The stalemate between creditors and Hicks Sports Group over the sale of the Texas Rangers will see a dramatic turn this week, including the possibility that Major League Baseball could take control of the club, according to a report in this morning’s SportsBusiness Journal.
Were the league to seize the team under its “best interests of baseball”rule, MLB could sell the club to the group led by Chuck Greenberg and Nolan Ryan without, the league believes, the creditors blocking the deal, these sources said. But were MLB to choose that course — and late last week, the situation was still fluid — financial sources predicted a furious legal response from the creditors that could involve an involuntary bankruptcy petition on behalf of the baseball team.
In this case, if MLB settled on seizure, it would revoke HSG’s membership in MLB, theoretically invalidating the creditors’ rights because their contracts are with HSG. MLB could then sell the team and distribute the proceeds to the creditors and Hicks.
The creditors, however, would almost surely challenge MLB’s legal right to do so, setting up another test case of the rights of sports leagues, similar to the NHL’s successful battle in the Phoenix bankruptcy court. In that case, the NHL blocked the sale of the team because the buyer wanted to move the franchise to Canada without the league’s consent.
Attempts by The Biz of Baseball to reach Chuck Greenberg for comment have gone unanswered.
MLB took over control of the sales process in January as HSG and the creditors became stuck on a $30 million gap between the $270 million post-sale figure HSG was willing to offer and the creditors demanding at least $300 million. Hicks Sports Group has fallen $525 million in debt. The lead creditor, Monarch Alternative Capital – a predatory hedge fund that purchased $100 million of HSG’s depressed debt in order to make a profit – has been the sticking point in getting the deal completed. According to the SBJ report, Monarch’s “fund manager Andrew Herenstein, has conducted one-on-one talks with MLB President Bob DuPuy, underscoring its central role.”
The last time MLB took control of a club under the “best interests of the game” clause was with the sale and relocation of the Montreal Expos. More recently, the NHL took control of the Phoenix Coyotes when they fell into bankruptcy.
If the measures by MLB or the creditors were to be enacted, legal fees would expand greatly in the process of completing the sale to the satisfaction of one side or the other, thus underscoring the $30 million gap which would be slowly chewed up by legal fees and continuing interest on the debt.
FOR MORE ON THE SALE OF THE TEXAS RANGERS SEE THE MLB CLUB SALES SECTION OF THE BIZ OF BASEBALL
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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