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Home Maury Brown Inside How the Sale of the Texas Rangers Gets Done

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Inside How the Sale of the Texas Rangers Gets Done PDF Print E-mail
User Rating: / 9
Written by Maury Brown   
Thursday, 11 March 2010 21:36

Texas RangersIt’s been nearly a year since Tom Hicks began exploring the sale of the Texas Rangers. Hicks Sports Group, who is $525 million in debt, put the team up for sale in late March of last year.

When there is a debt component in play, there are creditors to contend with. In this instance, the owner that is selling (Tom Hicks), wanted to remain with the organization in some capacity, and there is real estate in play. When you throw in an open bidding process, and MLB approval, the deal is, by most any standard, complex.

As Opening Day approaches, there have been several reports that have surfaced dealing with “snags” in getting the deal done. Here’s some clarification on the final push to try and get the sale wrapped-up:

Creditors are Unhappy with the Deal – The SportsBusiness Journal and SportsBusiness Daily have had two stories that highlight displeasure within the creditors of Hicks Sports Group who are unhappy in how the deal is structured.

The creditors, along with 75 percent of MLB's owners, must approve the sale. The league which is acting as an intermediary between Hicks and his lenders, held a conference call last Friday that went very poorly, the sources said. The creditors are seeking a minimum $300M of the proceeds.

What is really in play here is the lead debt holder, Monarch Alternative Capital, a hedge fund that now owns $100 million of the $525 million of HSG debt. In a prior SBJ story, Monarch Alternative Capital was portrayed as a “predator” or “distressed debt buyer” that buys debt from the banks in the hopes of turning a profit on the deal.

Hicks is Both a Buyer and Seller – This news should have been long gone when the sales agreement between Hicks and the group headed by Chuck Greenberg and Nolan Ryan was finalized, but it still lingers. While Hicks is still the majority owner, when the sale is completed, he will hold only an exceptionally small percentage of the club.

The Rangers Could Fall into Bankruptcy – Wednesday’s SportsBusiness Daily piece ended by saying, “How much longer the situation can drag on is unclear, with one source saying in a few weeks the team could be forced into bankruptcy protection.”

To begin with, the Rangers would not fall into bankruptcy, but rather Hicks Sports Group. How the creditors would move HSG into bankruptcy is unclear. This seems to be a leveraging comment by a creditor to try and spook fans or the Greenburg/Ryan group. Consider: let’s say that somehow HSG were to fall into bankruptcy. The courts would then sell off HSG’s holdings which include not only the Rangers, but the NHL Dallas Stars. Hicks Sports Group has the $525 million that is owned lenders, and as part of the debt, sources indicate that a lien on the Rangers of under $100 million is in place. Historically, sports holdings have decreased in value through bankruptcy, not increase. So, it is possible that by not excepting the sales agreement in place, the creditors could lose millions on the deal.

Could There Be Lender Liability If the Sales Deal is Not Accepted? - It’s clear that key creditors are upset about not garnering everything they are seeking (the reported $300 million), but if they don’t accept the deal, there is potential lender liability arising from blocking the sale of an asset even though the sale would generate proceeds in excess of the sub-$100 million lien. That would seem to place pressure on creditors to accept the deal, as opposed to looking for a method to push HSG into bankruptcy.

The Greenberg/Ryan Group is Undercapitalized – There’s been a couple of reports as of late saying that a key concern over the bid by the Greenberg/Ryan group is undercapitalized. In discussions with several sources there was nothing that would lead one to believe that is the case.

If the Sale Isn’t Completed by Opening Day, the Deal is Getting Scuttled – Whether it was the sale of the Cubs, or the current situation with the Rangers, often times deals of this magnitude get consummated at the 11th hour. Would it surprise anyone if the sale of the Rangers didn’t gain approval from the lenders by Opening Day? No. But, at the same time, it should not signal that the deal is set to collapse.

Final Thoughts – Expect the sale of the Rangers to occur, with some bluster coming out of the trenches on the creditors’ side over the time leading up to Opening Day. It is possible that the deal will not be done by then, but expect the deal to get done with Greenberg/Ryan still in the driver’s seat.

Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is available for hire or freelance. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

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