Post by WpgJets2008 on Sept 4, 2009 10:43:17 GMT -5
Moyes decision could set precedent
David Shoalts Globe and Mail Friday, Sep. 04, 2009 08:20AM EDT
www.theglobeandmail.com/sports/hockey/moyes-decision-could-set-precedent/article1275338/
The fight between Jim Balsillie and the NHL over the Phoenix Coyotes is full of side issues but one in particular, which is deemed by the participants to have no significant impact on the bankruptcy case, could have severe repercussions in the future for any sports team owner.
That is the question of whether or not the $104-million (all currency U.S.) Coyotes owner Jerry Moyes claims he has paid to cover operating losses over the years makes him a creditor or if that money represents equity in the moribund team.
The City of Glendale, where the Coyotes play, has asked the U.S. Bankruptcy Court to rule that it is equity, which means Moyes would receive nothing from any of the three potential bids for the team. The NHL, which has a bid of $140-million for the Coyotes, supports Glendale on this issue since its offer does not include any provision to pay Moyes.
During Wednesday's court hearing on whether or not Balsillie's $212.5-million bid for the Coyotes should be accepted by the court despite the fact Balsillie was rejected as an owner by the NHL (a decision was reserved), it was also decided that Moyes's status would not be argued until Sept. 10 – the day of the auction sale – at the earliest. And if the long list of other matters to be argued before the sale can proceed takes up too much time, the Moyes issue will not be heard until some time after the sale.
At this point, the auction is still officially scheduled for the afternoon of Sept. 10 with the morning devoted to hearing issues like the admission of Balsillie's bid, the relocation of the team and a relocation fee. There will also be an argument from Baslillie's lawyers that the NHL cannot block his bid because that is a conflict of interest since the league itself is a bidder.
It was acknowledged in court Wednesday that the legal arguments will likely push the auction back to Sept. 11.
Whenever the Moyes issue is heard, team owners will be watching closely for a couple of reasons. If the court sides with Glendale and the NHL, it could mean any team owner who has to reach into his own pocket to pay for losses will similarly be left with nothing if his team goes bankrupt. But the bigger problem for owners, according to one NHL governor, is the tax implications.
The governor, speaking on condition of anonymity, said paying for operating losses as loans is common practice in professional sports for tax reasons. If the owner puts in his money as equity it is treated as income and is taxed accordingly when he is repaid by the team. Loans are not subject to income tax.
“If you're saying that is now equity, I can't imagine any NHL owner wanting to [stay in the league],” one of the lawyers involved in the nasty court battle said.
There must also be some discomfort on the part of NHL executives in seeing the league turn on one of its owners.
Moyes has said he got into this mess originally in 2001 because former owner Steve Ellman needed a loan of $5-million to keep the team afloat. As a resident of Glendale, Moyes said he decided to help, even though he is not a hockey fan because he felt the team was good for his community.
More than $100-million later, Moyes finds himself vilified by both the NHL and Glendale officials because he finally turned to Balsillie, who wants to move the Coyotes to Hamilton, when no other buyers could be found.
One of Moyes's lawyers, Earl Scudder, was in charge of finding a buyer. According to court documents, efforts to sell the team began in December, 2007, about a year after Moyes took control of the team from Ellman. Moyes approached Scudder in December of 2007 about “contacting potential buyers and potential investors to take over the ownership of the team.”
The asking price was $200-million.
Scudder put the sales pitch on hold throughout most of 2008 while the club tried unsuccessfully to line up financing. By the end of the year, he had reached out to several potential bidders including Vancouver-based Titan Sports, owned by former player Kevin Epp; Howard Baldwin, a former NHL team owner who now produces films; Maloof Companies, owners of the NBA's Sacramento Kings; and Game Plan LLC, a sports investment firm.
But by then the Coyotes losses were so horrendous no one wanted the team, and Scudder wound up making an agreement with Balsillie, which started the legal war.
