The Phoenix Coyotes Bankruptcy Fiasco Takes Another Skate Around the Rink Skip to main content

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The Phoenix Coyotes Bankruptcy Fiasco Takes Another Skate Around the Rink


The most talked-about sports team bankruptcy of the summer is still having effects on its city, taxpayers and fans.

The Phoenix Coyotes were embroiled in a drawn-out and often convoluted bankruptcy proceeding that introduced the notion of the team's relocation at the hands of Canadian technology billionaire Jim Balsillie, personal vendettas between league executives and Balsillie and the very notion that the NHL may be losing the face-off between its product and a Southwestern city not exactly known for its ice sports.

The league is currently courting buyers for the team with the hope that the sheer market size and fan support will be enough to keep the team in place. However, NHL commissioner Gary Bettman has to deal with the problems the team's insolvency has introduced to the local municipality that invested in its success.

In 2003, Glendale, AZ, the city in which the team is actually located, invested $182 million in the team's arena. At the time, there was excitement and confidence about the deal.

In its bid to the court for ownership, the NHL set an end-of-season deadline for finding a new owner who would agree to keep the team in its current location. The bid language also dictated that if that goal is not met, the league will petition the judge to reject the team's exisiting arena lease, opening the door to potential relocation.

The City of Glendale will be able to file a counter suit for damages as a result of the substantial funds lost from lease payments and tax revenue. Because of the bankruptcy, the City will simply become another creditor owed money by the Phoenix Coyotes. On top of that, the team will only be able to distribute about $10 million between all creditors.

The attorney for the team's former owner, who initiated the bankruptcy hearings as part of a covert deal to open up its reduced sale to Balsillie, has stated that Glendale understood the risks upon formalizing the relationship and should be entitled to no additional compensation should the team ship out of Arizona.

Meanwhile, the Glendale Mayor Elaine Scruggs has created a team of employees to court potential owners or at least develop a plan for the team to once again become financially stable, if not profitable.

The league is doing its part too, having recently initiated discussions with six possible owners. One of those groups, Ice Edge Holdings, is a conglomerate of Canadian and American investors that would plan on leaving the team in Arizona and implement an aggressive plan to get the team out of the financial penalty box.

Ancilliary problems faced by the city include the development of a nearby commercial center that targeted the team's draw as a reason to build new homes and retail establishments. The owner is also a former owner who sold his share before the bankruptcy to focus on building the Westgage City Center. The tax proceeds from the now stalled project were to also help the city recoup its investment in the team.

The developer, Steve Ellman, is also ignoring a clause in his agreement with the City to pay $1 million per year if his project did not meet pre-set milestones in construction. Further complicating matters is the fact that in previous years, Ellman's payment was channeled through the team. Again, because of the bankruptcy, the payments have ceased.

Just when we thought this bankruptcy story was losing its legs, it appears we only made it through the first period. Stay tuned.

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