RPT-DEALTALK-NHL risks buying white elephant with Coyotes

(Repeats Aug. 28 story for wider readership)
(For more Reuters DEALTALKs, click [DEALTALK/])

* Auction for team to be held Sept. 10

* Judge to decide next week if Balsillie bid eligible

* Expert says process "ends in legal hell regardless"

By Ben Klayman

CHICAGO, Aug 28 (Reuters) - The National Hockey League grew
tired of waiting for a white knight to save its bankrupt
Arizona team from Canadian billionaire Jim Balsillie and
decided this week to take matters into its own hands.

By offering to buy the Phoenix Coyotes for $140 million in
the hope of then flipping it to a buyer of its choice, however,
the North American sports league risks hemorrhaging money and
an antitrust lawsuit, sports bankers and analysts said.

"It's a way to prevent the court's becoming the de facto
new commissioner of the NHL," said Roger Noll, a professor of
economics at Stanford University.

The NHL is opposed to Balsillie's ownership because he has
tried to skirt league rules on the relocation of franchises
several times in the past.

The NHL filed its bid on Tuesday for the team, which lost
more than $67 million last season and filed for bankruptcy in
May, in the hope of retaining control of a sales process that
could lead to the Coyotes' relocation against league wishes.

The bankruptcy process allows a judge wide latitude to
throw out contracts, including league rules, arena leases and
concession agreements that would limit a team's value, analysts
said.

An auction for the team is set for Sept. 10 in federal
bankruptcy court in Arizona and the NHL is staring at a
potential epic battle if the judge rules Balsillie, who wants
to move the team to Canada, the winner.

"This is a soap opera," said Robert Boland, a professor of
sports management at New York University. "This ends in legal
hell regardless of the outcome."

RUNNING OUT OF CITIES?

Balsillie, the co-CEO of BlackBerry maker Research in
Motion Ltd (RIM.TO), has offered $212.5 million for the team,
but only on the condition he can move it to Hamilton, Ontario.

Meanwhile, a group that includes current Coyotes coach and
part owner Wayne Gretzky, hockey's all-time leading scorer, has
offered up to $150 million and promised to keep the team in
Arizona.

A third bidder -- Jerry Reinsdorf, the owner of the Chicago
White Sox and Bulls baseball and basketball teams -- on Tuesday
pulled his bid of up to $148 million. Before the bankruptcy
filing, the NHL had arranged a sale to the part-time Arizona
resident, who also had promised not to move the team.

The judge is expected to decide on Wednesday whether
Balsillie's bid can be included in the auction.

The NHL made its bid to "stem further erosion of the team's
value." However, it said in court documents it does not expect
to make a profit on any potential sale of the Coyotes.

Ironically, the group offering the highest bid for the
Coyotes is the man the NHL least wants as an owner.

Balsillie in recent years has failed in attempts to buy NHL
teams in Pittsburgh and Nashville, Tennessee, and move them to
Canada. NHL owners recently unanimously rejected Balsillie's
ownership application.

Even if successful in its bid, the NHL may be hard-pressed
to find a better offer than it already has, analysts said.

The NHL's bid also included wording that guarantees play in
Arizona only through the 2009-2010 season, leaving open the
door to relocation. The Coyotes have never made a profit since
moving to Arizona from Winnipeg, Manitoba, in 1996.

However, several analysts and bankers said the 30-team
league has added too many franchises over the years and there
are not many viable options left.

"We're running out of cities now," Boland said. "Where are
they going to go? Kansas City?"

Several sports bankers also expect Balsillie to sue the NHL
on antitrust grounds, arguing the league is preventing a team
in Hamilton for no valid reason.

In the end, a settlement with Balsillie remains the best
option, said Mark Conrad, who teaches sports law at Fordham
University's School of Business.

"Stranger things have happened," Conrad said. "If you want
to replicate Middle East peace talks you may have that
possibility happen."
(Additional reporting by Phil Wahba in New York, editing by
Matthew Lewis)