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Shoalts: New lifeline could keep Coyotes from changing hands

Arizona Coyotes left wing Mikkel Boedker (89) celebrates his goal against the Edmonton Oilers in the first period at Rexall Place on Oct 1, 2014.

Chris LaFrance/USA Today Sports

The ownership structure of the Arizona Coyotes may be changing once again, although the NHL's new lifeline could allow Calgary financier George Gosbee and his partners to maintain control of the club.

That lifeline is the $1.4-billion (all currency U.S.) credit facility arranged by the NHL with Citi Private Bank that is available to all 30 clubs. This could allow Gosbee, co-owner Anthony LeBlanc, who is also Canadian, and their partners to refinance some or all of the franchise's $205-million debt at a lower interest rate through the league.

The ownership of the NHL's most troubled franchise came up yet again when The New York Post reported Thursday that Philadelphia hedge fund manager Andrew Barroway is in "advanced negotiations" to buy controlling interest (51 per cent) in the Coyotes through IceArizona, the company Gosbee and LeBlanc set up to buy the team last year. While talks are under way, sources familiar with the Coyotes' finances say it is unlikely a sale is imminent.

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NHL deputy commissioner Bill Daly declined to discuss the situation, but he did indicate something "positive" may be in store for the Coyotes.

"There's nothing I can share other than to say that there is no concern at all about the franchise or its future in Arizona," Daly wrote in an e-mail message. "If anything happens, and nothing has to this point, it will only be a positive for the franchise."

Neither Gosbee nor LeBlanc responded to requests for comment but later on Thursday issued a statement confirming they are in negotiations with "an unsolicited potential investor." The statement went on to say none of the current IceArizona partners is leaving and the investor's interest is because of "the successful first year of IceArizona's ownership."

According to the Post, Barroway would buy the 51-per-cent interest in the Coyotes based on a "recent valuation" of the franchise at $305-million. Gosbee and LeBlanc paid $170-million to the NHL for the club after the league bought the Coyotes out of bankruptcy for $140-million. Barroway would also agree to drop a $10-million lawsuit against New York Islanders majority owner Charles Wang, which was launched after his bid to buy that club went sour.

The problem for the latest owners is the same as it was for all the previous owners – despite any claims to a successful first year, the Coyotes' cash flow is not enough to service the franchise's enormous debt. The team's hockey-related revenue (HRR) for the 2013-14 season was said to be just $40-million, last among the NHL's 30 clubs.

Gosbee and LeBlanc borrowed $120-million from Fortress Investment Group and $85-million from the NHL to finance the team and have some working capital left over. While the NHL loan is at favourable terms, one source pegs the interest rate for the Fortress loan at 10 per cent.

Thus the NHL's announcement this week it secured a $1.4-billion credit facility, backed by the collateral of the league's billion-dollar television contracts with NBC in the United States and Rogers Communications Inc., in Canada, was welcome news for the Coyotes. This allows the league's poorer clubs to borrow money at a good interest rate with the NHL providing the security.

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It is possible Gosbee and LeBlanc could refinance the Fortress loan and the existing NHL loan at a better interest rate. This could allow them to accept new partners on their terms and retain control of the club.

While any sort of a sale is said not to involve a move of the franchise, the Coyotes owners do have an escape clause in their arena lease with the suburban city of Glendale, Ariz., after the 2017-18 season if total losses hit $50-million. The Post reported the club is claiming a loss of $24-million for 2013-14.

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About the Author
Hockey columnist

A native of Wainfleet, Ont., David Shoalts joined The Globe in 1984 after working at the Calgary Herald, Calgary Sun and Toronto Sun. He graduated in 1978 from Conestoga College and also attended the University of Waterloo. More

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