DALLAS — With time working against it, Glendale, Ariz., is seeking a solution to the sale of the Phoenix Coyotes hockey team that might involve a bond issue smaller than the $100 million originally planned.
Under a new effort to save the sale of the team to Matthew Hulsizer, Glendale would sell $70 million of sales tax bonds. The downsized deal would help keep the city’s costs affordable in light of rising interest rates, according to a report in the Phoenix Business Journal. The $70 million would then be handed over to Hulsizer so that he could purchase the team from the current owner, the National Hockey League.
The NHL, which bought the team out of bankruptcy in hopes of keeping it playing at the city-owned Jobing.com arena, would be asked to lower the $170 million price of the Coyotes. Glendale, which has agreed to cover up to $25 million of losses while the NHL owns the team, would seek to apply that money to the sale price.
Still hanging over the sale is a potential lawsuit from the Goldwater Institute, a conservative think tank that says the deal violates the Arizona constitution’s gift clause. Glendale and the institute have been battling over documents. The city threatened to sue the institute for interfering in the sale of bonds, but has reportedly backed off that plan.
The city is hoping that the smaller bond issue would cause Goldwater to drop its resistance to the deal.
The bonds were supposed to go on sale in February. But it was delayed after institute lawyers issued warnings that the deal between Glendale and Hulsizer violates the gift laws that prohibit excessive public subsidies to private enterprises.
While there is no official deadline to sell the team to Hulsizer, events beyond Glendale are adding pressure. An investor group wants to buy the Coyotes and move them to Winnipeg, Canada. But another team, the Atlanta Thrashers, is also in play. An investment group known as True North could bring either the Coyotes or the Thrashers to Winnipeg.
Hulsizer told the Toronto Globe and Mail that he had been approached by other teams seeking a sale.
“I don’t think I have the patience to last months,” he said of the Coyotes deal. “Weeks, yes — months, no.”
A Goldwater attorney wrote letters to rating agencies and underwriters in January notifying them that Goldwater was looking into potential litigation to block the city’s agreement, according to the Arizona Republic.
Glendale blames the institute’s threat of legal action for delaying the bond sale and boosting interest costs by as much as $100 million.
After the city approved the bond deal, Moody’s Investors Service downgraded Glendale’s general obligation rating to Aa2 from Aa1 and lowered the second-lien excise-tax revenue bonds of the type that would be issued for the sale to A1 from Aa3. The third-lien bonds dropped to A2 from Aa3.
Standard & Poor’s put Glendale’s certificates of participation on negative watch after the city’s action. The city’s COPs remain at AA-plus, but the negative watch indicates a possible downgrade in the not-too-distant future.
Glendale, which financed the arena in 2003 with $180 million of revenue bonds, has no good choices in trying to keep the team playing there.
The arena, built specifically for the Coyotes, would be vacant most nights without NHL games. But the deal with Hulsizer requires that the city to simply hand over $197 million to the private investor. From that amount, he would pay the league $170 million for the team.
In exchange, Hulsizer would manage the arena and allow the city to collect parking revenue.
The team’s losses, estimated before the season at $25 million, have risen to $40 million, according to the city.
Officials hope to bring those losses down with higher attendance during the playoffs.