Texas Rangers seek bankruptcy protection to help spur $575 million saleBy Stephen Hawkins, AP
Monday, May 24, 2010
Rangers seek bankruptcy protection to spur sale
ARLINGTON, Texas — The Texas Rangers have filed for Chapter 11 bankruptcy protection in an effort to spur completion of the stalled $575 million sale of the team — and maybe clear the decks for the new owners to make pennant-chasing decisions this summer.
The bankruptcy filing Monday comes four months after Tom Hicks announced an agreement to sell the team to a group led by Hall of Fame pitcher and team president Nolan Ryan and Pittsburgh attorney Chuck Greenberg.
“I did not want to put the baseball future of the Texas Rangers in jeopardy or uncertainty for an extended period of time,” Hicks said. “This action is all about creating an end to the impasse in allowing this team sale to go forward.”
Under the plan that will be the subject of a court hearing Tuesday, the Rangers would fully pay the $75 million of the club’s debt tied up in Hicks’ financially strapped ownership group. That would remove the team from the additional claims by creditors against Hicks Sports Group that have stalled the sale.
“We feeling like this is the correct thing to do,” Ryan said. “We have some deadlines coming up that are obviously important to us as a ballclub, and feel like by bringing this to finality that we will then be able to do the things we feel like we need to do and push forward with the winning ways of the ballclub.”
The Rangers, who haven’t been to the playoffs since 1999, have a two-game lead in the AL West.
In order for the Rangers to have financial flexibility at the non-waiver trading deadline July 31, the sale of the team will need to be completed. There is also the amateur draft next month.
A 21-page filing in U.S. Bankruptcy Court in Fort Worth included the top 30 unsecured creditors, a list headed by Alex Rodriguez, who is owed $24.9 million in deferred compensation six years after he was traded away from the team.
The next five on the list are also current or former players: Kevin Millwood ($12.9 million), Michael Young ($3.9 million), Vicente Padilla ($1.7 million), Mickey Tettleton ($1.4 million) and Mark McLemore ($970,000).
Even if the court approves the Rangers bankruptcy petition, the sale would take several more weeks to complete.
“I know it will be faster than the other alternative would have been,” said Hicks, who bought the team in 1998 from a group that included former president George W. Bush.
Since the filing was made by the team, not Hicks Sports Group, the group of about 40 creditors owed money by HSG could object to the sale. Greenberg knows that is a distinct possibility.
“Given the way a couple of these renegade creditors have behaved, I’m not expecting an overnight personality transplant,” Greenberg said. “So, the odds are they won’t take this well.”
Greenberg said doesn’t believe the court will disregard the process and other events that have taken place so far.
“Particularly since every creditor of the Texas Rangers will be paid 100 cents on the dollar,” he said.
Rodriguez played for Texas from 2001-03 after signing what was then a record $252 million, 10-year contract. He was traded to the New York Yankees before 2004 season, and that contract has since been replaced by a $275 million, 10-year deal with the Yankees.
Young, the longest-tenured Ranger in his 10th season, is the only current player among creditors listed in the filing. Neither Tettleton and McLemore have played for the club since the 1990s. Others among the top 30 listed in the filing are Tickets.com, Rawlings Sporting Goods Co., Clear Channel Outdoor and Stats Inc.
Greenberg initially hoped to have control of the Rangers by opening day, but concerns from Hicks’ lenders have slowed the deal and Hicks Sports Group defaulted on $525 million in loans last year. Greenberg said Hicks’ agreement to sell 153 acres around the stadium facilitated the agreement; the land is part of the $575 million sale price.
Hicks said it became apparent about a month ago that the Chapter 11 bankruptcy would be the only way to break the stalemate created by creditors.
The filing is not the first in baseball.
The Chicago Cubs briefly filed for Chapter 11 protection last year in a step that allowed its new owners to avoid potential claims from Tribune Co. creditors. The Baltimore Orioles were sold in a bankruptcy auction in 1993 after owner Eli Jacobs filed for Chapter 11; the same step happened to the Seattle Pilots after the 1969 season, before the new owners moved the team to Milwaukee and changed its name to the Brewers.
The Greenberg-Ryan group includes about a dozen mostly local investors. An agreement in principle to buy the team from Hicks was announced Jan. 23, more than a month after the two sides entered into exclusive negotiations.
Once the bankruptcy issue is settle and the sale proceeds, at least 75 percent of baseball’s owners will then have to approve the transfer of ownership from Hicks. In a letter included in the bankruptcy filing, commissioner Bud Selig said he intends to recommend the approval of the sale to the baseball owners.
Major League Baseball has agreed to give the Rangers a new credit facility while it waits for the deal to be completed, the team said.
This is the 50th season of the franchise that began as the Washington Senators in 1961, and moved to Texas in 1972. The Rangers have never won a playoff series, going 1-9 in the postseason — all against the Yankees — after winning their only three AL West titles in a four-year span at the end of the 1990s.
Cash flow problems for the Rangers began in 2005, according to court records. Hicks had provided more than $100 million to the Rangers since purchasing the team, but problems have mounted over the years.
“Due to the unprecedented downturn in the U.S. economic and housing industry and global economic recession, other commitments and contractual restraints, Mr. Hicks was no longer willing to provide the same material financial support he had in the past,” Kellie Fischer, the Rangers’s chief financial officer, wrote in a separate filing Monday.
Rodney Fort, a sports professor at the University of Michigan and vice president of the International Association of Sports Economists, dismissed the notion that escalating player salaries played a role in forcing the bankruptcy filing.
“That’s the silliest of all economic logic — to blame your employees because you can’t manage the asset in such a way that you can make a go of it,” he said. “That’s not to say that the high cost of baseball players doesn’t lead owners annually to reassess, ‘How good a team should I put on the field, so that I can make some money in the process?’ …
“It’s unlikely that even if it were true that high salaries were causing problems for the Rangers, that the answer is declare bankruptcy and sell the team. The answer is look more like Kansas City than you do the Yankees.”
Andrew Zimbalist, a sports economist at Smith College, agreed.
“The Rangers, by declaring bankruptcy here, are attempting to get the judge to agree to a prepackaged plan, basically that would force the creditors to give up their liens on the Rangers and allow the sale to go through,” he said. “The Rangers are doing fine as a team. They might have some cash flow issues, but those are not terribly pressing or relevant. They’re in first place. They’re projected to be profitable.”
AP Sports Writer Noah Trister in Little Rock, Ark., and AP writer Paul J. Weber in San Antonio contributed to this report.
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