Post by JETStender on Jun 18, 2009 16:21:33 GMT -5
Coyotes ruling bucks bankruptcy trend
An Arizona bankruptcy judge's decision to block Jim Balsillie from acquiring pro hockey's Phoenix Coyotes out of bankruptcy for $212.5 million and relocate the franchise to Hamilton, Ontario, is a victory.
Not because we think Phoenix needs a hockey team. After all, the franchise has lost $36 million since 2006 (perhaps ice loses its luster to people living in the desert after a while). What makes the June 15 order refreshing is that Judge Redfield Baum of the U.S. Bankruptcy Court for the District of Arizona actually relied on case law and creditor rights in making his decision.
In an era where large debtors with a myriad of creditors holding billions of dollars in claims are rushed through bankruptcy court at the direction of the U.S. government, with little concern for bankruptcy law (see Lehman Brothers Holdings Inc., Chrysler LLC and soon General Motors Corp.) it has become almost surprising when a judge doesn't rubber stamp a sale motion.
In coming to his decision, Baum weighed diverse issues such as whether Balsillie's PSE Sports & Entertainment LP could acquire the Coyotes in a Section 363 sale, the right to move the team without the NHL's consent, how antitrust law applies to a move, and the effects of a sale and subsequent move on creditors, the city of Glendale and even other professional sports leagues, which filed briefs supporting the NHL's objection to the deal.
This appears to be the first case under the Bankruptcy Code ... where a professional sports team seeks to use the rights contained in the Code to force a sale and relocation of a team," he wrote in his 21-page decision. "The legal issues trigger not only bankruptcy law, but antitrust law and commercial law in the context of a professional sports team, as a Chapter 11 debtor. ... No cases have been found that precisely or even closely fit this scenario.
Ultimately, however, he ruled that there was not enough time before a June 29 sale deadline in PSE's asset purchase agreement for unresolved issues to "be fairly presented to the court."
Noting that the NHL playoffs were being held concurrently with the sale request, Baum said that NHL commissioner Gary Bettman "literally left June 9th hearing in Phoenix in the afternoon so he could be present at a game six of the finals in Pittsburgh." Because such relocation applications "create significant issues that mandate careful consideration by all effected parties," Baum said he was "unconvinced" that he should order the NHL to decide the necessary relocation applications by June 29.
Baum said it was a "paramount concern" of his to ensure all of the Phoenix Coyotes' creditors received a maximum recovery, which they likely would through the sale, but noted that "such an outcome does not lessen the requirements under the [bankruptcy] Code."
Compare that decision to Lehman, which was able to close a sale of its entire North American brokerage and investment banking assets to Barclays Capital Inc. just seven days after its Sept. 15 Chapter 11 filing. During a hearing to approve the sale, attorneys for the U.S. Department of Justice, U.S. Securities Exchange Commission and the Federal Reserve Bank all supported the deal, arguing it was necessary for the health of the financial markets.
Though the U.S. Bankruptcy Code requires that a debtor give 20-day notice to all interested parties of a 363(a) sale, Judge James Peck of the Manhattan bankruptcy court said he was willing to forgo constitutional due process because the "fast-track case needs to be addressed in an extraordinary way."
Maybe the team -- which has been funding operations with financing from the NHL since August 2008 -- should have applied for government bailout money. The U.S. Treasury, as a creditor, would likely ensure that the sale go through, bankruptcy law be damned. Just ask Chrysler. Or it should've filed in New York, where Lehman, Chrysler and GM did, and the judges are supposed to be so sophisticated.
All we know is, it's taken a judge well beyond the glamor of the East Coast to actually follow the bankruptcy law and be respectful of creditor rights, no matter how long it may prolong a sale. - John Blakeley
An Arizona bankruptcy judge's decision to block Jim Balsillie from acquiring pro hockey's Phoenix Coyotes out of bankruptcy for $212.5 million and relocate the franchise to Hamilton, Ontario, is a victory.
Not because we think Phoenix needs a hockey team. After all, the franchise has lost $36 million since 2006 (perhaps ice loses its luster to people living in the desert after a while). What makes the June 15 order refreshing is that Judge Redfield Baum of the U.S. Bankruptcy Court for the District of Arizona actually relied on case law and creditor rights in making his decision.
In an era where large debtors with a myriad of creditors holding billions of dollars in claims are rushed through bankruptcy court at the direction of the U.S. government, with little concern for bankruptcy law (see Lehman Brothers Holdings Inc., Chrysler LLC and soon General Motors Corp.) it has become almost surprising when a judge doesn't rubber stamp a sale motion.
In coming to his decision, Baum weighed diverse issues such as whether Balsillie's PSE Sports & Entertainment LP could acquire the Coyotes in a Section 363 sale, the right to move the team without the NHL's consent, how antitrust law applies to a move, and the effects of a sale and subsequent move on creditors, the city of Glendale and even other professional sports leagues, which filed briefs supporting the NHL's objection to the deal.
This appears to be the first case under the Bankruptcy Code ... where a professional sports team seeks to use the rights contained in the Code to force a sale and relocation of a team," he wrote in his 21-page decision. "The legal issues trigger not only bankruptcy law, but antitrust law and commercial law in the context of a professional sports team, as a Chapter 11 debtor. ... No cases have been found that precisely or even closely fit this scenario.
Ultimately, however, he ruled that there was not enough time before a June 29 sale deadline in PSE's asset purchase agreement for unresolved issues to "be fairly presented to the court."
Noting that the NHL playoffs were being held concurrently with the sale request, Baum said that NHL commissioner Gary Bettman "literally left June 9th hearing in Phoenix in the afternoon so he could be present at a game six of the finals in Pittsburgh." Because such relocation applications "create significant issues that mandate careful consideration by all effected parties," Baum said he was "unconvinced" that he should order the NHL to decide the necessary relocation applications by June 29.
Baum said it was a "paramount concern" of his to ensure all of the Phoenix Coyotes' creditors received a maximum recovery, which they likely would through the sale, but noted that "such an outcome does not lessen the requirements under the [bankruptcy] Code."
Compare that decision to Lehman, which was able to close a sale of its entire North American brokerage and investment banking assets to Barclays Capital Inc. just seven days after its Sept. 15 Chapter 11 filing. During a hearing to approve the sale, attorneys for the U.S. Department of Justice, U.S. Securities Exchange Commission and the Federal Reserve Bank all supported the deal, arguing it was necessary for the health of the financial markets.
Though the U.S. Bankruptcy Code requires that a debtor give 20-day notice to all interested parties of a 363(a) sale, Judge James Peck of the Manhattan bankruptcy court said he was willing to forgo constitutional due process because the "fast-track case needs to be addressed in an extraordinary way."
Maybe the team -- which has been funding operations with financing from the NHL since August 2008 -- should have applied for government bailout money. The U.S. Treasury, as a creditor, would likely ensure that the sale go through, bankruptcy law be damned. Just ask Chrysler. Or it should've filed in New York, where Lehman, Chrysler and GM did, and the judges are supposed to be so sophisticated.
All we know is, it's taken a judge well beyond the glamor of the East Coast to actually follow the bankruptcy law and be respectful of creditor rights, no matter how long it may prolong a sale. - John Blakeley