation cannot happen. I have always expected it to be a bit of a roller coaster ride, and it certainly is."
NHL committed to Phoenix
Coyotes majority owner Jerry Moyes filed for Chapter 11 bankruptcy protection on May 5 — a move intended to facilitate the sale of the franchise to Balsillie for $212.5 million US, but on the condition he could relocate the insolvent team to Hamilton.
Balsillie also agreed to provide $17 million US in bridge financing to keep the team operating in advance of the proposed sale.
The NHL claimed it remained committed to trying to keep the Coyotes in suburban Glendale, Ariz., so challenged Moyes's legal authority to file for bankruptcy shelter, arguing it had assumed control of the franchise and removed him as majority owner.
The league also told the court that it had four expressions of interest from potential buyers interested in operating the Coyotes in Phoenix, including Jerry Reinsdorf, owner of the Chicago Bulls and Chicago White Sox, and Howard Sokolowski and David Cynamon, co-owners of the Toronto Argonauts.
"We will turn our attention now toward helping to facilitate an orderly sales process that will produce a local buyer who is committed to making the Coyotes' franchise viable and successful in the Phoenix/Glendale area," Daly said. "We're confident that we will be able to find such a buyer for the Coyotes and that the claims of legitimate creditors will be addressed."
The City of Glendale, which spent $183 million US to build what is now Jobing.com Arena and argued that Moyes was hoping to escape the lease, was relieved by Baum's ruling.
"Clearly, the court recognized the significance of these issues and the unique interests of the City of Glendale and its taxpayers," city officials said in a statement said. "The court based its decision on the law and facts and not on countless rumours and innuendo regarding this matter."
Moyes lost more than $300M
Moyes has claimed to have lost more than $200 million US in equity and more than $100 million US in debt since buying the Coyotes with developer Steve Ellman for $90 million US in 2001.
Court documents detail $73 million US in team losses between 2005 and 2008 and, according to Forbes magazine, the Coyotes are worth an estimated $142 million US — the lowest value in the NHL.
"I think people are going to be shocked when they see the value of this team remaining in Glendale," said Thomas Salerno, Moyes's attorney. "It's going to be materially less than the offer we have on the table."
Rob Becker, a New York attorney and legal analyst on sports issues, said Balsillie, however generous, was thwarted by the June 29 deadline of his own making.
"It may be that Balsillie's tough-guy strategy of holding the league's feet to the fire with a deadline may have backfired because it may have also held the judge's feet to the fire," Becker said. "If it was a deadline that he himself did not need for business reasons, then he may well regret it.
"But if the reason he put the deadline on there was because he didn't think that he could move the team unless it was done by [June 29], well, then, I guess he doesn't regret it because he had to do it."
Tried to purchase Penguins and Predators
Balsillie tried twice before to buy an existing NHL franchise and relocate it in southern Ontario, only to have both efforts fall through.
He struck a tentative agreement to purchase the Pittsburgh Penguins for $175 million US three years ago, but the offer was dissolved because NHL commissioner Gary Bettman intervened and reportedly imposed restrictions that would keep the team in Pittsburgh.
Balsillie later agreed to purchase the Nashville Predators for $238 million US from Craig Leipold in 2007, and started a season-ticket drive in Hamilton when Leipold had second thoughts and scuttled the deal.
Leipold later sold the Predators for $193 million US and bought a 51 per cent majority stake in the Minnesota Wild.
"The Phoenix court confirmed Mr. Balsillie was approved as an NHL owner in 2006 and [he] remains so," Walker said. "We believe he has made the best offer and Hamilton remains the best location for this team [Coyotes]."