Breaking Down The Texas Rangers Move Into Voluntary Bankruptcy.
In what can only be called a surprise move, Tom Hicks and the other current owners of the Texas Rangers Baseball Club, and Rangers Baseball Express, the local investor group led by team president Nolan Ryan and Chuck Greenberg, moved the sale into a voluntary, "prepackaged," court-supervised process under Chapter 11 of the U.S. Bankruptcy Code in order to complete the sale, under the group name Texas Rangers Baseball Partners
HSG Sports Group, the holding company for the Rangers that is attempting to complete the sale to the Greenberg/Ryan group is $525 million in debt to 40 creditors, and has been at an impasse for months in completing the sale. At a press conference today, Tom Hicks said that the plan to push the club into voluntary bankruptcy started to be discussed approx. 3-and-half weeks ago.
The sale, already a complex deal to begin with, sees this new twist to its saga. But, what does it all mean? Here's some info to help clarify what's involved.
The deal on the table is the same deal that was on the table by the Greenberg/Ryan investment group (Rangers Baseball Express ) months ago which sees an aggregate transaction value of approximately $575 million, and includes the Rangers, and their lease of the Rangers Ballpark in Arlington, together with the separate sale of approx. 154 acres of land around the Ballpark.
The plans byTexas Rangers Baseball Partners to go into voluntary bankruptcy was not made known in advance to the creditors.
The sale would see all Rangers debt, both secured and unsecured, paid. That means the secured $75 million lien on the Rangers would be paid, and then other proceeds through the sale would pay off unsecured debt such as $61,988.16 owed Tickets.com or $41,167.79 owed Rawlings Sports Group, the $18 million loan that the Rangers got from MLB's credit facility to cover operating expenses, and more.s
It should be noted that while the money will not be going into the escrow account, yet (the payment is not yet due), the Greenberg/Ryan group will make their required payment for deferred player compensation. Players such as Alex Rodriguez, Kevin Millwood, Michael Young, and Vicente Padilla are listed as the top unsecured creditors of the Rangers.
While the Rangers are in bankruptcy, a new line of credit from MLB's facility fund would be offered the club to continue operating as it has been (see the complete details from today's press release (http://bizofbaseball.com/index.php?option=com_content&view=article&id=4393:texas-rangers-voluntarily-go-into-chapter-11-bankruptcy-to-finish-sale-to-greenbergryan-group&catid=70:mlb-club-sales&Itemid=157))
(See the list of the top 30 unsecured creditors (http://www.bizofbaseball.com/docs/RangersUnsecuredCreditors.pdf) listed in the bankruptcy petition - PDF)
While owners will approve the vote for ownership transfer, that technically would not occur unless the courts approved the sale to the Greenberg/Ryan group.
There has been discussion (http://hardballtalk.nbcsports.com/2010/05/the-rangers-announce-the-greenberg-sale-is-going-through.html.php) that it "this can't be a 'paid in full' thing. It has to be a 'we've been paid enough to be happy' thing." As a matter of clarity, the Rangers are going into bankruptcy as they are in a state in which they cannot operate at their current levels, hence the partnership's (and baseball's) willingness to allow the deal to go into Chapter 11. The sale of the assets fulfill the obligation to pay the secured and unsecured debt, in full.
The biggest issue that those watching the sale need to take in is that this is about the Texas Rangers, not Hicks Sports Group. HSG has not yet been pushed into bankruptcy. The Chapter 11 filing, through the bankruptcy process, will extricate the Rangers from HSG Sports Group (formerly Hicks Sports Group).
Months ago, we reported that Tom Hicks would retain below 5 percent ownership of the Rangers, once the sale was completed. Sources close to the sale asked us not to divulge the exact amount of equity Hicks would retain, but that is now public record as Hicks made mention of it in yesterday's press conference. As "chairman emeritus" for three years, Hicks will retains a 1 percent ownership stake in the Rangers.
Finally, what legal recourse the creditors have is the unknown. There has been numerous discussions as to the lenders, not those in baseball, putting the Rangers assets into involuntary bankruptcy. In some senses, it looks as if that weapon was used upon the creditors, themselves. At the very least, it's possible the transaction will languish in the courts far longer than those in Major League Baseball would like to see. And, certainly there will be a discovery phase where information that baseball would not like to see public, is unearthed and put on display (see what is part of what was made public as part of the Phoenix Coyotes bankruptcy proceedings (http://bizofhockey.com/index.php?option=com_content&view=article&id=219&Itemid=74))
See the complete bankruptcy petition by selecting READ MORE
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|Publication:||The Biz of Baseball|
|Date:||May 24, 2010|
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