The Phoenix Coyotes, a professional ice hockey team of the National Hockey League (NHL), and known as the Arizona Coyotes from 2014 until suspending operations in 2024, filed for bankruptcy in 2009 after incurring several hundred million dollars of losses since their move to Phoenix, Arizona from Winnipeg, Manitoba, where they were known as the Winnipeg Jets. A bankruptcy court rejected a plan to sell the team and move it to Hamilton, Ontario, Canada, and the team was later purchased by the NHL. The NHL operated the team in Phoenix for four seasons while seeking a new owner. After several failed prospective purchases, the team was finally sold in the summer of 2013.
Summary In December 2008, the media reported that the Phoenix Coyotes were losing money at a high rate and were being directly funded by the NHL. The media reports were minimized by NHL commissioner Gary Bettman and deputy commissioner Bill Daly, but secretly the NHL had taken control of team operations. In May 2009, team owner Jerry Moyes placed the team in bankruptcy hours before Bettman was planning to present a potential purchase offer. Moyes intended to sell the team to Canadian billionaire Jim Balsillie, who wished to move it to Hamilton, Ontario without being restricted by the NHL's relocation rules.
From May until September 2009, hearings were held in Phoenix bankruptcy court to determine the fate of the Coyotes and the holding company. Two potential bidders for the team surfaced—Chicago Bulls and White Sox owner Jerry Reinsdorf and Ice Edge Holdings, Inc.—but they did not submit bids. The NHL placed the only rival bid to that of Balsillie while fighting Moyes' plan. The Phoenix court ruled that the team could not be sold to Balsillie, as bankruptcy could not be used to subvert the league's rules. The NHL's original bid was also deemed insufficient by the bankruptcy judge, as it did not treat Moyes and Gretzky as full creditors. The NHL later settled with Moyes, with the league buying the team and assuming all debts in the process.
After the sale, the NHL negotiated a temporary lease with the city of Glendale, Arizona, owner of Jobing.com Arena (now known as Gila River Arena). The NHL then worked with the two potential bidders, Reinsdorf and Ice Edge, to arrange a deal with Glendale. Ice Edge signed a letter of intent to buy the team from the NHL while Reinsdorf won the city's approval. By the end of the summer of 2010, both bidders had failed to complete a purchase and withdrew. The NHL, which had threatened to move the team to Winnipeg for the 2010–11 season, agreed to keep the team in Glendale for the season after the city agreed to fund its losses. The NHL publicly announced a deadline of December 31, 2010 for any purchase to keep the team in Phoenix, after which it might make plans to move the team. In December 2010, Chicago-based investor Matthew Hulsizer, along with several investors, was approved by the NHL to purchase the team and reached a lease agreement with Glendale. A deal was reached between Glendale and Hulsizer that involved the sale of bonds by the city to pay Hulsizer more than $100 million against future parking revenues at the arena. The Goldwater Institute, a think tank and litigation center, announced that it would challenge the lease agreement in court, and the threat led to the failure of the bond sale. Hulsizer abandoned his bid for the Coyotes on June 27, 2011.
For the 2011–12 season, Glendale set aside $25 million to ensure that the Coyotes would stay in Glendale for another season, while the NHL worked on arranging the purchase. In August 2011, a group headed by former San Jose Sharks CEO Greg Jamison, which intended to keep the team in Arizona, was identified as a potential purchaser. Another group, including past bidder Reinsdorf, emerged in September 2011. The city of Glendale intended to complete negotiations with one or the other by the end of December 2011, but no deal was forthcoming. In May 2012, the NHL announced a tentative agreement with Jamison's group and hoped to complete the sale "within weeks". In June, a lease agreement between Jamison and Glendale was reached, but a clause forbidding the placement of the agreement on the November municipal election ballot was rejected in court. A minimum number of petition signers were required to add the referendum to the ballot, but in July, Glendale rejected petitions as being delivered late and without enough signatures. The lease agreement was eventually revised and approved by Glendale in November 2012. On January 31, 2013, Jamison stated that he would be unable to complete the sale of the Coyotes under the terms of the lease signed in November 2012.
In May 2013, a new group was formed to purchase the team. Renaissance Sports & Entertainment (RS&E), which included investors who had submitted a previous offer, struck a deal with the NHL to purchase the team for $225 million. The deal required an arena lease agreement with the city of Glendale. The NHL informed the city that it would be the last potential sale to keep the team in Glendale, and arranged to move the team to Seattle in case a deal could not be reached. By a 4–3 vote in a July 2, 2013 city-council meeting, Glendale agreed to accept a deal with RS&E. The deal kept the team in Glendale for a guaranteed minimum of five years, with a maximum lease lasting for more than 15 years. The team would also change its name from the Phoenix Coyotes to the Arizona Coyotes. On August 5, 2013, the NHL Board of Governors approved the sale of the Coyotes to RS&E.
Warning signs On December 8, 2009, during a press conference at the annual December NHL board of governors' meeting, the issue of the state of the economy was raised by reporters. The Coyotes were reported to lose as much as $35 million during the 2008–09 season. Asked to comment on Phoenix's loss, Bettman was quoted as saying, "They're going to get through the season just fine." Coyotes president and COO Doug Moss admitted that the team had lost a great deal of money and was continuing to do so. He also refused to reveal the number of season-ticket subscribers: "We have never really revealed our season-ticket base ... it's too low, that's a number that's too low." It was revealed during bankruptcy proceedings that the Coyotes averaged 5,450 season tickets per season for the four seasons from 2005 to 2009.
