Tom Hicks, who owns the Texas Rangers, as well as the NHL Dallas Stars, could be removed from ownership after Hicks Sports Group has gone into default on over a half-a-billion in loans. The companyâ€™s declaration is the clearest sign that the sports industry is not recession proof.
According to the Wall Street Journal, in regards to Hicks â€śa group of 40 financial institutions and other investors hold $525 million in debt. Galatioto Sports Partners, a New York sports-financing group, holds the largest position, having lent nearly $100 million to Hicks Sports Group.â€ť
The $525 million default is on a $350 million bank term loan, a $100 million second-lien loan and a $75 million revolving credit facility.
Late last month, Hicks missed a $10 million quarterly interest payment, thus triggering the default.
Could the default force Hicks to sell the Rangers and Stars? According to an email sent to the Star-Telegram, Hicks says emphatically, no. Hicks is working toward selling 46 percent of his 95 percent controlling stakes.
"There is no possibility of banks owning the teams," Hicks wrote. "I am working closely with both leagues to find quality partners that share my long term vision of building these two great franchises. I will continue to fund the teamsâ€™ operations. I am the largest creditor to HSG and need 51 percent of the banks to agree with my plan."
However, the clock is ticking for Hicks as there is a 180 day window for him to make good with the creditors. If Hicks is unable to find partners willing to invest in the Rangers and Stars to meet his debt obligation, or restructure the loans, the process of extracting the sports franchises would commence. In the case of the NHL, there are safeguard provisions in place that prevent immediate foreclosure. In the case of the Major League Baseball, if HSG is unable to satisfy its lenders, they can force the sale through a league-sanctioned process.
Maury 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 contributor to Baseball Prospectus, and is available as a freelance writer. 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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