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SBJ/20100308/This Week's News
Sale of Rangers hits snag as Opening Day approaches
Published March 8, 2010
The sale of the Texas Rangers stalled last week, sources said, after MLB informed the team’s creditors that there would be delays in responding to the lenders’ concerns about the deal.
The developments serve as a challenge to would-be buyer Chuck Greenberg’s stated goal of having the transaction closed by Opening Day, if it can close at all, the sources said.
The Rangers are owned by Tom Hicks, whose Hicks Sports Group also owns the Dallas Stars. HSG last March defaulted on $525 million of debt. Under pressure from MLB, Hicks agreed to sell the Rangers and chose Greenberg as the buyer in mid-December, reaching a formal agreement a little more than a month later.
The creditors are unhappy with the structure of the proposed $570 million deal because only $230 million would flow to the lenders, according to terms of the initial deal submitted to them in late January. They are looking for at least $300 million.
MLB, acting as intermediary between the creditors and HSG, was scheduled to respond by Feb. 26 to their demand for more cash. On March 1, MLB informed the lenders that there were delays but did not offer details for why the delays were happening, the sources said.
Of the delays, one financial source said, “I don’t even think a deal gets done at $300 million from the banks’ perspective. It feels like they are spinning their wheels.” Another financial source was not as pessimistic but conceded that the clock was approaching midnight for getting a deal done by Opening Day.
Hicks, through a spokesman, declined to comment. Greenberg spokesman Kevin Sullivan said his client remains confident of the Opening Day target.
“As with any deal of this complexity, there are a myriad of matters to be addressed, but nothing has happened, or not happened, to delay the April timeline,” Sullivan said.
Greenberg is moving on another front to get the deal done. He has arranged a loan commitment from Bank of America for $140 million to help fund the deal in the event the creditors agree to it, sources said. He plans to tap only $80 million of the funding immediately, one source said, leaving the remainder in reserve.
Bank of America and Greenberg, through Sullivan, declined to comment.
MLB’s chief financial officer, Jonathan Mariner, who along with MLB President and Chief Operating Officer Bob DuPuy is leading the talks at the league level, also declined to comment.
The reason for the disparity between the $570 million purchase price and the money flowing to the banks is monetary offsets. For example, the Rangers owe $57 million to the MLB credit facility and $17 million to the league to pay back payroll cash the team borrowed. The parking lot around the ballpark is appraised at $75 million, and that money goes directly to Hicks. There also are tens of millions of dollars in investment banking fees.
The lead creditors are Galatioto Sports Partners, Monarch Alternative Capital, Metropolitan Life, Bain Capital affiliate Sankaty Advisors and JPMorgan Chase. GSP, Monarch and JPMorgan declined to comment. Sankaty and Met Life did not return calls.