SBD/Issue 177/Franchises

Lenders Argue In Court That Rangers Sale Price Is Too Cheap

Lenders Argue Rangers Are
Worth More Than $575M

MLB yesterday agreed to "terms on a $6 million credit line," allowing the Rangers to "keep operating after lenders raised objections to the team's proposed sale in federal bankruptcy court," according to Barry Shlachter of the FT. WORTH STAR-TELEGRAM. At the opening bankruptcy hearing yesterday, the lenders "attacked the 'pre-packaged, voluntary' Chapter 11 plan and asserted the team was worth more" than the proposed $575M offered by prospective owners Chuck Greenberg and Nolan Ryan. The attorneys alleged that the Greenberg-Ryan group "wasn't top bidder among three groups despite the blessing" of MLB Commissioner Bud Selig. If Selig backed a lower bid that "he considered better for the team's stability as well" as MLB, the lenders yesterday "made it clear that they want to recoup as much of their investment as possible by slowing down the bankruptcy process and possibly re-opening the bidding." Attorney Dennis Dunne, representing the Rangers' top four lenders, claimed that Greenberg "even lowered his bid at one point -- an assertion that Greenberg denied." Rangers attorney Martin Sosland told the court that "many baseball teams bleed red ink and the Arlington franchise was no exception," saying that team Owner Tom Hicks had lost almost $100M. Judge Michael Lynn yesterday "approved motions to maintain operations as well as monthly payments to two former players, Mark McLemore and Mickey Tettleton." Lynn said that both sides will "present arguments on the Chapter 11 reorganization plan on June 15 and he set July 9 as a possible date when the Rangers could emerge from bankruptcy" (FT. WORTH STAR-TELEGRAM, 5/26).

ON THE WAY OUT: In Ft. Worth, Mitchell Schnurman reports after "drowning his sports teams in debt and taking the Texas Rangers into bankruptcy, Hicks still expects to walk away" with $75M from selling the team. Through a separate partnership detailed this week in court filings, Hicks stands to earn $5M in cash; a $53M note that pays 4.1% annual interest; a 1% stake in the Rangers; and the "elimination of $12.8 million in debt from 1998, which will be assumed by the new buyers." Hicks also will be granted the honorary title of Chair Emeritus with the Rangers for three years, "and if the side deal is challenged, the Rangers pledge to cover the legal costs" (FT. WORTH STAR-TELEGRAM, 5/26). Hicks yesterday admitted he will lose "a couple hundred million" on the Rangers and Stars. However, he said that he "expects to make it up when he sells" his 50% stake in EPL club Liverpool, and stressed that he "will be glad to exit the professional sports business." Hicks: "It's never been my primary business. And it's a business I no longer want to pay the price to be in." He noted that "one thing he won't miss is the publicity that comes with owning pro sports teams." Hicks: "It's a brutal invasion of privacy." He said his effort to sell the Stars is "quietly" progressing, and noted he could be a small partner with an incoming ownership group. Hicks also indicated that he "expects to sell" Liverpool within 12-18 months, and believes that the club could attract a sale price between $860M-$1.15B (DALLAS MORNING NEWS, 5/26).

A LOOK INSIDE THE CLUBHOUSE: In Dallas, Case & Jacobson note the Rangers' bankruptcy filing includes "some of the details of the Rangers' business operations," as well as a "detailed peek at the effort to sell the team." The filing reveals that "at least 15 prospective buyers and investors executed confidentiality agreements to learn more about the Rangers." The Greenberg-Ryan group also includes "two leading" North Texas businessmen: former Energy Transfer Partners co-CEO Ray Davis and XTO Energy Chair Bob Simpson. Meanwhile, the filing also shows that "each of the Texas Rangers' 320 full-time employees gets 120 game ticket vouchers a season." The Rangers pay season employees "a total of about $62,500 per home game in hourly wages, not including overtime," and 22,000 Lexus vehicles "park free during the season thanks to a sponsorship between the auto brand and the team" (DALLAS MORNING NEWS, 5/26).

ON A THIN LINE: ESPN.com's Buster Olney wrote if MLB approves a deal for the Rangers to acquire Astros P Roy Oswalt before the sale goes through, "you can bet that MLB will have some really, really, really angry folks in its ranks -- guys in suits holding pitchforks." Other teams have been "propping up the Rangers financially over the past year, and the feeling in some other executive suites is that Texas should not be allowed to take on payroll after creating its own financial trouble through decisions" like the Alex Rodriguez signing. Execs with other teams "don't believe a franchise that has been run this poorly should be able to spend other people's money until it gets its financial house in order" (ESPN.com, 5/25).

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