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>Chops Are Becoming a Bloody Mess

1 - Published June 27, 2009 by in Uncategorized

>By now you have probably heard most of the latest about the Chops, but I will give you a brief recap:
1. The Schlegels proposed selling the AHL franchise and replacing it with a lower tier CHL franchise.
2. Knowing that plan would not fly, the Schlegels proposed selling the AHL franchise to pay off their creditors. Polk County would then get whatever was leftover, what they claimed as “A significant amount of money.”
3. Polk County immediately rejected the latter proposal (PC had already dismissed their CHL plan). The “significant amount of money” was estimated to be under $700,000.
4. Prior to placing an AHL franchise in Des Moines (the Stars then Chops), the Schlegels signed a $12.5 million non-relocation agreement. Essentially they cannot move or sell the franchise before the 2015 season. It does not take a genius to figure out their “significant amount” of $700,000 is a wee bit less than $12.5 million.
5. Polk County has now filed lawsuits against the Schlegels as they are clearly not acting in good faith toward the signed contract (non-relocation agreement).

Now the non-relocation agreement has been published by the Des Moines Register. Here are some key points:
Section 3.1 Relocation of the Team,(a) The Team shall not relocate the Team or the Home Territory of the Team outside the boundaries of the Local Area during the License Term.

Section 3.2 Prohibited Actions. Except during the last year of the License Term, the
Team shall not apply for or seek approval from the American Hockey League for the relocation of the Team or the Home Territory of the Team outside the Local Area or for the reduction of the Local Area.

Since it is a pain to copy and edit the text from the image file published, I will summarize the rest of the important stuff. You can read the full copy here.

Section 4.4 Basically says that by signing the Non-Relocation agreement, the Schlegels have consulted and confirmed with their attorneys that the agreement is legally binding. They not forgo their obligation by filing bankruptcy. Even in the event of a bankruptcy, the Schlegels are on the hook for the penalty ($12.5 million).

Section 5.1.2 specifies that the Schlegels must field an American Hockey League franchise (meaning their CHL proposal would violate the non-relocation agreement). (f) Specifies that the Schelgels must abide by the AHL’s rules for ownership; they violated this rule previously by using the team as collateral for a loan.

5.2 Confirms that the AHL recognizes the legality of the non-relocation agreement. They agree that the Schlegels are bound by it.

In the language, the Schlegels are represented by DM Hockey Holdings LLC. AS Manager of the franchise, Howard Baldwin signed off on the agreement.

Now that I better understand the terms of the non-relocation agreement, I think the Schlegels should sell the franchise to Polk County for the fair market value (less than $5 million). Since Global Spectrum already runs Wells Fargo Arena and basically splits revenue with Polk County, they should be contracted to run the franchise. That way the two entities with the most financial interest in the arena would be in control of it anchor tenant (the Chops) and have direct control over its revenue stream, marketing, etc. Since their revenues would be impacted by the box office performance of the team, they would be wise to improve the quality of the product on the ice and increase the marketing and exposure for the team.

An alternative suggestion would be to sell the franchise to the Ducks (our 2008-09 affiliate). Bind them with the non-relocation agreement, but renegotiate the arena lease to make the team more profitable. Anaheim has stated several times that they were happy with the fans, the facilities, the travel, and pretty much everything else in Des Moines. The only thing that they were unhappy with was the Schlegels.

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