I will be posting more from Balsillie's group in a bit.
By Eric Morath
Of DOW JONES DAILY BANKRUPTCY REVIEW
The National Hockey League is asking a bankruptcy judge to determine who
controls the Phoenix Coyotes: the league or majority owner Jerry Moyes.
If the court determines that the NHL controls the team, the league can move
forward with its attempt to have the team's Chapter 11 bankruptcy case thrown
out.
Under Moyes' direction, cash-strapped Coyotes Hockey LLC filed for
bankruptcy Tuesday after reaching a deal to sell the team to Research In
Motion Ltd. (RIMM) founder Jim Balsillie, who wants to move it to Canada.
However, the NHL said in documents filed with the U.S. Bankruptcy Court in
Phoenix that it was closing in on a deal to keep the team in Arizona.
A hearing is scheduled for May 19 to determine who controls the hockey team.
The NHL contends that it has controlled the Coyotes since Nov. 14, 2008,
when it extended an open-ended letter of credit to the team so Phoenix could
put a squad on the ice last season.
Under the terms of the deal, the NHL said control of the Coyotes was handed
over to the league and NHL Deputy Commissioner Bill Daly supplanted Moyes as
the team's chief executive, according to court documents.
"Mr. Moyes asked that he be allowed to retain his titles to avoid public
embarrassment, and the league so agreed, but with the express understanding
that he had no authority to cause the (Coyotes) to take any actions outside
the normal course of business, including filing for bankruptcy," attorneys for
the NHL said in court documents.
In a separate court filing, the team said Moyes retained his power to
negotiate a sale of the team and to put the team in bankruptcy protection. The
team said the NHL should be treated as a secured creditor, not an owner.
The Coyotes "dispute the NHL's contentions that Mr. Moyes has been removed
from his position of authority to act on behalf of the (team), that the NHL
owns the Coyotes, or that these cases were not commenced by a valid
representative of the (team)," Coyotes attorneys said in court documents.
The team said the financing deal only gave the NHL the majority of voting
rights among the team's "members," but Moyes was not required to seek a vote
in order to put the team in Chapter 11.
The NHL said the Coyotes' bankruptcy surprised the league. Representatives
from the league were negotiating a deal with Jerry Reinsdorf, majority owner
of baseball's Chicago White Sox, that would keep the Coyotes playing at
Jobing.com Arena in Glendale, Ariz. The White Sox play spring training games
in the same city.
League officials have said they want to keep the Coyotes in the Phoenix area
and that Balsillie's proposed move to Hamilton, Ont., would likely not be
approved by the league's other owners because it impedes on the territory of
two nearby teams: the Toronto Maple Leafs and the Buffalo Sabers.
The league says it told Moyes' attorney of the possible Reinsdorf deal less
than a week before the team filed for bankruptcy and announced its pact with
Balsillie. The NHL says at the time Moyes' attorney claimed the team didn't
have any better offers.
"However, as is now apparent, Mr. Moyes secretly was negotiating a sale of
the club to Jim Balsillie," the NHL said in court documents.
The team is seeking to hold a bankruptcy auction by June 22, with
Balsillie's $212.5 million offer serving as the lead bid.
The team, which has never turned a profit since it relocated to Arizona in
1996, saw its finances worsen in recent years, posting an operating loss of
$73 million for the last three seasons. The league stepped up its financial
support last year after Moyes said he would no longer fund the team's losses.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies
and those under bankruptcy protection.)
-By Eric Morath, Dow Jones Daily Bankruptcy Review; 202-862-9279;
[email protected] 
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