Breaking The Rangers' Sale Logjam
Chuck Greenberg, Tom Hicks and Nolan Ryan stage a press conference on Monday, May 24th.It's not a sale-finalizing gambit, per se, but it's the logjam-clearing tremor that was a prerequisite to any substantive movement on the Rangers sale front, and undoubtedly the biggest official sale-related development since Tom Hicks originally selected the Chuck Greenberg/Nolan Ryan-led ownership consortium to purchase the Rangers back in mid-December -- a decision which he repeatedly attempted to avert beforehand and later attempted to renege on by conducting apparent covert negotiations with "losing" bidder Jim Crane, but let's flush all of that from our consciousness for the moment.
As was announced this morning via team press release (and elaborated upon by Maury Brown), the Rangers filed for voluntary Chapter 11 bankruptcy this morning, a "pre-packaged" petition which effectively means that all necessary approvals are secured and as much work is completed as possible beforehand, thereby lessening the amount of time required for the court-supervised portion of the sale. Provided that the requested court hearing goes ahead as planned 45 days from now wherein the sale and reorganization plan are confirmed, the sale should hopefully be finalized sometime around early- to mid-July.
This has all the appearances of being a preemptive move designed to thwart creditor-imposed involuntary bankruptcy, as this plan -- which, according to Chuck Greenberg, was proposed by Tom Hicks' legal team some 3½ weeks ago -- fully satisfies the $75 million lien on the ballclub and ostensibly reduces the chances that Monarch Alternative Capital attempts to pull that exact stunt; however, unless Hicks -- as suggested by NBC's Craig Calcaterra this morning -- negotiated some sort of back-door settlement with Hicks Sports Group's most aggressive creditors, or otherwise has assurances in hand that no retalitory motion will be filed, I daresay this isn't the end of the war.
Irrespective of the outcome and/or accompanying delays, it seems fairly clear that the Rangers, despite all assurances that the Rangers would "work within their budget" with respect to the impending amateur draft (never mind that we don't know what the budget entails), aren't going to go off the reservation with their four top-50 picks and select players requiring well-above-slot bonuses; pick No. 14(a) is going to require a draftee with a 95-100 percent chance of signing, since the penalty for failure is the permanent loss of the pick, and while I expect there will be a little more flexibility available at pick No. 22, I can't imagine a player being drafted whose demands fall way beyond slot.
18 Comments | in Analysis, The Season
Reader Comments (18)
Finally some movement. Forgive the analogy but this process has been constipated for way too long and it's good to know that it's at least moving and not stale anymore.
I just want this to end. PLEASE.
How embarrassing. Could you imagine this crap happening to Jerry Jones or Mark Cuban?
Could you imagine this crap happening to Jerry Jones or Mark Cuban?
Yes.
WGAF about NBA and NFL though.
It's really not THAT embarrassing, if at all. Why would we as fans be embarrassed that Hicks is in financial trouble? The team is in 1st place and shouldn't be affected as far as on field and day-to-day operations. The Cubs filed bankruptcy last year too. Donald Trump has done is multiple times. Is he embarrassed? Hell no. If this is a way of liquifying the Rangers and appeasing all 3 sides then this is the smart move. The creditors deserve their money, Hicks doesn't have the money to afford that, and Ryan/Greenberg need to be given their chance. It'll all work out eventually.
And a lot of people GAF about NBA and NFL, a lot more than GAF about MLB in this town.
This was not a surprise, other than that it took this long to pull the trigger. Understand that Weil Gotshal, hicks' law firm is arguably the preeminent b/k firm in the country. They know what they are doing. It was a bizarre notion th an involuntary petition was ever a viable weapon of the creditors. It made zero sense given that their loan was at the holding company level and limited in the amount of the lien to $70mm. This delay was most likely about selig making sure that it wouldn't damage relations with the league's regular financing sources.
I'm not a b/k attorney, but do practice a significant am out of structured lending. This a smart move. The right move and the timely move. Now let's figure a way to stop burning out the bullpen before June.
That should be significant amount of secured lending.
