MORE DRAMA IN OTTAWA

As if the last 12 months haven’t been enough of an eye-roll in Ottawa, the latest hoopla surrounding Eugene Melnyk’s LeBreton Flats project, which included a new home for the Senators, just about takes the cake.

To make a long story short, Melnyk sued his then-partner John Ruddy of Trinity Development Group Inc. for $700 million, citing an “egregious conflict of interest” after their plans fell apart. Ruddy then counter-sued Melnyk for $1 billion on Tuesday, claiming Melnyk wants a “free arena” for the Senators and doesn’t have the funds to go ahead with the project. And as I was told after this month’s BOG meetings, their arrangement with the National Capital Commission, who own the land, terminated its deal with Melnyk and Ruddy on Wednesday.

You can be sure the NHL is watching this situation ever so closely – especially after they were kept out of the loop, for the most part, that Melnyk’s deal was falling apart, I was told from a League source.

According to the source, the NHL had no further clarity on the developments going into their BOG meetings earlier this month and called the Senators’ current situation both “dire” and “complicated.”

It appears some of the NHL’s other owners are frustrated by these turn of events, as it could affect the team’s overall valuation.

On July 28, I reported the Senators were presented with an offer to sell the team. While Melnyk engaged in talks, he ultimately rejected the proposal. At the time, I was told the pitch was well below what Melnyk or the NHL would consider as market value, which is now believed to be around $600 million to $700 million for the Sens – how this latest development affects the numbers remains to be seen.

NHL Deputy Commissioner Bill Daly acknowledged the report, at the time, but told me via email he did not “equate an offer to purchase the Sens with an intention or desire to sell the team.” Soon after, Melnyk reestablished his commitment to keeping the Senators.

Another cause for concern is the suggestion in Ruddy’s countersuit that Melnyk’s company, Capital Sports Management Inc., and effectively Melnyk himself, “is not financially sound.”

On July 27, one day prior to my report, the Senators announced a $135 million refinancing loan that has a six-year term credit with multiple financial institutions on both sides of the border. On Oct. 19, they entered into a $30 million five-year revolving credit facility with the Bank of Montreal’s Corporate Finance Division.

Things have certainly changed since the season started – for example, players have told me Melnyk’s presence around the locker room has been uncharacteristically and noticeably minimal – and one has to wonder what happens now.

As is my understanding, there are at least two groups interested in pursuing the purchase of the Senators – the previous group and another one – but it’s unclear if either of them have recently expressed their intentions to Melnyk or the NHL. Could Melnyk reconsider his position? Perhaps, though I’m sure he’ll argue against that.