Hicks Calls Default A Tactic In 'Business Dispute'

Apr 4 2009 | 6:32pm ET

Hicks Sports Group, which owns baseball’s Texas Rangers and hockey’s Dallas Stars, has confirmed that it has defaulted on more than $500 million in loans as part of what it calls a “business dispute” with some 40 lenders.

The Dallas-based company said in a statement that it “decided to withhold last week’s interest payment” in an effort to renegotiate some loan terms and covenants.

“We are simply asking the lenders to be reasonable,” Tom Hicks, the private equity veteran who owns the holding company, said. “And they need to understand that there important assets must be managed with a long-term perspective and a commitment to winning.”

HSG’s default on the debt was first reported by FINalternatives on Friday. The company confirmed that the negotiations with the bank syndicate involved some $515 million in debt. That debt is partially secured by HSG’s 95% stakes in the Rangers and Stars, but not by Hicks’ 50% stake in the English soccer team Liverpool Football Club. HSG emphasized that the default would have “absolutely no impact on operations of either team or the fan experience at its venues.”

“Like so many other companies and institutions, HSG has been impacted by a global credit crisis which no one could have anticipated,” Hicks said. “The company is not asking for additional money; it is only asking for full access to the interest reserve account and revolving credit line as well as some amendments in the debt covenants.”

According to Bloomberg data, the loans were arranged by JPMorgan Chase and Barclays, with maturities next year and in 2011. They include a $350 million term loan with an interest rate of 2.5 percentage point over the London interbank offered rate, $100 million second-lien loan with a rate of 5.5 points over Libor, and a $75 million revolving credit facility with a rate of 2 points over Libor.

Hicks, the single-largest lender to his own sports group, did acknowledge that he is seeking buyers for a minority stake in both of the affected teams.

“We continue to interview prospective partners for the team, and we are optimistic because these are two strong long-term investments for the right people.”

In an interview with the Associated Press, Hicks acknowledged that the proposed stake sales were part of an effort to pay off the defaulted loans.

“I’m bringing in minority partners, so I can pay off the loans,” he said. “I wouldn’t normally do that. In this particular environment, that’s what we should do.”

Hicks also told the AP that he expects to be able to come to an agreement with the banks.

“We need 51% approval, which we anticipate,” he said. But he added, “It is hard to get two banks to agree to anything, much less 40 on a timely basis.”

“Under normal market conditions, it would be a nonevent,” he said.

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