Balsillie's bid for Coyotes hinges on hearing

A decision anticipated Wednesday by a U.S. bankruptcy judge could permit Jim Balsillie to continue his pursuit of the Phoenix Coyotes and relocate them to Hamilton.

Wednesday will be decision day in the desert.

That is when Judge Redfield T. Baum will rule in an Arizona courtroom whether Canadian billionaire Jim Balsillie can participate in a Sept. 10 auction for the bankrupt Phoenix Coyotes.

Balsillie confirmed Tuesday in a court filing by PSE, the company he formed to pursue the Coyotes, that he will attend the bankruptcy hearing.

"Recognizing that his credibility has been put at issue and the court may have questions not covered in the declarations and deposition testimony," the court filing stated, "Mr. James Balsillie will be present at the hearing in order to respond to any questions the court may have."

Balsillie, the co-CEO of Research In Motion Ltd., maker of the BlackBerry smartphone, has offered $212.5 million US to buy the NHL franchise on the condition he can relocate it in Hamilton.

But the league's board of governors voted 26-0 with three abstentions to reject Balsillie's application for ownership because it considered him untrustworthy.

"The owners concluded apparently that he was not a person that they felt had the appropriate character and integrity and would not be a good partner in the league," NHL commissioner Gary Bettman testified during an Aug. 20 deposition filed Tuesday.

"In my history, my roughly 30-year history in professional sports, generally it doesn't get this far," Bettman continued. "Somebody who's having admission problems because there may be a character or integrity issue generally doesn't push it far enough to a vote. They typically drop out."

Bettman on Balsillie 

"There was an article in the most recent issue of Fortune Magazine, in addition to the fact that we've seen his financials that indicates that he owns six per cent of RIMM, which they said in the article has a market cap of $42 billion. I think we can all agree that he has the financial wherewithal. But as you know, that's not the end of the story." — NHL commissioner Gary Bettman from an Aug. 20 deposition filed Tuesday.

Baum must decide whether or not to uphold the board's vote as it pertains to the Coyotes' bankruptcy proceeding.

"Remember, the judge is there to try and obtain the highest and best offer in the interest of maximizing distribution to creditors," said Eric Schaffer, a senior partner with a Pittsburgh law firm involved in the Penguins bankruptcy three years ago.

Balsillie's bid is the most lucrative and contingent on relocating the Coyotes in Hamilton, which PSE claimed in filings "is, irrefutably, the only chance to maximize the value of the debtors' assets and pay off all creditors."

But Balsillie's deal commits $104 million US of the sum total to Coyotes majority owner Jerry Moyes, who filed for Chapter 11 bankruptcy protection on May 5.

A second bid for $150 million US was submitted by Ice Edge Holdings LLC, a group committed to keeping the Coyotes in Phoenix pending a lease agreement and on the proviso they play five games in Saskatoon.

The five dates — Nov. 12 (Montreal Canadiens), Dec. 21 (Columbus Blue Jackets), Jan. 21 (Nashville Predators), Feb. 8 (Edmonton Oilers) and Mar. 2 (St. Louis Blues).

The NHL, which favours keeping the franchise in Phoenix for the time being, has bid $140 million US.  

The league entered the bidding war last week when Jerry Reinsdorf, owner of the Chicago Bulls and Chicago White Sox, withdrew his $148-million US bid, citing an inability to reach an agreement with the city of Glendale, the Phoenix suburb where the Coyotes play. 

If the NHL succeeds in buying the Coyotes, it still could sell them to an owner willing to keep the team in Phoenix, an owner intending to move it elsewhere or perhaps even Reinsdorf.

"If he [Balsillie] loses on this one, then he probably is done as a potential owner," Schaffer pointed out. "It means you have a court decision that says the NHL does not have to take him in under any circumstances."

If Balsillie's bid is deemed valid, the NHL will likely appeal and demand a stay of sale.

Conversely, if Baum rules in favour of the NHL, he runs the risk of Balsillie filing an antitrust lawsuit against the league over territorial rights.

"The only reason that the NHL will not consider relocation to Hamilton is to protect the concededly unlawful territorial veto rights of the Toronto Maple Leafs," PSE contended.

"A court could conceivably order the NHL to add another team [in Hamilton] or give him the right to buy another team or may just award him money damages," Penn State scholar Stephen Ross explained, noting that such litigation could take up to four years at an estimated cost of $10 million US to Balsillie.

'He was an informed purchaser'

Balsillie previously tried — and failed — to purchase the Penguins and Predators so he could move them to Hamilton.

Balsillie struck a tentative agreement with Mario Lemieux to purchase the Penguins for $175 million US in 2006, but Bettman intervened and reportedly imposed restrictions that would keep the team in Pittsburgh.

Balsillie later agreed to purchase the Predators for $238 million US from Craig Leipold in 2007, and began 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.

Now the owners' perception is Balsillie is trying to circumvent league rules to acquire the Coyotes.

"He should have followed the league's rules and procedures with regard to acquisition," Boston Bruins owner Jeremy Jacobs testified in an Aug. 19 deposition. "And he had much experience in dealing with the Penguins and the Predators prior to his pursuing the Coyotes."

"He was an informed purchaser," Jacobs continued. "And he specifically stated when he couldn't go through the front door, he was going to go through the side door or the back door or climb over it however he was going to do it."

With files from The Associated Press