This NHL-Balsillie-Moyes situation is pure power business. I hadn’t been following it until I read about the court case this morning, which made me do research.

The story so far is that Jerry Moyes bought the Winnipeg Jets for $207 million and brought them to Phoenix as the Coyotes in 2004. The City of Glendale issued (depending on your source) between $180 and $200 million in debt to build a hockey rink in the desert, which they then leased to the team. Because of the cost of the arena and the unlikelihood of renting it to anyone else the lease included a $750 million penalty if the team relocated within 30 years. Lease payments were about $50,000 per month, plus other cost-and-revenue sharing agreements to bring the total to about $300,000 per month.

The Coyotes proceeded to play hockey in the desert, losing $200 million over the next five years. Late in 2008 the team suspended rent payments while it renegotiated the lease. Without those payments Glendale began having trouble covering the coupons on the bonds it issued to build the rink. Arena rent pays for about half of the city’s total debt service, and Moody’s raised concern over the viability of the city’s bonds without the team*.

While this was happening Moyes, the Coyote’s owner, had the team file for Chapter 11 bankruptcy protection, then went to the NHL for financial assistance.

The NHL financed the team and ambiguously removed Moyes from upper management. I say “ambiguously” because Moyes still owned and managed the team, but was asked politely to refrain from executive-level decisions.

The league brokered a sale of the Coyotes to the Chicago Bulls. Meanwhile, Moyes ignored the league and brokered a much better sale of the Coyotes to Balsillie, who agreed to pay $217 million for the team on the condition that the league allow him to move it back to Canada.

Either due to the bankruptcy proceedings or some league rule about buying teams (I’m not sure which), we know that Balsillie’s offer was at least $5 million more than Chicago’s and, presumably, that Chicago isn’t willing to beat Balsillie by $5 million. We can intuit that the NHL probably gave the Bulls something of a sweetheart deal, which ticked off Moyes who understandably wanted to rescue as much of his $207 million investment as possible.

Balsillie guaranteed $17 million in bridge financing to the team while the negotiations are in progress and, after extracting what concessions they could on the lease, the Coyotes paid their back rent to Glendale.

In today’s court case the NHL is arguing that Moyes didn’t have the authority to sell the team. Moyes takes the position that because the team filed for bankruptcy protection before asking the league to step in, and because he’s still managing the team, the sale wasn’t really an executive decision. He’s just complying with the directives of the court: get the best possible deal for Coyote creditors.

Moyes’ maneuvers have the potential to let the team avoid Glendale’s $750 million penalty for moving the franchise, because bankruptcy courts in the ‘States can abrogate leases. The league doesn’t like Moyes’ business judo and is threatening to not allow the team to move, but then Balsillie’s bridge financing dries up and Glendale is left holding the bag.

The only way Glendale doesn’t lose is if someone offers $5 million more than Balsillie is willing to pay and agrees to keep the team in a money-losing market. Or if Balsillie’s offer, which is contingent on the team being relocated, goes away and someone (like the Bulls) ponies up millions to… Keep the team in a money-losing market.

This is clearly coming down to the decisions of the bankruptcy court and the NHL. Balsillie’s people have an online petition, which I’ve signed, to convince the league that Canadian hockey fans want The Jets back. Assuming the league ignores that perhaps the bankruptcy court will order the NHL to allow Balsillie to move the team, because his offer is best for creditors. I don’t know if they have the power to do that, and remember: Americans hate our success. If a judge orders the sale of the team to a Canadian billionaire, and in the process dooms Glendale to the consequences of its ridiculous financial decisions, he might lose his re-election campaign.

If the NHL won’t allow the sale, and if court doesn’t have the power to compel them, or if Moyes it turns out didn’t have the power to sell the team, then Balsillie probably has to walk away.

Our man Balsillie seems to have achieved shih, the power of strategic advantage, the power of a boulder perched on a cliff above the enemy. Moyes is willingly serving as his cat’s paw and is drawing most of the ire of the league. Balsillie can walk away from the deal with little downside (< $17 million in bridge financing -- probably a tax loss -- and some bad will with the NHL). At the same time he's put his opponents in a difficult position: Glendale and the Coyotes bear almost all of the risk in this situation.

Through the popular petition he’s essentially attempting to flank the League as well — some strident Canadian commenters are beginning to call the NHL “anti-patriotic”. The league keeps re-affirming its “commitment to Arizona”, despite the fact that Arizona fans evidently have no commitment to hockey.

Still, Balsillie taking on the NHL might be unwise. This is an organization he wants to work with long-term, and what is this if not a thinly-veiled show of aggression towards them? For this deal to go through it might be a good idea for Balsillie to allow them to save face, somehow. Or not: If he actually does have them trapped why not press the advantage? Balsillie might just be able to skate circles around them like Cuban does with the NBA.

On balance, I reckon that without some concession to Glendale the bankruptcy court won’t allow the Coyotes to move either. With such a concession, and if the court has the power, it’s possible the NHL could be ordered to allow the sale. I’d imagine that such a concession could take the form of Glendale issuing bonds to Balsillie at a lower coupon and using the proceeds to repay the stadium debt. That might be excessive though, and is certainly something to be vigorously negotiated between the various parties — if the court will order around the NHL without any concession to Glendale then Balsillie scores an unqualified win.

* This should make your lobes tingle with opportunity. Munis in the ‘States default very rarely because cities can raise taxes. If you think Glendale, the home of the Arizona Cardinals, has a decent tax base then these bonds might get cheap when the Coyotes move or fail.