In documents filed with the Phoenix bankruptcy court, the NHL stated that the league took official control of the team on November 14, 2008. The league then began advancing money to the club from league revenues and extended a $44.5 million loan to the team in February 2009 for the full season. The league fired Coyotes CEO Jeff Shumway and dismissed 18 team employees. Moyes' documents filed with the court indicated that the team had lost $73 million over the past three years and that the projected loss was $45 million for 2008–09. In the September 2009 bankruptcy hearings, it was noted that an audit had shown that the team had never made a profit since moving from Winnipeg, Manitoba in 1996 and had lost $54.8 million in 2008 alone.
On December 23, 2008, The Globe and Mail reported that the Coyotes were receiving financial assistance from the league in the form of advances on league revenues. The Coyotes pledged all of their assets to New York company SOF Investments LP to cover an estimated debt of $80 million. The team had lost an estimated $200 million since 2001 and in recent years had posted heavy losses, including $41.6 million in 2006–07, $37.3 million during the 2007–08 season and $54 million in 2008–09. One of the team's owners and Jerry Moyes' principal source of revenue, Swift Transportation, was also experiencing financial difficulty. Television network ESPN reported that the league had become involved with the operations of the Coyotes and that Moyes was interested in selling his share of the team. Hollywood producer and hockey fan Jerry Bruckheimer was cited as a possible investor.
Bankruptcy filing
On May 5, 2009, the Coyotes' holding company, Dewey Ranch Hockey LLC, filed for Chapter 11 bankruptcy. In a statement, Moyes announced that he had agreed in principle to sell the team to PSE Sports and Entertainment, headed by Research in Motion co-CEO Jim Balsillie, for $212.5 million. As part of the deal, Balsillie intended to move the Coyotes to Hamilton, Ontario. Although initial reports said that Balsillie was considering Kitchener as well, Hamilton already had an NHL-sized arena in place, Copps Coliseum (now FirstOntario Centre), and Balsillie was already in talks with city officials to secure a lease for the arena. Balsillie had previously made unsuccessful approaches to purchase the Pittsburgh Penguins and Nashville Predators, with the intent of relocating either team to Hamilton.
Any potential purchasers who wished to submit a counteroffer had to exceed Balsillie's bid by at least $5 million. At Moyes' request, Balsillie agreed to post debtor-in-possession financing of $17 million. Balsillie also launched public-relations campaigns such as the creation of the web site makeitseven.ca to build public support in Canada for his purchase and transfer of the Coyotes to Hamilton.
The announcement was as a surprise to the NHL and even to Coyotes staffers. Bettman had helped broker a deal that would have seen the Coyotes sold to Chicago Bulls and White Sox owner Jerry Reinsdorf. At the time of the announcement, Bettman was in Phoenix to present the deal to Moyes. Unlike Balsillie's offer, the Reinsdorf deal would have kept the Coyotes in Arizona. Terms of the Reinsdorf deal were not disclosed, but The Sports Network's Bob McKenzie speculated that it was almost certainly less than the Balsillie offer.
The NHL responded by stripping Moyes of virtually all of his ownership authority, although he remained the owner in title. Bettman said that Moyes may not have had the authority to file the bankruptcy petition and may not have even had full control of the team by virtue of the massive financial assistance that he had received. Although it has been widely speculated that southern Ontario is a large enough market to support a third NHL team alongside the Toronto Maple Leafs and Ottawa Senators (and with the Buffalo Sabres and Detroit Red Wings just across the border), Bettman suggested that it was unlikely that the league would approve any plan to move the Coyotes to Canada, and accused Moyes and Balsillie of attempting to circumvent league rules. He also reiterated that the NHL was committed to the Phoenix area.
Bankruptcy hearings The first bankruptcy hearing was scheduled for May 7, 2009. Court documents submitted by Moyes cite 30 creditors, including Moyes himself, for an amount in excess of US$103 million. TSN's Bob McKenzie said that Moyes was very receptive to Balsillie's offer because, as the team's largest unsecured creditor, the best chance of recouping most of his money was to persuade someone to buy the team from bankruptcy. The league's position was that it was Moyes' fault that he paid himself so much money and that he was entitled to only $14 million of the $103 million loss, which would have been the case if Reinsdorf's lower bid had been accepted.
At the bankruptcy hearing, the NHL argued that it had been in control of the team since November by virtue of a proxy agreement with Moyes. The NHL claimed this agreement, and several others signed by Moyes, specifically barred Moyes from filing for bankruptcy. Moyes claimed that the agreement only gave the league voting rights, not outright control. Bankruptcy court judge Redfield Baum scheduled a second hearing for May 19 to determine who actually controlled the team. However, Daly said that regardless of how the judge ruled, the league owners would have the final say in whether to allow the Coyotes to move. Daly repeated Bettman's doubts about Balsillie's bid, saying Balsillie was acting "in total disregard" for NHL rules.