Capitalist Fools

The Glendale City Council should have the information they need to begin discussing a plan to deal with the arena they own. The agenda for the upcoming Tuesday, June 4 meeting has the regular executive session agenda placeholder for arena discussions. So, if you were hoping for discourse that wasn’t private and behind closed doors, you’re out of luck again.

I've Met Two Of These People

I’ve Met Two Of These People

So, without solid information, that leaves plenty of room for rumor and speculation and uncertainty. Into that gap jumps Forbes.

Forbes Is Wrong

Even after the demise of the extremely interesting Malcolm Forbes, the magazine started by his father continues to cover the money business. The family divested itself of all of the Malcolm fun and nearly all of his extravagances and trophies, yet the Forbes label adds legitimacy to statements.

Statements including the following from this article describing the structure of the Renaissance deal with the NHL:

A source close to the negotiations, who traded candor for anonymity, revealed the purchase price as $170 million. The capital structure would consist of RS&E putting in $45 million of equity, Fortress Investment Group lending $120 million (to be repaid by the fee Glendale taxpayers are going to pay the team to run the arena), and an $85 million loan from the NHL.

Sources closer (than the Forbes staffer) to the current state of the Coyotes ownership situation have stated the deal as presented in Forbes piece is:

  • Close to what the actual deal is.
  • Not reflective of recent changes (what was the source of the outdated info to Forbes?).
  • Close to the deal that Hockey Partners (Jamison) had with the NHL.

Let’s just examine the above paragraph for why it is inflammatory.

Hit Piece

Hey It Wasn't Me!

Hey It Wasn’t Me!

Coyotes fans are as inured to misinformation being published and immediately disseminated as Leafs fans are to their team sucking. Once these pieces hit the Interwebs, they are immediately parroted by interested parties and soon become “facts” regardless of their veracity.

This is just another example.

There are two key characteristics to a “hit piece”.

The first is a plausible premise, a lie or misdirection wrapped in half truths that sounds like it could be true.

The second is the timing of release. In this case, the Forbes piece was released five days before the Glendale City Council would have their first legal chance to, as a group, discuss the RSE deal within the context of the “non hockey” arena management bids submitted to Beacon.

Five days is enough time for damning statements to affect the people that will object to a deal between Glendale and Renaissance.

What’s The Hit?

Put yourself in the shoes of a citizen and/or council member of Glendale. The numbers provided above, with the explanation that Glendale would be responsible for repayment of a $120M loan to RES from Fortress, would have ONE conclusion:

The citizens of Glendale will be paying more for the hockey team ($120M) than the new owners ($45M).

It gets worse when somebody asks the staffer a question in the comments section, which the staffer answers with a wildly misleading statement:

Q: In what manner does RSE expect to collect the 120M from the CoG? Over five years? Ten? Fifteen?
A: Trent, Fortress puts in most of the $120 million when deal closes and all within 5 years.

The question was in what period of time RSE expects Glendale to pay their $120M Fortress loan off. That’s easily understood and “Trent” even made it into a multiple choice to make it simpler to answer.

Let’s stipulate the Forbes staffer isn’t so dense that he didn’t understand a simple multiple choice question. Did he answer it or did he provide marginally related information that APPEARED to answer the question yet smells really bad for the citizens of Glendale?

The answer implies Glendale will be paying off the loan “all within 5 years” doesn’t it?

The answer meets the definition of a hit piece, plausible yet completely incorrect and intentionally misleading information designed to elicit a particular response.

Get Real

Hey Don't Look At Me!

Hey Don’t Look At Me!

The rumor mill has informed us the Darin Pastor bid was immediately dismissed by the NHL because the payment term for the team was longer than five years. The more covert rumor mill maintains there were other significant reasons for rejecting the bid, but I’m not privy to the source information.

Let’s assume Fortress has agreed to kick in $120M within five years. I’m certain it’s not a “no money down” thing and they’d have to be expecting a decent interest return on their investment, with that interest adding more strain to the future financial viability of the Coyotes. It may be true that the expectation is the “fee for services” from Glendale will retire that debt. Does it mean the RSE people represented to the NHL that Glendale will pay off the loan in five years?

No. It only LOOKS like that because of the misleading way information is provided in the Forbes piece.

Most people don’t read past the headline, anyway. Remember, we’re talking “optics” and “narratives” here.

The implication of the article AND the followup comment answer is the City of Glendale will be paying off the $120M in five years. It doesn’t matter if the $120M is being personally guaranteed up to a certain amount with an equity share of the team as a partial buyout. Remember we’re wearing the shoes of Glendale people who have been bombarded with wildly inaccurate, yet effective, bites of financial amounts for four years now.

The math that will be used as ammunition against any deal with Glendale makes it $24M per year based on the piece and the attached comments (120M/5 years = $24M per year).

Look more Closely

Rumors surrounding the deal now have RSE looking for $13M-$15M per year with a 3-7 year “out clause”. Let’s assume those are the essential parameters presented to the City by the NHL and RSE people last week.

If the business plan is requiring the taxpayers of Glendale to repay the Fortress $120M loan, and there is an “out clause” at five years, does the business plan account for the years PAST the “out clause” date when the Coyotes could be located in another municipality? If so, then are the taxpayers of Glendale truly responsible for repaying the Fortress loan in it’s entirety? Of course not.

Suspicions Planted

So what’s the purpose of the planted story? I honestly don’t know.

The Forbes pieces has likely had ZERO impact on the real efforts to make the deal in Glendale happen. So who offered the information to Forbes?

Hey it's not me

Hey it’s not me

Based on the fact the structure of the deal reported in the Forbes piece was “close” but actually did NOT include recent changes in the deal, maybe we have a clue as to who is the source willing to “trade candor for anonymity” and why they would want that information “out there”.

The NHL and RSE people certainly have access to the latest structure of the deal they have been negotiating. Neither would have reason to omit the facts of the new structure, unless it was significantly in their favor. Who is the most likely to have an accurate but “old” copy of the deal sitting around?

Somebody with the City of Glendale, based on an answer I received (to one of my comments) from the staffer:

A: The money from Fortress is being repaid from the fees the city though not in five years. If you doubt me ask the city.

Who in “the city”? I have a few guesses, and a few more as to the reason why they leaked the information.

Let’s leave that speculation for another day.