I seriously doubt Bud Selig listens to Bob Dylan, but if he did, I suggest he spins, “The Times They Are A Changin’” when his mind rolls over to what can only currently be called a stalemate in the protracted process involved in the sale of the Texas Rangers. Now, over a year since current owner Tom Hicks fell into default to the tune of $525 million and put the club up for sale, the process has had creditors, MLB, and owners-in-waiting Chuck Greenberg and Nolan Ryan playing a sports business game of chicken.
As I said at the outset, the times have changed from the days before the economy went colder than a spring baseball game. There was a point in the past when the banks that MLB owners dealt with over debt issue were almost exclusively key partners with the league. Lenders such as JPMorgan Chase and Bank of America might be willing to play ball with baseball’s owners given the cozy relationships, and the fact that even if there was a slight hiccup, the feeling was that with money flowing freely, nothing staggering on the scale that HSG is currently i, would befall those that might have outstanding debt with these institutions (for more detail on this, see the SportsBusiness Journal article Creditors push back)
Now, there’s new players in the game, who would probably rather spit on Babe Ruth’s grave than settle with Hicks, or for that matter, Major League Baseball.
Such is the case with the lead debt holder of the Rangers, a “predatory” hedge fund called Monarch Alternative Capital who scooped up $100 million of Hicks Sports Group debt for pennies on the dollar. As a hedge fund, Monarch’s M.O. is to make a profit off of distressed debt. A hedge fund isn’t going to be a cornerstone partner with MLB, or Greenberg/Ryan, so when Hicks is offering up approx. $270 million post-sale to the creditors, and the creditors (read: largely Monarch) aren’t going to budge on signing off on the sale unless they get $300 million, well... Welcome to Jungle.
For those that have been following this saga, prospective owner Chuck Greenberg has felt that the deal would be reached soon. Recently, he said that while he wasn’t make a solid prediction, if the parties continued to constructively work to an agreement, this week would be the time for the deal to get signed off on. Since then, Greenberg has wisely gone silent citing the “delicacy” of the deal.
There’s been talk that the creditors could push the Rangers into bankruptcy court. There’s talk that they want to see the bidding opened back up to see Houston businessman Jim Crane back into the mix.
At this point, a small faction is holding the deal hostage over $30 million. The longer the deal languishes, the more in legal fees rack up. MLB takes over the Rangers, and they have the pockets to counter the banks, and precedent in the prior Phoenix Coyotes deal to fall back on.
For those not familiar with the Coyotes situation, owner Jerry Moyes threw the club into bankruptcy, and then tried to do an end-around on the NHL by offering to sell to Research in Motion (Blackberry) co-CEO Jim Balsilliie who had designs of relocating the club to a suburb of Toronto, Canada. The short story is, the NHL said that leagues control who owns clubs, and even though the offer from Balsillie was far in excess of what the NHL was offering to keep the club in Phoenix, a bankruptcy judge agreed with the NHL.
And, Tom Hicks, unable to see that at this stage he would be better off seen than heard in this saga (after all, he created the mess, see How Tom Hicks Became the Most Hated Man in Baseball), jumped into the fray Weds. night:
"I think the lenders feel that [the Greenberg-Ryan] group may not be the highest option," Hicks said. "It's something that has to be worked out between MLB, the lenders and the Greenberg group. When we agreed to this sale in January, we said it was a complicated deal and it's only getting more complicated. At the end of the day, the lenders have the final say."
MLB released a statement shortly after that shows they’ve just about had enough of Hicks, Monarch… the whole damn mess; time to play hardball:
“As part of the Texas Rangers sale process, Tom Hicks selected the Chuck Greenberg/Nolan Ryan group as the chosen bidder on December 15, 2009 and entered into an exclusive agreement with that group. Major League Baseball is currently in control of the sale process and will use all efforts to achieve a closing with the chosen bidder. Any deviation from or interference with the agreed upon sale process by Mr. Hicks or any other party, or any actions in violation of MLB rules or directives will be dealt with appropriately by the Commissioner.”
So much for Crane. Tom, time to go sit in the corner.
And Bud, maybe you need to drop the Bob Dylan and move on to listening to something more aggressive. Maybe something more Texan... Say, Pantera.
The league has been at the head of the table, but technically isn’t controlling the club; time to consider taking it over. The league has more or less protected HSG from the creditors only allowing for minimal embarrassment. After Hicks made his statement to the press, the league appears ready to say enough is enough, hence the message being sent from the press release.
Oh, and there’s lender liability issues, as well. For those that may not know, there’s a $70 million lien on the Rangers. The offer on the table is approx. $270 million, or $200 million over the lien value. So, just how is that going to sit with the bankruptcy courts?
So, creditors, try taking the Rangers into bankruptcy. To get this deal done, it’s time for the league to flex some muscle, otherwise, there will be continued haggling, possibly until the All-Star break. After the league’s statement, it seems unlikely the Greenberg’s educated target date of this week for closing the sale isn’t going to come, unless the creditors see the statement from the league as a clear sign that they mean serious business about the Greenberg/Ryan group’s offer and that the alternative is bleeding away legal costs on the $30 million gap. Maybe it’s time to take the money on the table and worry about the next matter on the table for HSG… the sale of the NHL Dallas Stars.
NOTE: I will be on WBAP Newstalk 820AM and 96.7FM in the Dallas/Ft. Worth market Thursday at 7:45AM CT talking the sale of the Rangers.
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 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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