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The judge overseeing the case of the NHL's bankrupt Phoenix Coyotes raised the possibility of rejecting both existing bids for the money-losing team.

Judge Redfield Baum of US Bankruptcy Court in Phoenix said at a sale hearing that he could deem bids by the NHL and Canadian billionaire James Balsillie unacceptable.

"Just so we're all clear, there is a third possibility - no sale," Baum said. "It's more than theoretical. You all ought to keep that in mind."

The judge did not specify what would happen to the Coyotes if he made that ruling. The Coyotes, owned by trucking magnate Jerry Moyes, filed for bankruptcy protection in May.

Balsillie, co-chief executive of BlackBerry maker Research in Motion Ltd, has bid $242.5 million for the franchise on condition that he be allowed to move it to Hamilton, Ontario.

The NHL opposes the team's relocation but has only guaranteed one more year in Glendale, the Phoenix suburb where the team plays its games. The Coyotes have never made a profit since moving to Phoenix from Winnipeg, Manitoba, in 1996.

The NHL has bid $140 million in addition to offering to give the creditors, including an investment firm controlled by Dell Inc CEO Michael Dell, any profits when it resells the team.

Last month, the NHL entered the auction process in an effort to shift control of the sale process away from the bankruptcy court.

Balsillie and NHL Commissioner Gary Bettman were at the hearing and are both expected to take the stand later on Thursday.

A third group - Ice Edge Holdings - that included current Coyotes coach and part owner Wayne Gretzky, hockey's all-time leading scorer, dropped out of the auction on Wednesday.

Baum still must decide whether to include Balsillie's bid over the NHL's wishes. Last month, league owners rejected Balsillie's ownership application.

NHL officials have vowed in court to appeal a Balsillie victory if it occurs, arguing that the league has the right to control whom teams are sold to and where they play.

Reuters