originally posted by wagner3 on another topic...
Coyotes' financial situation gets uglier
From Wednesday's Globe and Mail
E-mail David Shoalts | Read Bio | Latest Columns
December 23, 2008 at 10:52 PM EST
The NHL is providing financial assistance to keep the Phoenix Coyotes alive in the form of advances on the franchise's share of league revenue, according to a source at the league board of governors level.
Bill Daly, deputy commissioner of the NHL, did not directly confirm or deny the Coyotes are receiving money. But he did say in an e-mail message that "advances on league distributions are not unusual."
One league governor said he is "99.9-per-cent sure" NHL commissioner Gary Bettman has approved providing funds to the financially devastated team, with the permission of the governors' executive and finance committees. That permission is needed if the NHL wants to loan one team money that technically belongs to the other 29 teams.
A second NHL governor said the league can provide a team financial assistance without the governors' unanimous approval as long as it is in form of an advance on shared revenue. This could include broadcast income, as well as revenue-sharing payments from other NHL teams that is usually paid out at the end of a season. The Ottawa Senators regularly received such assistance before Eugene Melnyk bought the team from Rod Bryden in 2003.
Two additional NHL owners said yesterday they were not aware the league was helping the team meet its player payroll obligations. But, one of the owners said, "I have heard it is bad in Phoenix."
It appears the league is now the only benefactor to which the Coyotes can turn.
Financial documents obtained by The Globe and Mail show the team has pledged the franchise and all its assets, including all forms of revenue (with the possible exception of arena-naming rights), as collateral for loans from New York company SOF Investments LP.
SOF Investments is a subsidiary of the MSD Capital hedge fund, which is controlled by computer tycoon Michael Dell.
Team owner Jerry Moyes has been ensuring the Coyotes cover their losses, which are expected to be more than $30-million (all currency U.S.) this season, and as much as $200-million since he and former partner Steve Ellman bought the team in 2001.
But Moyes's chief business, Swift Transportation, is in severe financial difficulty. It was hit by the economic downturn that crippled many trucking companies, which calls into question his ability to fund any hockey losses.
One source familiar with the Coyotes' loans said their collateral covers an obligation of about $80-million to SOF Investments.
The value of the franchise is not clear. Moyes and Ellman paid $120-million for the team and the league argues even its poorest franchises are worth almost $200-million. Last October, Forbes magazine said the Coyotes were worth $142-million, lowest in the NHL.
Daly said the Coyotes' pledge of all their assets and revenue is not a concern to the NHL.
"Secured lenders grab as much as they can — for the amount of their loan," Daly wrote in an e-mail. "The only relevant issue is whether the club is worth more than the secured loan. We have policies that regulate that.
"We have no doubt that the Coyotes' secured loan is more than covered by the value of the franchise."
A third source said the Coyotes have already approached the city of Glendale about renegotiating their 30-year lease at Jobing.com Arena. While the lease does give the team most of the revenue from the arena operations, there are items such as parking in which the city takes money from the Coyotes.
The only way the team can break its lease and relocate is by declaring bankruptcy.
Coyotes chief executive officer and league governor Jeff Shumway did not respond to requests for comment. But he told ESPN.com yesterday that "everybody agrees that we need to find a solution that works for both of us" concerning the lease.
Glendale city manager Ed Beasley did not respond to several requests for comment.
Beasley's spokeswoman, Julie Frisconi, refused to confirm if the Coyotes and the city have discussed the lease.
"Anything we are discussing are private matters until they become public," Frisconi said. "I couldn't confirm this is happening. It is not on the radar at this point that the team will go bankrupt."
If the Coyotes do collapse, it would be a major embarrassment to Glendale Mayor Elaine Scruggs. Under her leadership, the city has aggressively pursued professional sports teams and events. In addition to landing the Arizona Cardinals of the NFL by building a football stadium, the city covered $180-million of the $220-million price tag of Jobing.com Arena.
But the Coyotes have struggled to draw fans since they moved to Glendale, on the opposite side of Phoenix from their wealthy fan base in Scottsdale.
The league says it is helping Moyes to find other investors — but sources in the banking and NHL communities doubt one can be found who is willing to keep the team in Glendale.
The Coyotes began borrowing money from SOF in 2003, and increased its collateral in succeeding years, according to documents obtained by The Globe and Mail. According to a Uniform Commercial Code financing statement filed with the state of Delaware, the Coyotes pledged everything from ticket revenue, broadcast revenue, concessions, future NHL expansion payments, player contracts, insurance policies, arena revenue and merchandise sales as collateral.
A series of financing statements were filed over the years as the Coyotes continued their relationship with SOF. On Jan. 17, 2007, another document contained a single sentence: "The collateral consists of all assets of the debtor."
The timing of that document suggests the Coyotes increased their loan from SOF in order to pay off one to another New York hedge fund, Fortress Credit Opportunities LP. On Jan. 16, 2007, a document was filed that terminated the relationship between the Coyotes and Fortress.
In a statement filed on Nov. 6, 2008, which extended the loan from SOF until Dec. 29, 2013, almost all of the Coyotes' assets were listed as collateral. The arena-naming rights were excluded as long as the Coyotes met the terms of their loan.
The only other notable exclusion is the contract of managing partner and head coach Wayne Gretzky. But a source familiar with lending laws said it is not unusual because it is a personal-services contract, which cannot be used as collateral.
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