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LWIB: Updates on Texas Rangers Bankruptcy, the Rule 4 Draft, Plus Tidbits PDF Print E-mail
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Pete Toms Article Archive
Written by Pete Toms   
Monday, 14 June 2010 07:40

Last Week in Bizball by Pete Toms

This week in “Last Week in BizBall“, the Texas Rangers bankruptcy, the Rule 4 draft plus the weekly tidbits.

RANGERS BANKRUPTCY I

This weekend saw reports (here and here) that the creditors of Hicks Sports Group (owners of the voluntarily bankrupt Texas Rangers) continue to insist in bankruptcy court that MLB approved the sale of the baseball franchise to a group led by Chuck Greenberg and Nolan Ryan over a more lucrative bid from Jim Crane. The creditors hope to persuade the judge presiding over the bankruptcy to reopen bids for the team. (LWIB reported on this same matter two weeks ago.) LWIB sports economist Andrew Zimbalist criticized the creditors for holding up the sale of the franchise and predicted that the bankruptcy court will uphold MLB’s authority to approve any transfer of ownership. From the SportsBusiness Journal:

Eventually, it appears that the key issue — who will buy the team and at what price — will be determined by the judge. The judge first must rule on whether or not the bidding for the team will be reopened. If it is not, then it would appear that the Greenberg bid will hold. If it is reopened and there appears to be a higher bid than the Greenberg group’s offer, then the true present value of the bid and the strength of its capitalization must be assessed. If the bid is superior financially, MLB would then have to vet and approve any new ownership group.

Based upon the bankruptcy court decision in the recent Phoenix Coyotes’ case, which showed full deference to the NHL’s internal rules: the general practice for bankruptcy courts to choose the course of action that is least disruptive to the business: and comments made by Lynn in this case, there is little doubt that MLB’s bylaws will be respected.

The agreed-upon sale price for the team and associated real estate is above the 2.5 to 3 times revenue multiple for MLB teams that has applied in recent franchise sales. It is a solid offer and suggests no favoritism or foul play. Rather, it was the product of an open bidding process that lasted nine months and resulted in three final bids toward the end of 2009. The Rangers selected the best bid.

Given all this, it is both peculiar and unfortunate that the secured creditors are holding up the team’s sale….

RANGERS BANKRUPTCY II

(EDITOR"S NOTE: The hiring of Perella Weinberg was first reported by the SportsBusiness Daily) David McLaughlin reported for Bloomberg that the bankrupt Texas Rangers “…asked a judge for permission to hire Perella Weinberg Partners as an investment banker as it works to complete a sale of the team.” From the same report, “In addition to identifying potential investors, Perella Weinberg would “contact and solicit” investors at the team’s request, according to the court filing. The firm also would help arrange financing for the Rangers while in bankruptcy and help structure and execute a sale of the team.”

SELECT READ MORE TO SEE DETAILS ON THE RULE 4 DRAFT, AND THIS WEEK'S TIDBITS

FIXING THE RULE 4 DRAFT

The Rule 4 draft was very topical LWIB due to the hype surrounding #1 pick Bryce Harper in combination with the enormous fan and media interest in last year’s #1 pick Stephen Strasburg. Strasburg joins fellow pitchers Mike Leake and Drew Storen in the class of 09 draftees playing MLB this season. Last season saw Rick Porcello excel in the Detroit Tigers rotation as a 20 year old. The recent excellence of very young players in MLB is not limited to the pitching ranks. 20 year old OF Jason Heyward has posted an .874 OPS after 255 PAs. Heyward was recently joined in the OF ranks of the NL by another prodigiously talented 20 year old, Mike Stanton. Meanwhile, veterans in their mid 30’s such as Jermaine Dye, Jarrod Washburn and Braden Looper remain unsigned well into June. The trend in MLB front offices is unmistakable, young is good, old is…just old. At the same time as young players have become increasingly important to clubs, the argument that “fixing the draft” is key to promoting/preserving/achieving greater competitive balance in MLB finds more converts. LWIB, Wayne McDonnell, Clinical Associate Professor of Sports Management at New York University detailed the “signability” and “slotting” conundrums inherent in the present structure of the Rule 4 draft.