With a report from Paul Waldie
Chris
David Shoalts Globe and Mail Friday, Sep. 04, 2009 08:20AM EDT
www.theglobeandmail.com/sports/hockey/moyes-decision-could-set-precedent/article1275338/
The fight between Jim Balsillie and the NHL over the Phoenix Coyotes is full of side issues but one in particular, which is deemed by the participants to have no significant impact on the bankruptcy case, could have severe repercussions in the future for any sports team owner.
That is the question of whether or not the $104-million (all currency U.S.) Coyotes owner Jerry Moyes claims he has paid to cover operating losses over the years makes him a creditor or if that money represents equity in the moribund team.
The City of Glendale, where the Coyotes play, has asked the U.S. Bankruptcy Court to rule that it is equity, which means Moyes would receive nothing from any of the three potential bids for the team. The NHL, which has a bid of $140-million for the Coyotes, supports Glendale on this issue since its offer does not include any provision to pay Moyes.
During Wednesday's court hearing on whether or not Balsillie's $212.5-million bid for the Coyotes should be accepted by the court despite the fact Balsillie was rejected as an owner by the NHL (a decision was reserved), it was also decided that Moyes's status would not be argued until Sept. 10 – the day of the auction sale – at the earliest. And if the long list of other matters to be argued before the sale can proceed takes up too much time, the Moyes issue will not be heard until some time after the sale.
At this point, the auction is still officially scheduled for the afternoon of Sept. 10 with the morning devoted to hearing issues like the admission of Balsillie's bid, the relocation of the team and a relocation fee. There will also be an argument from Baslillie's lawyers that the NHL cannot block his bid because that is a conflict of interest since the league itself is a bidder.
It was acknowledged in court Wednesday that the legal arguments will likely push the auction back to Sept. 11.
Whenever the Moyes issue is heard, team owners will be watching closely for a couple of reasons. If the court sides with Glendale and the NHL, it could mean any team owner who has to reach into his own pocket to pay for losses will similarly be left with nothing if his team goes bankrupt. But the bigger problem for owners, according to one NHL governor, is the tax implications.
The governor, speaking on condition of anonymity, said paying for operating losses as loans is common practice in professional sports for tax reasons. If the owner puts in his money as equity it is treated as income and is taxed accordingly when he is repaid by the team. Loans are not subject to income tax.
“If you're saying that is now equity, I can't imagine any NHL owner wanting to [stay in the league],” one of the lawyers involved in the nasty court battle said.
There must also be some discomfort on the part of NHL executives in seeing the league turn on one of its owners.
Moyes has said he got into this mess originally in 2001 because former owner Steve Ellman needed a loan of $5-million to keep the team afloat. As a resident of Glendale, Moyes said he decided to help, even though he is not a hockey fan because he felt the team was good for his community.
More than $100-million later, Moyes finds himself vilified by both the NHL and Glendale officials because he finally turned to Balsillie, who wants to move the Coyotes to Hamilton, when no other buyers could be found.
One of Moyes's lawyers, Earl Scudder, was in charge of finding a buyer. According to court documents, efforts to sell the team began in December, 2007, about a year after Moyes took control of the team from Ellman. Moyes approached Scudder in December of 2007 about “contacting potential buyers and potential investors to take over the ownership of the team.”
The asking price was $200-million.
Scudder put the sales pitch on hold throughout most of 2008 while the club tried unsuccessfully to line up financing. By the end of the year, he had reached out to several potential bidders including Vancouver-based Titan Sports, owned by former player Kevin Epp; Howard Baldwin, a former NHL team owner who now produces films; Maloof Companies, owners of the NBA's Sacramento Kings; and Game Plan LLC, a sports investment firm.
But by then the Coyotes losses were so horrendous no one wanted the team, and Scudder wound up making an agreement with Balsillie, which started the legal war.
With a report from Paul Waldie
Chris