Tom Hicks has gone from being a major mover and shaker in sports to the
best example of how fast you can fall when you take on too much debt
Texas Rangers fans can debate the state of the line-up, whether manager Ron Washington should or should not have been fired over cocaine use last season, and where the team might land in the AL West rankings for the upcoming season, but there has been near unanimity on their dislike for owner Tom Hicks. Hicks, mired in $525 million in debt, also has more than fans to deal with. Breaking it down, here’s how Hicks has become MLB’s biggest pariah.
The A-Rod Deal – At the time, many fans in Texas saw the ten-year, $252 million free agent signing of Alex Rodriguez as a good deal. After all, Hicks told A-Rod’s agent, Scott Boras at the time, "We're Number 4 in [major league] revenue and heading up." That seemed to signal that Hicks would be able to keep throwing money at the roster to address pitching. He didn’t, and the rest is history. According to numerous sources, the deal infuriated owners, as well as Commissioner Selig. Why? It was seen by most as Boras bamboozling a mid-market owner trying to make a splash, placed pressure on every mid-market to go after big free agents, and in the end, it was understood that it would harm more than help the roster.
The Infamous "Yacht Press Conference" - It's been well over a decade since there was a work stoppage in MLB, but back in 2002 it was on everyone's mind as a new CBA was on the cusp. Owners and the MLBPA were working to get the word out on their position, and Hicks was in the mix. The problem was, he came off as a hypocrite. "For the good of baseball, we need to have cost-containment," Hicks said at the time, referring to player salaries. Unfortunately, the message was lost in the setting. Hicks held court with the media on his yacht off San Diego. It became a talking point for the MLBPA, and the league had to play damage control (h/t to Craig Calcaterra)
Upsetting MLB (loan to make payroll) - As mentioned, Hicks is now over a half-a-billion dollars in debt. As the red ink flowed, Hicks and the Rangers had to come forward with hands extended asking for a loan from MLB to meet payroll, an embarrassing bit of news for the league when it leaked out. How much? $25 million.
Upsetting the MLBPA (missing deferred compensation payment) – The funds were covered, but it still didn’t sit well with the MLBPA. The Rangers failed to pay at least $39.55 million into a deferred compensation fund for the players. According to the Feb. 15 edition of the SportsBusiness Journal, “The fund is a reserve pool designed to cover a team’s future obligations in this area. The amount is calculated by MLB and each team has the responsibility to fill their designated amount.” No players missed their comp payments, but it was none the less, a breach of the collective-bargaining agreement.
Upsetting MLB (labor issues) – See above. While the current CBA doesn’t expire until the end of 2011, the stage is being set for bonafide negotiations. Having to deal with Hicks’ gaffe with the deferred comp payments was embarrassing, and something they surely wished to not see happen given labor issues on the horizon
Upsetting the Creditors –Hicks Sports Group is in debt to 40 creditors. And while a recent Wall Street Journal article had much of * its numbers off, it outlines serious friction between the lenders and HSG. While each creditor may have specific interest in what they get out of the deal, they are unanimous in one thing: they want to make Hicks pay, and pay dearly. “They want to do more than get their money back from Hicks,” said one insider. “They want to embarrass him.”
Upsetting the Glorypark Developers – Hicks was engaged in a commercial and residential real estate project called “Glorypark” outside of 154 acres that is part of the Rangers sale between Hicks and the group led by Pittsburgh sports attorney Chuck Greenberg. That project included 75 acre next to Rangers Ballpark in Arlington. The project was started in 2005, but withered on the vine in 2008 when Hicks’ finances began going south. In February, the developers hired by Hicks for Glorypark filed papers in an attempt to sue Hicks over not covering costs in the uncompleted project. In the court documents filed by Architecture firm RTKL and contractor VCC, the firms are seeking millions of dollars for work orders started by Hicks, but now sit idle.
As but one aspect of the claim, VCC says it is “owed not less than $4,018,960.00 inclusive of the $484,765.11 in design fees that would be remitted to RTKL upon payment to VCC for the parking design work.”
Piling On Debt with Chuck Greenberg’s Group – When the sale of the Rangers is completed, Hicks will continue his association with the Rangers as Chairman Emeritus, holding well under 5 percent ownership in the organization. Chuck Greenberg asked Hicks to take the minor position as a sign of respect. But, after the sales agreement was reached in January, the aforementioned debt has continued to pile up in the Greenberg group’s lap. While there has not been rumblings publicly (and for that matter, sources have not indicated that there is anything being said negatively behind the scenes), the additional debt isn’t something that would make any investor exactly happy.
Beyond Hicks – There’s been more than a few articles outlining how the creditors have mulled moving Hicks Sports Group into bankruptcy. With a April 1 closing date, the rhetoric has continued to escalate on that front. According to sources, there may have been some thawing on that front this past week as some creditors are seeing that not reaching a settlement will work to their disadvantage. Expect more movement this week, and most certainly the 29-31 of March, if the deal isn’t completed by then.
* For the record, the WSJ piece mentions:
In January, Mr. Hicks reached a deal to sell the Rangers for $530 million to a group led by Pittsburgh attorney and sports investor Chuck Greenberg and Rangers team president Nolan Ryan. The deal included a parcel of land next to the team's stadium, known as The Ballpark at Arlington. Now Mr. Hicks and his lenders are fighting over how to divide the sale proceeds, in particular the about $90 million that Mr. Greenberg would pay Mr. Hicks for the land he controls next to the stadium.
The 47-acre area is situated between the Rangers' park and the new 105,000-seat Dallas Cowboys Stadium.
Mr. Hicks' creditors claim the land is worth a fraction of the stated value in the deal, and therefore Mr. Hicks should receive substantially less than $90 million. Bob DuPuy, Major League Baseball's president, who is trying to mediate a settlement, declined comment.
- The 47 acre figure probably comes from earlier reports about the scope of the failed Glorypark development, which has nothing to do with sale of the Rangers. That real estate component is for 154 acres.
- In regards to the $90 million going to Hicks for the real estate. The figure is not even the gross let alone the net value. The real net price is less than $50 million NPV, off a gross of approximately $70 million.
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