Creditors Object to Texas Rangers Bankruptcy

Baseball team Texas Rangers’ legal shenanigans have come under heavy criticism from a group of its creditors led by a New York hedge fund. The management of the team had voluntarily pushed the team into bankruptcy on Monday in order to secure a takeover of the team by a group of investors led by Chuck Greenberg and its team president, Nolan Ryan for about $575 million.

When the creditors objected, federal bankruptcy judge D. Michael Lynn delayed a ruling until Wednesday to allow the Rangers’ proposed plan to pay $75 million of its debt currently tied up in owner Tom Hicks’ financially strapped ownership group, Hick’s Sports Group (HSG). If the payment had gone ahead, it would have removed the team from the additional claims by creditors against the Sports Group that have held up the stalled $575 million sale of the team.

The team’s decision to file for bankruptcy was done without the consent of some of the creditors. This could result in more delays in certain court proceedings. However, the bankruptcy judge did rule Tuesday that the management of the team could pay their players’ and employees’ salaries and conduct other normal forms of business so that the team won’t ‘go hungry’.

Lawyers for the top four creditors, including the hedge fund Monarch Alternative Capital noted that the team’s owner Tom Hicks had rejected previous higher bids to buy the team in favor of the lower bid by Greenberg and Nolan. Dennis Dunne, a lawyer representing Monarch, also said the team is responsible for the full debt, estimated at $550 million. Last year, the Hicks Sports Group defaulted on $525 million in loans which gave rise to grave concerns among its creditors.

The creditors have accused the team’s management of hastily filing for Chapter 11 bankruptcy without conducting a fair and transparent market search on the team.

Details of what transpired were revealed at the bankruptcy process. There were at least 15 prospective buyers who sought more information with a view of purchasing the team. Starting from July 2, information packets were distributed to at least 10 parties who had obtained the green light from Major League Baseball to be part of the sales process. By the August 18 deadline, Texas Rangers’ owners had received 6 non-binding bids and Hicks approved 3 of them to proceed on to the second phase of the process. November 20 was when the 3 prospective buyers submitted their final binding bids. Over the 2 weeks that followed, 2 out of the 3 prospective buyers upped their bids. However, the bankruptcy papers did not identify the unsuccessful bidders.

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