Creditors of the Texas Rangers, the Major League Baseball team that filed for bankruptcy yesterday, object to the $575 million sale to investors led by Hall of Fame pitcher and team president Nolan Ryan and his partner Chuck Greenberg, according to two people familiar with the matter.
The creditors, led by Monarch Alternative Capital, object to a planned sale of the club, which is controlled by billionaire Thomas Hicks, according to the people, who asked not to be identified. Hicks’s HSG Sports Group LLC, the parent company of the Rangers, defaulted on $525 million of debt last year. A bankruptcy judge will consider creditors’ objections in deciding whether to approve the sale.
“The sale is expected to be completed by mid-summer, subject to court approval, which will then allow the franchise to exit the Chapter 11 process,” the Rangers said yesterday in a statement.
The so-called prepackaged plan, which is supported by Major League Baseball, the current Rangers ownership and the Greenberg-Ryan group, provides “sufficient sale proceeds for the Rangers creditors to recover 100 percent of the portion of HSG Sports Group’s debt that is guaranteed by the Rangers and for all Rangers creditors to be paid in full,” according to the team’s statement.
U.S. Trustee’s Brief
The U.S. Trustee, tasked with looking after the interests of creditors, today filed a brief asking the court to treat the filing as a traditional bankruptcy, meaning terms would have to go to a vote of creditors. The trustee said the Rangers had devised a plan without asking creditors to vote and without participation from the lending group.
Pat Courtney, a spokesman for Major League Baseball, declined to comment yesterday on the creditors’ contesting of the Rangers’ bankruptcy and sale. A hearing is scheduled for 1:30 p.m. today in Fort Worth, Texas.
HSG Sports Group owes secured lenders $525 million on first- and second-lien loans, according to court filings. The team has guaranteed and is liable for $75 million of that $525 million debt, the filings show.
Under the plan, the lenders will be paid the $75 million guaranteed by the team, according to court filings. The documents don’t address how the lenders will recover the remainder of what’s owed them.
The lenders, including Galatioto Sports Partners LLC and CIT Group Inc., last month were seeking at least $30 million more from a proposed sale of the team, a person familiar with the situation said April 15.
Texas Rangers Baseball Partners listed assets and debt of $100 million to $500 million in Chapter 11 documents filed in U.S. Bankruptcy Court in Fort Worth.
“The primary purpose of the prepackaged plan is to bridge the impasse between” the Texas Rangers Baseball Partners and the lenders under the HSG credit agreement, said Kellie Fischer, Texas Rangers Baseball Partners chief financial officer, in court papers.
Alex Rodriguez, now the third baseman for the New York Yankees, was listed as the team’s top unsecured creditor. He is still owed about $24.9 million in deferred compensation from his earlier Rangers contract, according to court documents.
The club, which plays in Arlington, is the second Major League Baseball team to enter bankruptcy in less than a year. The Chicago Cubs in October joined owner Tribune Co. in Chapter 11 as part of that team’s sale.
Michael McCann, a sports-law expert and professor at Vermont Law School, said the bankruptcy proceedings of the National Hockey League’s Phoenix Coyotes may be a model for how a contested Rangers bankruptcy and sale could unfold.
In May 2009, the Coyotes filed for Chapter 11 protection from creditors and agreed to be acquired by an owner who wanted to move the team to Hamilton, Ontario. The NHL objected, seeking to keep the team in Phoenix and arguing the league, not the team owner, was in control of the troubled franchise.
A U.S. Bankruptcy Court judge ordered mediation between team and league and then presided over a series of hearings before setting up an auction that resulted, last November, in the Coyotes being sold to the NHL.
“Generally, courts try to take the course that’s least disruptive to the business,” McCann said.
The Rangers sale will be completed as part of a prepackaged reorganization plan for Texas Rangers Baseball Partners, the company said yesterday in a statement.
Under the plan, the company will sell the team to the investors in a transaction valued at about $575 million. That includes the investors taking on some debt, and a separate deal with another Hicks company to sell about 153 acres of land around the ballpark in return for cash, notes and an ownership interest in the group buying the team. The investors required the land as part of the agreement.
“This plan to complete the sale of the Texas Rangers serves the best interests of the team, its fans, MLB and all other parties involved,” Allan H. ‘Bud’ Selig, the commissioner of Major League Baseball, said in the statement.
The league agreed to provide the Rangers with a loan to ensure the team can meet its obligations while the sale awaits court approval.
Hicks bought the team for $250 million in 1998 from an investor group that included then-Texas Governor George W. Bush. The value of the team fell to $405 million last year from $412 million in 2008, Forbes magazine reported in April.
The franchise, which began play in 1961 as the expansion Washington Senators after the longtime Senators franchise relocated to Minnesota, moved to Texas for the 1972 season. The team has made the playoffs three times, never making it past the first round.
In 2000, the Rangers signed Rodriguez to a 10-year, $252 million contract, then the biggest in history. Rodriguez was traded to New York in February 2004 in exchange for then All- Star second baseman Alfonso Soriano and infielder Joaquin Arias. Texas also agreed to pay about $67 million of the $179 million that remained on Rodriguez’s contract.
A message left at the office of Scott Boras, Rodriguez’s agent, wasn’t immediately returned yesterday.
After Rodriguez, the next five unsecured creditors are also players or former players for the Rangers. They are: Kevin Millwood, a pitcher for the Baltimore Orioles ($12.9 million); Rangers third baseman Michael Young ($3.9 million); Los Angeles Dodgers pitcher Vicente Padilla ($1.7 million); Mickey Tettleton, who retired from the Rangers in 1997 ($1.4 million); and Mark McLemore, a former Rangers second baseman who retired from the Oakland A’s in 2004 ($970,000).
Hicks, 64, who served as chairman of private-equity firm Hicks, Muse, Tate & Furst Inc. from 1989 through 2004, also is trying to sell the Liverpool Football Club, the 18-time English soccer champion that Hicks co-owns with George Gillett.
Dallas-based Hicks Sports said in a statement in February that it was also exploring a possible sale of the Dallas Stars of the National Hockey League.
The case is In re Texas Rangers Baseball Partners, 10- 43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).