"The team is in 1st place and shouldn't be affected as far as on field and day-to-day operations."
With all due respect, you don't think this has affected us in day to day operations? Watch a TCU game and see if this affects us day to day. We drafted a guy with our first pick knowing what his contract demands were. The Rangers weren't even close because their "day to day" operations were being run by a suit in NY.
This deal was announced last year. It was supposed to be done before spring training. Then no later than Opening Day. Then mid-April. Then MLB was going to use the "Best Interest Of Baseball" clause to make it happen. Now bankruptcy. It now will be done within 45 days? What happens if their is an injunction? Any sort of delay? How does our draft go this year then? International free agency? Trade deadline?
Why do you think it is nobody GAF about MLB in Dallas? Look at where the Rangers were in the '90s compared to the Mavs. The Mavericks were the worst franchise in all of sports during the '90s. The Rangers were in the playoffs 3 of 4 years, averaging 36,000+ per night. Exactly how many people GAF about the Mavs then? Cowboys during the late '80s had a half full Texas Stadium every Sunday. How are they doing now?
The Cubs were able to sign their first round pick last year despite their bankruptcy. The managed to have a $150 million payroll this year (about a $15 million increase). Donald Trump is not in the business of winning and losing baseball games. The Texas Rangers are in the 5th largest TV market and has a payroll near the bottom of the league, and still couldn't pay the bills. So yes, this is an embarrassment of EPIC proportions.
This delay was most likely about selig making sure that it wouldn't damage relations with the league's regular financing sources.
I think one of the long-term implications of this whole mess will be more prudence on the part of the banks, particularly insofar as lending to major league teams ... this was already the case after the 2008 financial crisis, which begat a great deal more caution, but given the way that the Rangers/MLB have wholly sealed the creditors out of the process of dictating the terms of the sale, I suspect that the big dogs like Chase and BoA are going to drive a harder bargain for more creditor-empowering rights in future loans as a means of protecting themselves from debacles like this one.
If you're banking on Matt Purke to change the franchise NOW, this season, then it's probably irrelevant who is owning this team. Yes winning is what gets people interested and people in the seats, but the Rangers haven't had financial problems the last 10 years, and what did they achieve in that span? People are starting to get excited about this team and they should. But even if they starting making the playoffs, I presume they'll still be 3rd behind the Mavs and Cowboys as long as those 2 are still succeeding. IF, and we all know how this thing has gone, this plan goes accordingly then no the Rangers won't be affected all that much on the field, or even off it.
I'm not a finance major ... @#$%, I have a hard enough time with my own checkbook ... but from all that has been written and pontificated on, here's what I understand this morning ...
1) This move, engineered by Hick's legal minds, attempts to separate the Texas Rangers Baseball Club from HSG ... and the "pre-packaging" outlines how all of the outstanding debt ... of the Texas Rangers Baseball Club, not HSG ... will be satisfied.
2) The Judge has to decide whether to allow the Texas Rangers Baseball Club to be "severed" from HSG, and thus sold as an independent entity, to Greenberg/Ryan ...
3) If the Judge sides with the Rangers, the sale is done and everything concerning the Texas Rangers Baseball Club moves forward ... peace, tranquility, harmony, $$$ ... and the lenders are left to beat up on HSG in their own court filings, if that's how they decide to play this ...
4) If, however, the Judge determines that the Texas Rangers Baseball Club cannot be "severed" from HSG ... the Titanic sinks again ... the lamentations become long and loud, audible from DFW to the far reaches ... of SW FLA ... and chaos ensues
OK ... I think I got it now ... so either the Rangers are "paroled" in 45 days or less ... or the Judge is a "hangin' Judge" and all you-know-what breaks loose ...
Great !!!
3) If the Judge sides with the Rangers, the sale is done and everything concerning the Texas Rangers Baseball Club moves forward ... peace, tranquility, harmony, $$$ ... and the lenders are left to beat up on HSG in their own court filings, if that's how they decide to play this ...
