February 5, 2016 / 6:13 AM / in 3 years

Canada's weak dollar threatens to put Quebec's NHL bid on ice

WINNIPEG, Manitoba (Reuters) - The Canadian dollar’s recent fall threatens Quebecor Inc’s (QBRb.TO) bid to bring back Quebec City’s beloved National Hockey League franchise, the Nordiques, by increasing costs.

Montreal-based Quebecor, a telecommunications and media company, submitted its bid in July, vying with Las Vegas for a team that may start play in 2017.

When Quebecor struck a deal in 2011 to manage Quebec City’s new 18,259-seat Videotron Arena as it began talks with the NHL about a franchise, the Canadian dollar was trading at a slight premium to its American counterpart.

The currency has since been hit hard by falling energy and commodity prices. With the Canadian dollar now worth about 73 U.S. cents after touching a 12-year low of 68 cents in January, the NHL’s franchise fee of at least $500 million is now at C$685 million.

“Passion can only take you so far,” said Glen Hodgson, chief economist of the Conference Board of Canada and co-author of a book on the business of professional sports in Canada.

“Quebecor is going to have to think really hard before shelling out that much money because it could be really hard to show a return on your investment.”

Quebecor declined a request for comment on its NHL bid.

Quebec City lost its beloved Nordiques to Denver in 1995, partly because a sagging Canadian dollar boosted costs in a league dominated by U.S.-based teams.

In the two decades since the Nordiques and the Winnipeg Jets left Canada amid financial woes, the NHL imposed a player salary cap that decreases as revenue falls, giving Canadian teams a buffer against currency drops.

But that safeguard does not make the NHL’s asking price for an expansion team any cheaper. They earn ticket and concession revenue in Canadian dollars while salaries, which account for half of the league’s hockey-related revenue, are paid in U.S. dollars.

Stronger Canadian teams such as Montreal, Vancouver and Toronto benefit from large population centers. But smaller-market teams such as Winnipeg, Calgary, Edmonton and Ottawa are in a more precarious position.

Winnipeg, which lost its team in 1996, met with good timing when it bought another NHL franchise in 2011. The price was a reported $170 million and the Canadian dollar was strong.

“If the dollar was what it is right now, it would have been a material impact for sure,” Mark Chipman, chairman of True North Sports and Entertainment Ltd, which owns the Jets, told Reuters.

However, the flagging Canadian currency has had no impact on the Jets’ bottom line through five seasons, Chipman said, noting that the tie between revenue and player salaries offset more than three-quarters of the currency’s fall, with hedging mitigating the rest.

NHL Commissioner Gary Bettman, asked on Saturday about Quebec’s chances, said he did not know if the currency’s fall would be a factor in a purchase, but that he did not think the process had changed.

Bettman added that the league’s governors were not ready to recommend whether or not the NHL should expand, and needed a few more months.

To be sure, Quebecor, with a market capitalization of $3.2 billion, may still have the resources and appetite for a bid.

But the dollar’s plunge inevitably poses risk for Canadian teams who may need to hedge year after year, Hodgson said.

That’s a troubling thought for fans who dream of the Nordiques skating again.

“People here really really love hockey,” said Vince Cauchon, a Quebec City radio host who co-founded the fan website Nordiques Nation. “Every time we lose a cent on that dollar, it’s pretty concerning.”

Editing by Alan Crosby

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