Well, this is a fine mess you’ve gotten baseball into, Tom Hicks. The owner of the Texas Rangers (as well as the NHL Dallas Stars and half of Liverpool FC of the English Premier League), overleveraged himself to the tune of $525 million, and now, Major League Baseball is being shoved around for it.
Looking to try and pay back part of this incredible debt, Hicks put the Rangers up for sale, entered an exclusive agreement with a group of investors that is headed by Pittsburgh sports attorney Chuck Greenberg, and now creditors are balking at the deal.
In the bottom of the ninth, here’s the boxscore:
- Greenberg group’s reported sale offering: $570 million (includes the Rangers, plus 154 acres surrounding Rangers Ballpark in Arlington)
- How much Hicks Sports Group is offering creditors after the sale: Approx. $270 million
- How much lead creditor is willing to accept: $300 million
- Why the deal hasn’t gone through: That $30 million gap between what HSG is offering and what the creditor(s) will accept.
To be clear, there are 40 creditors that want a piece of Tom Hicks (at this point, it might be moving from figuratively to literally), but there is a class hierarchy in place with them – primary and secondary lenders looking to get their piece of the sale, with a predatory hedge fund holding the most debt and looking to make a sizeable profit off the deal.
Beginning tomorrow, MLB’s 30 owners will converge in New York for their quarterly meetings, and the sale of the Rangers will be front and center. Bud Selig, one known for building consensus, is going to work the room to determine whether the league should take control of the club, and in doing so, sell the club to the Greenberg group without creditor approval.
Selig, it’s time to make it so.
This will be a messing bit of doing and has ramifications for the other owners. In ramming the deal through, MLB runs the risk of alienating banks that would loan money to would-be buyers of clubs that come up for sale in the future. It’s possible that some may say, “What’s to keep you from burning us like you did with the Rangers?” It’s a matter that Selig and the owners will have to weigh, but here’s the deal: they need to ignore that fear and address what’s right in front of them.
While the creditors are due every penny back that is owed them, their beef should be with Tom Hicks and Hicks Sports Group, not Major League Baseball. What they’re doing now is ostensibly holding the league hostage in the hopes that prior bidders such as Houston businessman, Jim Crane, will offer up more for the Rangers.
Bud needs to tell them to stick it.
Going back to that boxscore, the Greenberg group is offering up $570 million while Hicks is offering up $270 million to the creditors, a difference of more than double what the Greenberg is offering. The reason is there is a lien on the Rangers, while the land in the sale, does not.
So, the beef needs to be with HSG, not with the Rangers. Have Hicks hold a bake sale, whatever, but holding the Rangers deal up when the focus should be on the man that got this whole matter into a mess in the first place should be the focus.
So Bud, make your mark. Use your “best interest of baseball” powers, and let the banks go after the vulture; the hedge fund.
And while you’re at it tomorrow, give the owners this message:
“We have rules concerning how much debt you can carry. Some of you are getting around this by using holding companies to access loans outside of your clubs, and putting yourself in danger of being overleveraged. Stop it. Homeowners across the country have found out the price for overleveraging themselves, and now one of our own is learning that same lesson. We’ve put up with that for as long as we can, but enough is enough. Tom, we can’t keep the wolves at bay any longer. You’re on your own. The rest of you 29... learn the lesson.
“As for the hedge funds, the message is clear: blood is thicker than water. You’re done messing with the family. We’ll see you in court. The fans will back us on this one – they understand that in making this move the Rangers will be able to get out from under the stranglehold, and unless the courts reverse their direction, we’ll prevail. In the meantime, that $30 million gap you stuck to will get chewed up by interest and legal fees. You’re surly getting some good media coverage out of all of this, which is probably a large part of your decision. Take it up with HSG. Now, what’s next on the agenda?”
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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