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Texas Rangers owe deferred-compensation fund

The Texas Rangers have been in violation of baseball’s collective-bargaining agreement since at least last season for failing to pay $39.55 million into a deferred compensation fund, according to a letter sent on Oct. 22, 2009, by MLB executive vice president Rob Manfred to the bidders for the ballclub.

The MLBPA is aware of the situation, Manfred wrote in the letter, and the union’s executive director, Michael Weiner confirmed, in response to SportsBusiness Journal questions.

“I will confirm that the union and the commissioner’s office have had discussions about the Rangers’ compliance with the deferred compensation funding requirement in the [CBA],” Weiner said, in a brief telephone conversation. “I can also confirm the Rangers have made all deferred compensation payments owed to players to date. I am satisfied thus far with the communications we have received from the commissioner’s office.”

The Manfred letter said that the buyer would be responsible for filling the fund upon completion of the team sale, meaning the liability was factored into the bidding prices. Rangers owner Tom Hicks’ holding company, which owns the club and the Dallas Stars, last spring defaulted on $525 million of debt. Last month the company chose an offer for the Rangers from a group led by Pittsburgh lawyer Chuck Greenberg and Nolan Ryan, the former pitcher who is now team president.

But the creditors had not signed off on the deal as of late last week, and exchanged a counterproposal with Greenberg seeking a greatly restructured deal, sources said. If the creditors reject the deal, they could throw the teams into bankruptcy this summer, or demand to reopen the bidding.

Hicks, who declined to comment, has also put the Stars up for sale.

It is unclear whether the MLBPA will continue to allow the deferred compensation violation to fester in the event that the creditors do not approve the Rangers deal. The fund is a reserve pool designed to cover a team’s future obligations in this area. The amount is calculated by MLB and each team has the responsibility to fill their designated amount.

Last summer, MLB forwarded $25 million to the Rangers to meet payroll, so some of their deferred compensation obligations could have been met in this regard.

Some Hicks creditors are unhappy because a chunk of money is being taken off the top of the Greenberg deal before they see a dime. The deferred compensation and the MLB payroll loan add up to $65 million alone.

The purchase price is $570 million. This includes the value of land around the ballpark, which the lenders do not control, as well as fees for Hicks’ investment banks and money the Rangers borrowed from MLB’s leaguewide credit facility. Sources say the Greenberg deal would deliver about $250 million to the lenders, and that their counterproposal calls for a “significant” increase in that amount.

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