The Phoenix Coyotes filed for Chapter 11 reorganization today in a move that could allow the franchise to be sold and moved to southern Ontario, Canada.
The National Hockey League team, which has played in metro Phoenix since 1996, has habitually lost money in the desert, first when they shared an arena with the Phoenix Suns in downtown Phoenix and most recently at Arena in Glendale.
The filing included a proposed sale of the franchise for $212.5 million to PSE Sports & Entertainment LP, which would move the franchise back to Canada, to southern Ontario, Canada.
Jim Balsillie, who is co-chief executive officer at Research In Motion, maker of the BlackBerry wireless device, would become the team's new owner.
The team came to Phoenix from Winnipeg, Manitoba.
The move is not a certainty, because other investors will have an opportunity to outbid PSE's offer.
"Extensive efforts have been undertaken to sell the team, or attract additional investors, who would keep the team in Glendale," said Jerry Moyes, Coyotes' chief executive officer and managing member.
Moyes is the team's largest unsecured creditor at nearly $104 million, according to bankruptcy records.
The city of Glendale, which receives lease payments from the team to play at Arena, is an unsecured creditor in the bankruptcy filing. The city would have to make a claim with the court to receive any payments, according to the team's bankruptcy lawyer.
"At the end of the day, you have a team that was not making money. It has not made money since it has been here, and he (Moyes) received an offer," said Thomas Salerno, the bankruptcy attorney for the Coyotes. "We feel it (offer) maximizes the value of the team for the assets and in such a way that sets up a process where other people can bid."
PSE's price of $212.5 million provides funds to pay secured creditors in full. Approximately $80 million would go to SOF Investments LP and $35 million to the NHL, which had loaned the team money earlier this year.
That would leave $97.5 million to unsecured creditors. Coyotes owners would receive nothing for their equity investment, including $206.5 million in preferred and common equity that will not be recovered by Moyes under the current offer.
Moyes said, "Creating a process under the supervision of a judge assures that anyone wishing to purchase the team will have the opportunity to bid."
"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 arena, the lease for which is subject to rejection in bankruptcy," Moyes 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."