….in 2004, Long Beach State University’s Jered Weaver was arguably the most heralded pitching prospect in the country at the time. In the eyes of many, he should have been the 1st overall pick in the draft by the San Diego Padres. However, he was represented by Scott Boras. Instead, the Padres drafted and eventually signed a high school shortstop by the name of Matt Bush. Unfortunately, Bush has had an injury plagued career in the minor leagues and has had to confront issues off of the field. Currently, he is now a pitcher and is in the Tampa Bay Rays’ organization at the Class A Advanced Florida State League level. On the other hand, Jered Weaver was selected 12th overall and has accumulated a 56-29 career record with an ERA of 3.62 for the perennial favorites to win the American League West, the Los Angeles Angels of Anaheim.

Mr. McDonnell’s deconstruction of the 09 Rule 4 draft includes these observations.

One of the most disturbing issues that will be intensely scrutinized by many over the summer months is the slotting fees. For example, the Kansas City Royals signed a high school catcher (William Myers) drafted in the 3rd round (91st overall pick) to a $2,000,000 signing bonus. This signing bonus was greater than the signing bonuses given to 15 players who were drafted in the 1st round by 14 ball clubs. The Royals actually gave more money to their 3rd round pick than they did to their 1st round pick (12th overall) Aaron Crow. Crow’s signing bonus was $1,500,000. Their 4th round pick (Christopher Dwyer) received a $1,450,000 signing bonus. This signing bonus was greater than the signing bonuses given to 12 players who were drafted in the 1st round by 10 ball clubs.

 For more of Mr. McDonnell’s arguments in favour of reforming the Rule 4 draft you can watch this SportsMoney video segment from Forbes.

TV BROADCAST OF THE RULE 4 DRAFT

Due to different reasons, MLB’s amateur draft has never generated the same level of interest amongst media and fans as do the drafts in the other “big 4” sports. The past two drafts have been covered by MLB Network who obviously aspire to make it more of an “event”. The Sports Media Watch blog reported on the audience numbers. “….first round coverage of the 2010 MLB Draft drew a 0.11 rating (132,000 HHs) on MLB Network -- up from last year's 0.09 (98,000 HHs), but down from a 0.25 (284,000 HHs) in '08, when the event aired on ESPN2.” Will Lingo, the Editor in Chief of Baseball America, praised MLBN’s coverage of the draft but offered some suggestions for increasing the appeal of the event. Mr. Lingo would like to see more players in the TV studio but admits that NCAA regulations make that difficult (if not impossible). “Most of the problem, unfortunately, comes from NCAA regulations. MLB can't pay for the players or their families to attend the draft without running afoul of eligibility rules. And because pretty much everyone in the draft at least wants the option of attending or returning to college, that's a big roadblock.” Mr. Lingo also recommends bringing fans and executives (General Managers/Scouting Directors) to the studio as well as devoting more broadcast time to “draft experts” (this year Jonathan Mayo and Jim Callis).

THE WEEKLY TIDBITS

  • LWIB saw indications that the political compromise necessary to initiate plans for a new Tampa Bay Rays stadium could be coalescing. Stephen Nohlgren reported for the St. Petersburg Times:

Construction of a new baseball stadium should begin by 2017, the St. Petersburg Chamber of Commerce advised Thursday, but only if the Tampa Bay Rays agree to stay within city limits.

Furthermore, if the team wants to leave downtown for a site closer to Tampa, the Rays should eventually bring spring training back from Charlotte County.

That's the gist of a letter the chamber sent Thursday to St. Petersburg Mayor Bill Foster. It was designed to "kick start'' negotiations between the city and Rays, said chamber president John Long.

And while the chamber still rejects a move of the Rays to Tampa -- a more accessible location for most of the population in the region -- they've now set a price for the team pursuing a ballpark closer to Tampa: a move of spring training back to downtown St. Pete. We're not sure whether than means a renovated Al Lang Field or what, but let's face it -- important forces in St. Pete are now contemplating a Rays' move away from Tropicana Field. What's now being negotiated: the terms.

  • Through the end of May, attendance in MiLB was up almost 700,000 over last season. See MiLB.com for details.

  • Mike Ozanian of Forbes noted that Orioles owner Peter Angelos is positioned to profit handsomely from the popularity of Nationals pitching phenom Stepen Strasburg. “You see, in order to allow the Montreal Expos to relocate to D.C., Angelos struck a deal with MLB that would eventually give him a controlling share of the MASN regional sports network. MASN televises both Nationals and Orioles games, and its ratings and advertising revenue will surge if Strasburg becomes a flame throwing star. So will the equity value of MASN. And you were wondering how an owner can do such a lousy job running a team yet make a mint from owning it.”

Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

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