Faced with the threat of an involuntary bankruptcy petition by its hedge fund creditors, the Texas Rangers baseball team has preempted it—by filing for bankruptcy protection itself.
The Rangers upped the ante yesterday in their battle with the creditors, led by hedge fund Monarch Alternative Capital, seeking to force a sale to a Pittsburgh lawyer and Hall of Famer Nolan Ryan that is favored by Major League Baseball. Monarch and its fellow creditors, who are owed more than $500 million by current Rangers owner Hicks Sports Group, earlier this month balked at the $575 million deal, despite the intervention of baseball Commissioner Bud Selig.
HSG, which is led by private equity veteran Tom Hicks, defaulted on $525 million in loans last year, as first reported by FINalternatives. Both Hicks and the Rangers proposed new owners say that the creditors will be made whole. But Monarch and its confreres believes that Hicks and MLB have passed over two better deals for the team in order to keep it in Ryan’s hands.
The creditors also object to what they see as a sweetheart aspect of the deal for Hicks, who would receive $75 million of the total for 150 acres in parking lots adjacent to Rangers Ballpark in Arlington, Texas. Creditors would receive only $230 million from deal, rather than the $320 million they sought. HSG plans to repay them the rest through its sale of hockey’s Dallas Stars. Hicks is also planning to sell his 50% stake in England’s Liverpool Football Club, but that stake is not owned by HSG.
Talks between the two sides broke down when they were only about $20 million apart, with HSG offering $280 million and the creditors demanding $300 million.
It is unclear what Monarch and the creditors plan to do, or whether they will launch an all-out war to block the sale to the Ryan group. But Chuck Greenberg, the lawyer putting up most of the money for the team, believes that sale will go through.
“Odds are, the creditors won’t handle this well,” he said at a press conference yesterday. “They may very well make a lot of noise. But the bottom line is the Rangers will satisfy all their obligations.”