The Phoenix Coyotes and the Atlanta Thrashers caused Gary Bettman much embarrassment over the years but the NHL commissioner is once again poised to emerge unscathed.
Bettman would use the gains from the impending sale of the Atlanta Thrashers to recover losses incurred by NHL owners from buying the Coyotes out of bankruptcy and operating the team in the red for the past two seasons. Bettman should have at least $60-million - the reported relocation fee included in the sale price - and possibly up to $90-million or more to apply to the Coyotes, once the pending sale of the Thrashers is completed.
Atlanta Spirit, LLC and True North Sports & Entertainment Ltd., of Winnipeg, on Friday were continuing to work through the details of an agreement in principle on the sale of the Thrashers, for an estimated $170 million.
The key move was to prevent the Coyotes from moving to Winnipeg. By working to keep the Coyotes in suburban Glendale, Ariz., Bettman maintained Winnipeg as an open NHL market. The strategy arguably propped up the value of the Thrashers as the only franchise available for relocation, in turn creating capital to subsidize the Coyotes losses.
Had the Coyotes moved to Winnipeg, sources say the value of the Thrashers would have dropped as low as $80-million without a viable market to accommodate the team. Quebec is not considered a current option because the city lacks an appropriate arena and the Phoenix situation needs a relatively immediate solution.
Bettman's maneuvering could have backfired, but he had luck on his side. When Glendale politicians kicked in another $25-million recently toward next season's Coyotes losses, Bettman won another year to sort out the sale of the Coyotes to Chicago businessman Matthew Hulsizer. The Goldwater Institute has effectively blocked that deal by threatening to sue if the sale of $116-million of municipal bonds is allowed to proceed. Revenue from the bonds is meant to finance the sale, along with $97-million in arena management fees that would be granted to Hulsizer.
Glendale's second consecutive $25-million gift allowed Bettman to redirect True North from a brief dalliance with the Coyotes, and back to the Thrashers.
It is now conceivable that Bettman will deprive the Atlanta Spirit group - nine partners led by Bruce Levenson and Michael Gearon Jr. - of any proceeds from the $60-million relocation fee. He may even insist that the league deserves a $30-million cut from the $110-million franchise price, too.
The commissioner can argue that he, with the help of Hulsizer, created artificial value for the Thrashers by keeping the Coyotes in Glendale. Bettman may also claim a finder's fee of sorts, by arguing the league brought True North and its $170-million to the table after Levenson and partners failed to sell the Thrashers after several years forlornly seeking a single credible buyer.
Bettman holds the hammer. A majority of the NHL's 30 governors must approve the sale and relocation of any team. Objections by the Thrashers owners could mean no approval, no sale, leaving Atlanta Spirit, LLC facing another year of losses in excess of $25-million and possibly a roadblock to a rumoured sale of the rest of the operation, including an arena and the NBA Hawks.
Should the deal go through, Bettman could feasibly extricate the NHL from the Coyotes situation in one of two ways.
As reported by The Globe and Mail three weeks ago, Hulsizer and Glendale agreed to restructure their agreement but have not come to terms because it requires the NHL to take a haircut. Hulsizer has agreed to increase his $70-million initial investment and take a reduced management fee, while Glendale will cut the bond offering to $75-million or less. They also need the NHL to lower its sale price of $200-million, which includes the $140-million paid for the Coyotes plus legal fees plus its share of losses over two seasons.
Bettman could apply the $60-million relocation fee to the NHL's cost for the Coyotes, effectively lowering the asking price to $140-million or less. This would be the easiest way, since Hulsizer nor anyone else is willing to pay $200-million for the team.
Or Bettman could turn to another buyer, maybe one named Jerry Reinsdorf. Goldwater's opposition to the sale of bonds as an allegedly illegal subsidy scared off potential buyers. Glendale would have had to take them to market at a rate of 9 per cent or higher to induce buyers, a rate the city couldn't afford.
But if Bettman buys, he can agree to pay 6 per cent in a private sale so the bonds get sold without having to go on the open market, thereby scuttling Goldwater's oppostion.