Coyotes file for bankruptcy, could move to Ontario

The Phoenix Coyotes filed for Chapter 11 bankruptcy protection on Tuesday, a move that could clear the way for the team to be sold and moved to Ontario.

They’ll first have to get past the NHL, which reacted angrily to the Coyotes’ decision by stripping owner Jerry Moyes of his powers and taking control of the team.

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“We have just become aware of today’s bankruptcy court filing purportedly made on behalf of the Phoenix Coyotes,” NHL deputy commissioner Bill Daly said in a statement. “We are investigating the circumstances surrounding the petition, including the propriety of its filing.

“We have removed Jerry Moyes from all positions of authority to act for, or on behalf of, the club. The league will appear and proceed before the bankruptcy court in the best interests of all of the club’s constituencies, including its fans in Arizona and the league’s 29 other member clubs.”

The Coyotes’ bankruptcy filing includes a proposed sale of the franchise for $212.5 million to PSE Sports and Entertainment, a Delaware-based partnership that would move the team to Ontario. Toronto businessman Jim Balsillie would become owner of the team.

“The current team ownership asked that I (make) an offer to purchase the Coyotes, and significant discussions resulted in an offer that is in the best interests of the franchise, the NHL, and the great hockey fans of Canada and Southern Ontario,” Balsillie said in a statement.

Glendale was also caught off guard by Tuesday’s developments, and issued a statement calling the Coyotes’ decision “to initiate bankruptcy proceedings without consultation or approval of the National Hockey League an unfortunate turn of events.”

“Even as the propriety of this unprecedented action is being thoroughly investigated by the NHL, city officials are working diligently to ensure that the public’s interest is fully protected throughout this process,” the Glendale statement continued. “The City appreciates the decision by the NHL to assume control of the Coyotes and we are confident that every effort will be made to honor all contractual commitments. It is our hope that the NHL action will provide immediate stability to the franchise and allow the Coyotes to remain an important part of the Arizona community.”

The bankruptcy filing doesn’t mean a move is a certainty, as potential buyers will have an opportunity to outbid PSE’s proposal. However, the team has been seeking investors and/or buyers for some time to no avail, and a higher bidder apparently would have to be in place by June 30.

The Coyotes have been losing money ever since moving the franchise from Winnipeg to the Valley in 1996.

Moyes, in a press release from the team, stated that “creating a process under the supervision of a judge assures that anyone wishing to purchase the team will have the opportunity to bid.” The offer from PSE sets the bar at $212.5 million, and Moyes said any bids must exceed the PSE offer by $5 million and must be fully funded at closing without a financing contingency.

“Likewise, the City of Glendale, which has been very cooperative with efforts to keep the team in Glendale, will be able to provide potential buyers assurances of the City’s willingness to offer incentives to keep the team as a tenant in the Jobing.com arena, the lease for which is subject to rejection in bankruptcy,” Moyes’ press release said. “The process assures that the identities of the new owner and the team’s location will be known by June 30, 2009, thus enabling the NHL to include the team in its 2009-10 schedule.”

PSE Sports and Entertainment agreed to provide $17 million in immediate financing to allow the team to continue to operate through the bankruptcy proceedings. PSE’s $212.5 million offer includes enough funds to pay secured debtors in full (about $80 million to SOF Investments and $35 million to the NHL) and $97.5 million to unsecured creditors. The total includes $206.5 million in preferred and common equity that the team said will not be recovered by Moyes under the current offer.

“As managing member of the Coyotes, I have a duty to seek a transaction that will return the most in sale proceeds to the secured and unsecured creditors,” Moyes stated. “No other proposal to acquire the team provided nearly as much payment to the creditors as that offered by PSE.”

The NHL loaned the Coyotes money in February to help keep the team afloat, but NHL commissioner Gary Bettman had stressed at the time that the financially struggling team wouldn’t be relocated.

“Our goal is to bring in new capital and make this franchise solvent,” Bettman said on March 26 while attending a Coyotes game. “That’s our direction, and at this point moving the franchise elsewhere is not on the table.”