ARLINGTON, Texas —The saga concerning the Texas Rangers’ sale entered a new chapter Monday: Chapter 11.
The Rangers, Tom Hicks, Major League Baseball and the potential purchasing group headed by Chuck Greenberg and Nolan Ryan all hope it’s the final installment in an epic that has been 15 months in the making.
The club, under the direction of owner Tom Hicks, intends to enter a voluntary, “prepackaged,” court-supervised process under Chapter 11 of the U.S. Bankruptcy Code pursuant to the sale plan previously negotiated and agreed to by the current Rangers owners and the Greenberg-Ryan group.
That sales agreement, worth approximately $575 million, was agreed to by Hicks Sports Group and Greenberg-Ryan’s Ryan Baseball Express on Jan. 23. It was contingent, however, upon the approval of creditors, who hold $525 million in notes on a loan which HSG defaulted on more than a year ago. The creditors, led by hedge fund Monarch Alternative Capital, have refused to approve the deal because they were unhappy with the amount of proceeds it would receive from the deal.
The creditors sought approximately $300 million in repayment from the Rangers deal, with the rest to come when HSG sells off other assets, such as the Dallas Stars. The current Rangers sales agreement calls for the creditors to receive approximately $280 million in proceeds.
The sides have been at an impasse for several months and not even the intervention of Major League Baseball Commissioner Bud Selig produced any tangible progress towards a deal.
Complicating matters was the structure of the HSG loan. Only $75 million of the loan was earmarked for the Rangers. Under the sales agreement, the sides intend to pay off that and all other outstanding debt with the remaining proceeds to be divided up among HSG’s creditors. While the club’s debt will be paid off, the HSG creditors would still receive about $280 million if federal bankruptcy judge Michael D. Lynn of Fort Worth approves the Rangers’ plan.
“We ended up reaching a complete impasse,” Hicks said at a Monday afternoon press conference while flanked by Greenberg and Ryan. “This was the only way we felt like we could move things forward in a timely fashion. This action is about ending that impasse and getting the club to the group we reached an agreement with and the group I feel is the right group.”
“This plan to complete the sale of the Texas Rangers serves the best interests of the team, its fans, MLB and all other parties involved,” said Baseball Commissioner Bud Selig in a statement. “This agreement assures an orderly process to expeditiously transfer Rangers ownership to the Greenberg-Ryan group, and it protects the franchise’s baseball operations. Rangers fans can have confidence that their team has the resources it needs to compete. “
A 21-page filing in U.S. Bankruptcy Court in Fort Worth included the top 30 unsecured creditors, a list headed by Alex Rodriguez, who is owed $24.9 million in deferred compensation six years after he was traded. The next five are also current or former players: Kevin Millwood ($12.9 million), Michael Young ($3.9 million), Vicente Padilla ($1.7 million), Mickey Tettleton ($1.4 million) and Mark McLemore ($970,000).
The idea, hatched by Hicks’ attorneys about a month ago, is all about timing. The Rangers, who are in first place in the AL West, have four picks among the top 50 in the upcoming amateur draft (June 7-9) and would like to add a veteran player or two before the July 31 trade deadline. To get the best talent in each requires payroll flexibility. It was something the Rangers did not have for the last year since. MLB extended the Rangers a loan of $18 million last June to help the club meet its operating expense. Until that money was repaid through the sale proceeds MLB took an oversight role on the club’s costs. That meant limiting both the draft bonus budget and the overall payroll.
The Rangers lost out on first-round pick Matt Puke last year because they were unable to meet his contractual demands. Though the team was active during the offseason when it came to adding players, it did so by jettisoning enough other payroll to balance out costs. In the meantime, MLB has agreed to loan the Rangers another $11.5 million to help cover operating costs until the deal is done. That money will be repaid to MLB as soon as ownership is transferred.
“I did not want to put the baseball future of the Rangers in jeopardy,” Hicks said.