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Selig to seize Rangers; creditors to force team into bankruptcy

May 10, 2010, 8:15 AM EDT

What was merely suggested a week ago now appears all but certain. In response to Major League Baseball’s warning that it was going to seize the Texas Rangers from Tom Hicks and invalidate the debt that held by the creditors to Hicks Sports Group, the creditors have voted to reject the deal, reports Daniel Kaplan of Sports Business Journal.

The result of this is that when baseball makes its move — which should happen following the owners’ meeting scheduled for later this week — the creditors will sue, forcing the Rangers into bankruptcy court and potentially opening the sale up for other bidders.  It would be up to a bankruptcy judge to determine whether that comes to pass or, alternatively, if Selig is within his powers to kick the creditors to the curb.

Which seems like a lose-lose for baseball.

If the creditors prevail it quite obviously delays the sale of the team and possibly takes Chuck Greenberg and Nolan Ryan out of the owners’ suite in favor of a higher biddder, should one emerge.  This is clearly not what Selig wanted, inasmuch as everyone seems pretty pleased with the Greenberg/Ryan team.

But say baseball wins the battle, is able to shrug the liens off the Rangers, and pays them a pittance to go away, thereby paving the way for the sale. If that happens, isn’t every bank and investment fund who ever considered lending money to a sports team going to freak out? Why on Earth would any of them give money to a sports team if they have good reason to believe that the debtor could simply refuse to pay up and then have the league come in and invalidate the debt in the first place?

Sure, there’s a lot to be said for team owners being forced to operate within their budgets and not rely on so much debt.  I’ve said plenty on the subject in the past. But I don’t think most team owners agree with me on that score, and they can’t be all too happy about the prospect of having all sources of credit dry up.

  1. YankeesfanLen - May 10, 2010 at 8:31 AM

    Seems to me that if banks as sources of credit dry up for fiscally-challenged teams, then new equity partners (i.e. private investors with$) would replace the needs and take a piece of ownership. Ultimately the source of the excessive spending would be censured or forced out.
    But maybe that’s what just happened to Hicks.

  2. Steve C - May 10, 2010 at 9:17 AM

    I’d love to see the Rangers head to bankruptcy court just so someone can forcibly enter Bud’s little club of owners.
    Captcha: was frizzing

  3. Old Gator - May 10, 2010 at 9:58 AM

    Which brings up an interesting question: if the Rangers are sold off to a high bidder as the asset in a bankruptcy proceeding, do the owners still get to exercise their prerogative of approving or disapproving the buyer’s membership? Or would that prerogative be voided by the bankruptcy judge, and if so under what powers?
    .
    Second question: would MLB or the buyer have any implicit obligation to succor Tom Hicks, or would that be up to the judge as well – or would Hicks be shit out of luck?

  4. Boo Hoo Florio picked on your team - GET OVER IT - May 10, 2010 at 10:16 AM

    I blame the creditors the most in this one (Tom Hicks doesn’t deserve to go unscathed for this entire ordeal however.) They keep trying to squeeze as much blood out of a stone as they can while running the risk of ending up with next to nothing. Which is what they just got with Selig seizing the team.
    Holding out lots of hope for Greenberg & Ryan to end up with this franchise after all is said and done, though. They seem to be the guys who have the best interests of the team in mind.
    Old Gator, to answer your second question, I believe the saying, “shit out of luck” would apply the best to Tom Hick’s situation. He’s likely headed to filing for personal bankruptcy.

  5. Old Gator - May 10, 2010 at 10:24 AM

    Heh. In which case Hicks and the creditors would have consummated their long-running game of chicken with a headon collision. I guess that Major League Baseball is death-proof, but to get the benefit of it you kinda have to be sitting where Bud Selig is.
    .
    Even so, I find it harder to blame the creditors than Hicks. After all, Hicks wanted to stiff them for a pretty sizable portion of his debt while walking away with a load of cash from the sale, and if I’m not mistaken that is what kept them from agreeing to the deal as it was presented to them. Ryan and Greenberg are the innocent bystanders in all of this, as are the fans.

  6. Old Gator - May 10, 2010 at 10:25 AM

    Heh. In which case Hicks and the creditors would have consummated their long-running game of chicken with a headon collision. I guess that Major League Baseball is death-proof, but to get the benefit of it you kinda have to be sitting where Bud Selig is.
    .
    Even so, I find it harder to blame the creditors than Hicks. After all, Hicks wanted to stiff them for a pretty sizable portion of his debt while walking away with a load of cash from the sale, and if I’m not mistaken that is what kept them from agreeing to the deal as it was presented to them. Ryan and Greenberg are the innocent bystanders in all of this, as are the fans. And as a Feesh fan, I know all about the fan as innocent bystander.

  7. Boo Hoo Florio picked on your team - GET OVER IT - May 10, 2010 at 10:30 AM

    The reason I blame the creditors the most is that they continue to defy reasonable retribution from the sale. They need to move on. Tom Hicks indeed put them in a nasty place and deserves to make zero profit from the whole debacle, but as debt collectors know, there’s a time to cut your losses and try to recoup what they can at this point. And we have already passed the point of “no return” a long time ago. The creditors have lost this game of chicken and are failing to come to grips with it.

  8. APBA Guy - May 10, 2010 at 3:04 PM

    Lot’s of interesting speculation. Thing is, what we know is the reason that creditors do these deals is that the value of baseball franchises almost always goes up, making the creditor’s investment appear almost risk free, especially during an easy money era like the one we just passed through. If these creditors take a loss, knowing too many wall street types, they’ll:
    – view the current group of creditors as stupid
    – write in much tougher language in future deals
    – continue to go forward with baseball deals
    The track record is still too good on these transactions. This will be looked at as a “one-off”.

  9. Austin Rangers Fan - May 10, 2010 at 4:35 PM

    The debt is from the Hicks Sports Group, which owns the Rangers, and is not directly tied to the Texas Rangers franchise. Note the word– “franchise”. MLB is going to take its franchise back and tell the creditors to have a nice day. The creditors needed to do a better job managing the terms of their debt. The rumors are that there is very little in the debt covenants that actually indicates what the debt is for, and recourse for the creditors if HSG were to default.
    The debtors are going to make a significant haul. Rumored again, is that the sale of the Rangers will net them the amount they paid for the debt, and their portion of the sale of the Dallas Stars will be pure profit.
    Just hard nosed business on both sides. I don’t see the debtors winning this round, but I do see tons of lenders lining up to loan money to baseball teams, because baseball teams have huge earning potential. Look for them to be smarter and include more precise terms in the debt agreements.

  10. Vin Smith - May 10, 2010 at 10:46 PM

    …Baseball on the field is a noble game. In the executive suite, it is a cruel sport. Everything from franchise moves (Dodgers out of Brooklyn, breaking that borough’s heart) to casting aside sports stars without paying them (when the Dodgers released the late Carl Furillo, they refused to pay him some $30,000; Furillo turned his back on baseball–I would have, too–and went to work for Otis Elevator).
    Selig’s plan is likely to blow up in the face of baseball. Again and again, Bud Selig proves himself the worst commissioner in baseball history. How about his plan to vanquish the Minnesota Twins? Pure stupidity then, utter nonsense in retrospect.

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