Pretty much, yeah. Mike Hindman and I were talking this morning and he sent me a recent 5th Circuit opinion on a case that apparently -- and I say apparently because I haven't slogged through the document yet, but rather relied upon MJH's penetrating legal mind for guidance -- deals with the approval of a Ch. 11 plan over creditors' objections where a company was separated from its parent. In this particular case, the opinion appears to be that if the secured liens of the Ch. 11 company are satisfied, the debtors of the parent company have no legal recourse.
Of course, there are subtleties and various other factual differences between this case (584 F.3d 229; 2009 U.S. App. LEXIS 21749; Bankr. L. Rep. (CCH) P81,642; 52 Bankr. Ct. Dec. 46) and the on-going HSG battle that, as Mike says, "will allow someone to say that it doesn't apply in their case because of some minor difference in the facts" and thus force the judge to decide whether the difference is significant enough to deviate from the precedent. Nevertheless, it's something to keep in mind.
I have worked in accounting & finance my whole life as a controller and CFO.
I thought this is what they should have done long ago. The creditors lien is satisfied. All proceeds go to HSG and (apparently) are then used to satisfy HSG debt. I do not believe that HSG is in bankruptcy only in default. So once the lien is paid the sale should go through. The bankruptcy court will see that all claims are paid and future obligations like accounts payable and deferred salaries are assumed by the new owners.
Monarch could force HSG into bankruptcy and try to link the claims. For example, argue that Greenburg overpaid for the land and underpaid for the ballclub thereby depriving the creditors of the true worth of the club. However, once the lein is satisfied I think that they are just general creditors like all the rest and their remaining claims are against HSG not the ball club. They will be streching and I think the judge will dismiss their attempt to link the two separate legal entities.
What I like about this is that it avoids the legal explosion that would have dragged on forever if Selig had seixed control of the team.
I suppose this took so long because Hicks-Greenberg-Selig were trying to have a settelement and avoid the bankruptccy option, but clearly Monarch was not going to do that.
It's Time!
Also, banks should be more careful when they loan money.
If they are going to loan a club $500 million what is the problem having a $500 million dollar lien against the asset?
I do not see that as hinderance; just plain smart lending and borrows should be able to live with that.
Also remember the first deadline is the July 31 Trade Deadline, if something is in place a week or 2 before that (well we can dream right) it wont effect anything tangible. Yes the draft is coming up soon, BUT if the club is confident new ownership will be in place before the signing deadline, then does it really matter?? New ownership could approve above slot money at that point allowing the draft pick to be signed. A bit like playing with a live grenade, but what would you do?
The problem with that, WilyRangerFan, is that it's a pipe dream to think that this will be complete by mid-July. I worked for a large corporation (which shall remain nameless) that went through TWO prepackaged bankruptcies during my tenure there and believe me, nothing happens as quickly as it theoretically can. This can still drag on for months.
Bummer.
This was a move for the sake of expediency, here is to hoping everything goes down the pipe smooth.
@ Drew
Of course, Purke was not going to help the big club this year. He may blow out his arm in AA in a couple years and never be heard from again. Right now, he would be just another chip at the disposable of the Rangers, making it easier to part with another top talent if it was required to add a piece to the big club.
The point is the Rangers were confident enough last year to draft him knowing his demands. Purke was advised by a Nolan Ryan business partner. Then poof, he's gone. This crap has been going on for about a year with consequences that can be felt. Just because they now say it will be done in 45 days, everyone believes it again?
Nolan Ryan on the Ticket this morning, was "hopeful" it would get done in 45 days, but there was no definite time table. The creditors in no way have signed off on this. Sports Business Journal writer being interviewed by Hitzges says it is entirely possible the bankruptcy judge could re-open the sales process. Judge's #1 job in bankruptcy is to maximize the assets for the creditors, not to push a sale in 45 days. This is going to be ugly, drawn out, and likely will not be settled by the time the draft comes around. Peter Angelos (sp?) bought the Orioles in 1993 out of bankruptcy and he WAS NOT the original bid winner (Crane). Could this result in Nolan Ryan not being a part of this?
How can this not affect day-to-day operations?
My Ranger loving heart is breaking.