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The Case of Coyote Fever

The problems in Phoenix are now in the hands of Andrew Barroway.

The hudge-fund manager purchased controlling (51%) stake of the franchise for a reported $155 million,

based on a valuation of $305 million. Barroway, who has longed for an NHL franchise with negotiations

with the New Jersey Devils two years ago and with the New York Islanders earlier this year.

This deal is based on a valuation almost double to what most people would expect the troubled

franchise to be worth (Renassance Sports and Entertainment purchased for $170 million the previous

year).

RSE, the previous owner of the team (under IceArizona), had an out-clause after five years (after 2017-

2018) if losses totaled $50 million for that duration. It has been reported that losses have already

accumulated to about half of that total in the first year. Glendale city officials are not sure if this sale will

impact the out-clause, but it could help justify the $300 million valuation, seeing as the team is not really

flushed with tangible financial assets.

After years which included bankruptcy, millions spent by the NHL to keep the franchise barely alive,many headaches in negotiations with the city of Glendale and an ongoing legal battle between the

league and previous owner Jerry Moyes, could this mean that the Coyotes will finally be leaving the

desert?

Many fans (especially the Canadian ones) have long been calling for the head of the coyote and bringing

it North to Canada, probably in Quebec. There has also been steady talks about bringing a franchise to

Seattle and more recently, Las Vegas (Yeah I dont know about that one).Bettman on the other hand,

who consistently generates increasing revenues for the league and its owners, realizes that Phoenix is

the 12thlargest TV market in the US, has a well-known stance in keeping the team where it is for as long

as possible.

And its not as if the city doesnt want the team there either, seeing as the franchise is the primary

tenant for Gila River Arena. So the question falls on the intentions of the new owner, Andrew Barroway.

Barroway, a Managing Partner and Founder of Merion Investment Management LP, has previously

shown interest in buying an NHL franchise in the Devils and Isles; the latter in which he sued owner

Charles Wang for reportedly dishonoring agreements in their potential deal (which is now dropped as

part of this deal). Neither are exactly the most attractive teams to purchase in the NHL, which could

deduce that Barroway is not just another investor, but rather a man who wants to own an NHL team.

So alas, after failing to acquire the Devils, Isles, and the 76ers (NBA), he now owns one of the worst

positioned teams in the NHL. Although financial statements are not publicly disclosed, it is apparent that

the Coyotes are losing money left and right; Forbes reporting an operating loss of nearly $9million for

2013, and attendance at the bottom. The franchise undoubtedly has little to no cash flows to finance its

debts and will desperately need the financial stability that Barroway will bring to the team. RSE could

restructure its loans (most notably from Fortress Investment Group), which could improve cash flows in

the future and allow more flexibility and increase for salary expenses.

Barroway could finally provide GM Don Maloney with some much needed salary cap help as the Coyotes

could potentially spend more than the salary floor, set at $51 million for the upcoming season. A team

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whose team has mostly consisted of stop-gap players over the years could see big names land in the

desert. The on-ice hockey product has been a big factor in the teams low hockey-related revenue and

the infusion of money could supplement its few stars in Keith Yandle, Oliver Ekman-Larsson, and up-and-

comers Max Domi (son of Tie Domi), Brandon Gormley, Brendan Perlini and a potential high-end draft

pick in 2015.

Even if Barroway wanted to take the franchise elsewhere, a prime choice such as Seattle may not be

ready to home an NHL franchise.

The aforementioned out-clause, if still valid, could allow Barroway to pay his way out of Glendale to a

city such as Seattle, where investor Chris Hansen is still hopeful for a new arena and plans to submit

proposals by the New Year. Seattle is ranked 14 thin terms of largest TV markets so its not too far off

from the Phoenix region ranking. While the city is Seahawks crazy, there are still lingering pains from the

relocation of the Sonics and should welcome a new pro franchise. However, City Council has made it an

unwavering condition that Hansen must secure a basketball team as part of the Seattle City Councils

approval of the potential arena.

So even if Barroway wanted to relocate, it seems one of the more logical choices in Seattle may not havea place for his team. The fact that Barroway was willing to purchase the Devils and Isles for a lot more

stake says he is not picky about which team he owns; He just wants to own one, and has the money to

support it, even one that has been hanging on life support for quite a while.