The judge in the Texas Rangers bankruptcy case said the team can keep using Perella Weinberg Partners as an investment banker and Weil Gotshal & Manges LLP as legal counsel while he reviews whether their prior work for the club poses a conflict of interest.
U.S. Bankruptcy Judge D. Michael Lynn in Forth Worth, Texas said he will consider objections to the work of the two firms raised by the U.S. Trustee, the arm of the Justice Department overseeing bankruptcies. Perella Weinberg, which advised the team’s owner before the bankruptcy filing last month, can continue to collect its monthly advisory fee of $87,500, and a one-time fee of $1.5 million upon completion of a restructuring or sale will be ruled on later, Lynn said.
Lynn said he will rule later on whether the bankrupt team can continue to retain Weil Gotshal, which has represented Tom Hicks, whose family controls Hicks Sports Group LLC, the parent company of the Rangers. He asked Weil to disclose any more information within a week.
“Any further advisements Weil Gotshal feels it should be making should be made one week from today,” Lynn said. He added that if the firm fails to disclose something, it does so “at its own peril.”
The judge approved today the hiring of AlixPartners LLP as a claims agent and Forshey & Prostok as conflicts counsel.
Separately, the Texas Rangers filed an amended Chapter 11 plan.
The Rangers already agreed to a sale to a group led by Nolan Ryan, the team’s president, and Chuck Greenberg, a minor league club owner.
Mark Semer, a Rangers spokesman, has said the team isn’t marketing itself.
Weil acknowledged that its prior work for Hicks and other entities could result in conflicts, and suggested hiring conflicts counsel.
The U.S. Trustee said Perella Weinberg “is not disinterested and holds a materially adverse interest” because a sale was already negotiated while it represented Hicks Sports Group. Perella Weinberg also represents Hicks Sports Group in connection with a sale of the Dallas Stars, the Trustee noted.
A group of lenders, calling themselves The Ad Hoc Group of First Lien Lenders, also objected to Perella Weinberg’s hiring, saying the team had refused to hold an auction for its assets. The group consists of GSP Finance LLC, Kingsland Capital Management LLC, Monarch Alternative Capital LP, Sankaty Advisors LLC and Stonehill Capital Management LLC.
Eve of Bankruptcy
The group said that because Perella Weinberg had previously been hired by Hicks Sports Group, the Rangers’ parent company, a new contract between the Rangers and Perella Weinberg on May 23 effectively “transferred” obligations of HSG to the Rangers on the eve of the Rangers bankruptcy.
On March 1, 2009, Hicks Sports Group, through Weil Gotshal, hired Perella Weinberg for several tasks, including a restructuring or sale, according to court documents.
The U.S. Trustee questioned whether the sale gives Hicks benefits, and said that Weil Gotshal shouldn’t be hired because it had “provided legal advice in connection with eve of bankruptcy transfers into the debtor as well as transactions that arguably worsened the debtor’s economic position.”
Texas Rangers Baseball Partners filed for Chapter 11 bankruptcy protection on May 24, announcing the proposed sale to the Greenberg-Ryan group. The team says the deal will pay creditors in full.
The case is In re Texas Rangers Baseball Partners, 10-43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).