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Did NHL favor Reinsdorf in Coyotes deal?
Bloomberg News
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Published: 7/10/2009 11:07 AM | Updated: 7/10/2009 2:34 PM

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The National Hockey League should explain why potential buyers of the bankrupt Phoenix Coyotes dropped out in favor of Chicago Bulls owner Jerry Reinsdorf, a government lawyer said.

Larry Watson, a lawyer for U.S. Trustee Ilene J. Lashinsky, said yesterday in court papers that NHL officials must dispel questions about whether they "encouraged" rivals to back out in favor of Reinsdorf, who also owns Major League Baseball"s Chicago White Sox.

"Without full disclosure, the integrity of the bankruptcy system is lost," Watson wrote to the judge overseeing the Coyotes" bankruptcy. "Who were these prospective bidders? Did these parties have a legitimate intent to purchase the team? Why did these local bidders step away from the sale process? Were they encouraged by the NHL to do so?"

The NHL has been fighting in court to prevent the Coyotes from being bought by Jim Balsillie, co-chief executive officer of Blackberry-maker Research In Motion Ltd., and moved to Southern Ontario. Part of that effort involved recruiting potential bidders willing to keep the team at its current home in Glendale, Arizona, a suburb of Phoenix.

NHL Senior Vice President Bernadette Mansur didn"t immediately return a call for comment.

Coyotes owner Jerry Moyes, who put the team into bankruptcy in Phoenix in May, has asked U.S. Bankruptcy Judge Redfield T. Baum to order the NHL to provide documents, including any communications the league had with potential buyers.

Largest Creditor

Baum scheduled a hearing for July 13 to help him decide whether to approve Moyes"s request. Moyes claims to be owed $104 million by the Coyotes, making him the largest unsecured creditor in the case.

The U.S. Trustee is an arm of the U.S. Department of Justice tasked with monitoring all corporate bankruptcies. In this case, the U.S. Trustee for Arizona urged Baum to allow parties involved in the bankruptcy to collect documents and other information from the NHL.

A group of bidders led by Reinsdorf has offered to buy the Coyotes for $148 million and keep the team in Phoenix, challenging Balsillie"s bid of $212.5 million. The Reinsdorf bid requires that creditors owed more than $100 million withdraw or renegotiate their claims, according to court documents.

Any other group that wants to buy the team and keep it in Phoenix must submit a bid by July 24. Baum will oversee an auction Aug. 5. Should he find that none of the offers are adequate, he may allow a second auction in September for bidders, including Balsillie, who want to move the team.

The case is Dewey Ranch Hockey, LLC, 09-09488, U.S. Bankruptcy Court, District of Arizona (Phoenix).