An interesting two-step dance is emerging in Glendale, Arizona between team sale price and lease subsidies.

One would be OFFside to use regular business valuation techniques in trying to solve for the Coyote purchase price. After all, how much value other than salvage, would you pay for an asset that has lost $300 million over 14 years, never showing any season in the black? A series of owners, two arenas, several managers and many coaches have meant little to the bottom line even with a 100-point team almost top of its' conference. A banking source revealed that the value of the team may be as low as $50 million. However both of these approaches fail to take into account this salvage value. The team when ported to a new locale becomes effectively an expansion team, fully stocked with a team, prospects and an administration. With recent reported past sales (Tampa $170 million with lease and land, Edmonton $200 million, Minnesota $250 million, Nashville $193, Tampa $206 million with the same lease and adjacent land), the franchise may sell from between $140 million and $200 million. Trouble is the NHL has truth-stretched "announced" attendances for years and now appears to be doing likewise with the most recent sale of Tampa Bay to say nothing of the debt assumptions in both Nashville and Edmonton. Rumours suggest Jeff Vinik, an investment banker, drove his usual hard bargain and dropped $80 million cash for 100% of the Lighting. So that is the background for negotiations heading into the Phoenix firestorm to come.

One would think that the NHL and the various 3 parties (IEH, Reinsdorf and TNSE)chasing the Coyotes would have had at least "feel out" discussions with the NHL to determine the purchase price, if not attempt real negotiations. The sticking point for the 2 buyers is based on how much of a concession they can get annually from Glendale. With the "subsidy" not known yet, the buyer business plan is incomplete. Thus the return on investment can't be calculated nor will banks pre-qualify the buyer to engage in a binding purchase price and contract with the NHL. And as the potential Glendale subsidy gets smaller, the purchase price that the buyers are willing pay almost certainly lessens, unless relocation is their desire as it is within the Thomson-Chipman camp. So in short, the purchase price may be only determined after the best lease is minted, unless relocation is the true motive in buying.

The IEH LOI, wrote in mid-December, probably expires shortly, unless it was "non-exclusively" binding on the NHL. Otherwise why would the NHL put all their eggs in the IEH basket leading right up to the relocation deadline? (Would you believe that was the fix to move the team to Winnipeg as Plan B before Reinsdorf leaped back into the picture? Nothing will I put past the NHL anymore.) So whether or not IEH had agreed in writing to a binding price purchase, it may matter little now.

Since Reinsdorf is in the picture it tells us that the IEH LOI was exclusive and has expired or their LOI wasn't exclusive after a certain date (rendering it practically as useless as being expired).

However, it is hard to imagine the NHL will sell the team at a loss (below $140 miilion) on top of 2 or more seasons of covering the team's losses on behalf of Jerry Moyes, the past owner the NHL is now suing. $140 million or bust may be Gary Bettman's motto. Now just imagine how bad Gary Bettman will look at the BOG table when he admits he took a "Leipold-style cut" on a potential deal. It's like going to the casino and losing the governors' own money. And the NHL hasn't even tried Las Vegas as a market yet! Of course, the public will never know how little the NHL got (unless the team comes to Winnipeg which will be almost certainly the first question from the local media).

As has been suggested by a few diehard Manitoban NHL fans (special kudos to RazorEdge), it is entirely possible that both buyers want Glendale to effectively cut the other out of a future negotiation with the NHL. Each side has contacts to swing favour their way. I believe that Glendale will sway towards either the NHL or Reinsdorf as both have considerable weight within city council. IEH however is on the outside track of course with Reinsdorf having John Kaites to grease the wheels. It is hard to believe that Glendale city council would cut out potential buyer without NHL first "consent". By doing so, Glendale would essentailly be taking control away from the NHL in choosing an owner for its' team. That may be enough to rile the NHL to pull the franchise and blame city council "for shutting the door on the NHL", especially with Winnipeg waiting in the wings.

Also, consider Thomson-Chipman involvement if only behind the scenes. Some of the local Winnipeg media recently chose to only look at the negative spin here but there is a suitable positive spin to consider. Of course, these 2 gentlemen effectively put pressure on Glendale to come through with a favourable lease. This is "the NHL used Winnipeg" sentiment. However "Plan C" also puts alot of pressure on the 2 buyers since any ridiculously low offer by them will just be ignored by the NHL and in turn may cause the NHL to irrevocably favour Winnipeg as Plan C.

Gary Bettman will not take kindly to that sort of gamesmanship from most people. Reinsdorf appears to be bargain hunting potentially at the NHL's expense. (Remember on May 5, 2009 the NHL was delivering to Moyes a binding LOI selling the Coyotes via Moyes' proxy to Reinsdorf. Moyes of course plunged the team into bankruptcy just in time wiping out the arrangement. The purchase price therein was never publicly released but most certainly would have been north of $140 million given the previous past NHL team sales. This will not be lost on Bettman.) Further, Gary Bettman's negotiation history shows that playing a game of brinkmanship can be expected. He flushed an entire season down the drain to break the NHLPA senior brass. Look what he did to both Balsillie and Moyes for working behind his back. Plan C, better known as Thomson-Chipman, effectively raises the bar on purchase price to a more reasonable level, in the NHL's eyes, long before the 2 buyers even know how favourable or unfavourable the new lease may become. Talk about being between a rock and a hard place if you are in Ice Edge Holdings or in the Reinsdorf camp.

In order for the team to remain in Arizona, one of two things must occur. The first scenario has either one of two buyers dance the Arizona-two-step and get help from Glendale that survives a court challenge by Goldwater in meeting the NHL's expectations. Most certainly this is a long shot given the number of weeks that remain on the relocation clock. The second scenario is much more straightforward: somehow a buyer convinces the NHL to take a pride-swallowingly large haircut so that funds for the purchase can be diverted to cover future losses until triggers allow the team to finally take flight in 3 to 5 years. In effect, the NHL would cover further years of losses at the governors' expense. Both scenarios seem as unlikely.

Plan C: Having the first two options fall away, we may look upon the sewn captain's "C" in a whole new way very shortly as Mr. Chipman steps up to a podium near you!

If you want to blown off steam, head down to the forum and tell us how you feel having watched this soap opera going on 3 years this fall! www.mbmbforum.com

Chris
President, www.myNHLincludesWinnipeg.com
~ The Reality May Surprise You! Excite You! ~