Glendale Selects Reinsdorf Group as Potential Coyotes Owner
During a council meeting Tuesday night, the Glendale City Council authorized City Manager Ed Beasley to enter into a Memorandum of Understanding (MOU) with Glendale Hockey, LLC, a group led by Jerry Reinsdorf.
Four members of the City Council voted for Reinsdorf while two council members voted for both Reinsdorf and Ice Edge, LLC. Council member Joyce Clark, who represents the Yucca District, which houses the arena, called Ice Edge’s insistence to have Glendale financially responsible for guaranteeing their purchase a “deal breaker.”
Glendale mayor Elaine Scruggs was in Washington DC with a contingent of local politicians. She submitted a statement regarding the topic but did not throw support behind either MOU. Clark criticized Scruggs for missing such an important vote.
The Glendale Hockey MOU will be forwarded to the National Hockey League (NHL) for their consideration. The MOU provides the guidelines under which a contract is negotiated.
Glendale Hockey, LLC is a group led by Jerry Reinsdorf, who owns the Chicago Bulls and Chicago White Sox. Reinsdorf, who is a part-time Valley resident, already has a relationship with Glendale following his involvement in the development of Glendale Camelback-Ranch, which is the springing training home of his White Sox and the Los Angeles Dodgers.
Ice Edge, LLC is a group of five Canadian and American businessmen including John Breslow, who was a minority owner in the previous ownership group which included Wayne Gretzky and Jerry Moyes.
It was Moyes who placed the franchise in bankruptcy last May, which led to an acrimonious court battle throughout the summer. The court allowed the NHL to purchase the team out of bankruptcy on Oct. 27 but the league did not assume the Arena Management, Use and Lease Agreement.
According to the terms of that deal, the NHL will seek an owner outside who could relocate the franchise if they can not find an owner who would keep the team in Glendale by June 30.
Reinsdorf was reportedly minutes from signing a letter of intent to as NHL Commissioner Gary Bettman was en route from New York to present the paperwork. Bettman was in the air when he was surprised by the unexpected news that the team was placed in bankruptcy.
It was pointed out that the Reinsdorf proposal does not have and out clause. That technically is true but a Community Facilities District (CFD) will be formed and it does include a recourse clause that will be reviewed after five years. The CFD is the independent third-party which collects revenue to assure the financial stability of the team and assures Glendale Hockey that they won’t lose any money from their initial investment. The City Council made it a point to mention several times that taxpayer money and the City of Glendale money is not on the line.
The recourse clause consists of three parts:
*Buyers have recourse ONLY IF the CFD does not fulfill funding obligations AND team has operating losses.
*City will have access to independent review by NHL to audit team operations and assure reasonable standards are achieved.
*City has protective remedies: Fund amount of shortfall (i.e. new revenue); or Find new buyer for team.
So while this is not an “out clause” the franchise could be relocated after the 2014-15 season.
The Reinsdorf group would make an equity purchase by investing $103 million to purchase the team. The CFD will fund $65 million to NHL over three years, along with $25 million per year in an operating loss reserve account capped at $100 million.
The Ice Edge proposal included debt financing through a bank, which the some members of City of Glendale was not convinced they could secure. The proposal would require city resources and taxpayer to satisfy the bank, which went against the parameters for purchase requested by the city. This proved to be the undoing of the Ice Edge bid int he City Council’s eyes.
Ice Edge CEO Anthony LeBlanc, also stated that the group would be willing to strike the clause in the MOU that could require taxpayer funds to guarantee the bank loan.
City manager Ed Beasley stated it was too late in the process to make the request and he didn’t know how that would affect other numbers in the proposal. Plus, it could delay the process which is under a tight time frame set forth by the NHL and bankruptcy process to have a new owner in place.
LeBlanc who mentioned he is now a Paradise Valley resident, said that while some bank financing is involved in the purchase, he and his partners will invest tens of millions of their own money. The group is also working to raise between $200-$250 million to not only cover the purchase of any potential future losses.
“It is not our intent to keep the team in Glendale for an additional 24 years, it is our commitment to keep the team in Glendale for 24 years,” LeBlanc said. “We don’t know why the city is considering any offers that would not commit to the keeping the team for 24 years.”
Glendale Hockey Partner John Kaites addressed the City Council but only proclaimed appreciation for the process.
Heather Schroeder, president of the Phoenix Coyotes Booster Club, was among the 25 fans, many of whom were wearing Coyotes jerseys, who spoke to the City Council. She presented a petition of more than 1,000 Coyotes fans who want to see the team remain in Glendale.
“Hockey isn’t just a game. It’s a way of life,” said one fan. “It would be like taking away food to some people.”
This is how the City Council voting broke down:
H. Philip Lieberman – Both
Joyce Clark – Reinsdorf, Glendale Hockey
David Goulet – Both
Steve Frate – Reinsdorf, Glendale Hockey
Yvonne Knaack – Reinsdorf, Glendale Hockey
Manuel Martinez – Reinsdorf, Glendale Hockey
“This one (MOU) tonight gave me more problems that any single one I have voted in the city of Glendale,” said Councilman Lieberman, a 19-year City Council member. “There are flaws in both contacts that should be corrected and hopefully will be corrected, The prime objective is to keep the team here and I am going to vote for both MOUs for the city to accept.”