Hockey's bonfire of the bankruptcies
Coyotes win court ruling over prospective sale; Could Dallas Stars be next up for Chapter 11?
May 12, 2009
Record news services
Web edition
While the Phoenix Coyotes turned up the heat on the NHL yesterday, the owner of the Dallas Stars appears to be laying enough kindling and timber to start another bankruptcy bonfire.
The Coyotes won a court ruling that will force the NHL to tell all it knows about White Sox owner Jerry Reinsdorf's mysterious bid to purchase the Coyotes to a Phoenix bankruptcy court judge.
The NHL must produce all documents related to Reinsdorf's bid today, ruled judge Redfield Baum.
The league has said it was close to announcing Reinsdorf as a white knight who would keep the team in Glendale, Ariz., when Jerry Moyes thrust the Coyotes into bankruptcy. The Moyes camp wants to see how good the offer was.
"The purpose of the production is to examine the content of those discussions and the potential offer outstanding by Mr. Reinsdorf related to these purported interests," read the motion filed by Moyes lawyer Thomas Salerno.
Canadian billionaire Jim Balsillie has made a $212.5 million (all figures U.S.) offer to purchase the Coyotes and move them to Hamilton as part of the franchise's bankruptcy proceedings that are being challenged by the NHL.
But Phoenix is only one of the many franchises in trouble during the recession.
Tom Hicks, who owns the Dallas Stars and baseball's Texas Rangers, defaulted a month ago on $525 million in loans tied to the teams, starting the clock ticking in a showdown with lenders that could see the Stars end up in bankruptcy proceedings in October.
At the time, Hicks said he was trying to work out a new deal with his creditors, and perhaps bring in new investors, but has been mum on the situation since. Dallas Stars president Jeff Cogen referred calls to a public relations firm, which said there was "nothing" to report.
NHL deputy commissioner Bill Daly did not respond to an email. A group of 40 financial institutions and other investors hold the debt in Hicks Sports Group, which owns the two teams. It would take 180 days for lenders to foreclose on defaulted loans, according the standard deals involving the NHL.
That gives Hicks another five months to find alternate financing, but lenders are tight with their money these days, and those who follow sports financing closely worry it's inevitable that the Stars will follow the Coyotes into bankruptcy.
"He's heading in the same direction," said a broker specializing in sports financing, who didn't want his name used because of his dealings with the NHL.
"It could be the second team in Chapter 11," said Andrew Zimbalist, an economics professor at Smith College, who specializes in sports business. "When Hicks put himself in that circumstance, he's creating a lot of difficulty for himself. He's going to squirm a little bit. Whatever leverage he had, he loses some of it.
"You go to your creditors and try to re-organize your loans," added Zimbalist. "(If) they say no deal, you can declare bankruptcy or sell the franchise or go to other banks and borrow more money."
Hicks also co-owns Liverpool, a soccer team in England's Premier League, another franchise looking for new ownership. His holdings in Liverpool – shared with Montreal Canadiens owner George Gillett –are outside Hicks Sports Group.
None involved believe the Stars are in danger of moving. Dallas is believed to be a strong market with the team able to turn a profit, especially if it makes the playoffs.
It's been a bad year for bankruptcies and the NHL. William (Boots) Del Biaggio faces jail time after having been found guilty of fraud for the way he helped finance his minority purchase of the Nashville Predators.
Meanwhile, the Atlanta Thrashers owners are fighting with each other, Tampa is looking for new investors and the New York Islanders are hinting at leaving unless they get a new arena.
"There could be other (bankrupt) teams down the road," said Zimbalist. "There are a lot of teams – as it were – skating on thin ice."
