Rangers Seek Bankruptcy Protection to Spur Sale


May 24, 2010

ARLINGTON, Texas — The Texas Rangers filed for Chapter 11 bankruptcy protection Monday in hopes of spurring completion of the $575 million sale of the team by midsummer to a group of investors that includes Hall of Fame pitcher Nolan Ryan.

Under the plan, the Rangers would fully pay the $75 million of the club's debt tied up in Tom Hicks' financially strapped ownership group. That would remove the team from the additional claims by creditors against Hicks Sports Group that have stalled the sale to the group led by Ryan and Pittsburgh attorney Chuck Greenberg.

"I did not want to put the baseball future of the Texas Rangers in jeopardy or uncertainty for an extended period of time," Hicks said. "This action is all about creating an end to the impasse in allowing this team sale to go forward."

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 away from the team.

The next five on the list 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).

A court hearing is scheduled Tuesday, though the process could take several more weeks to complete.

"I know it will be faster than the other alternative would have been," Hicks said.

Greenberg initially hoped to have control of the Rangers by Opening Day, but concerns from Hicks' lenders have slowed the deal and the Hicks Sports Group defaulted on $525 million in loans last year. Greenberg said Hicks' agreement to sell 153 acres around the stadium facilitated the agreement; the land is part of the $575 million sale price.

Hicks, who bought the team in 1998 from a group that included former president George W. Bush, said it became apparent about a month ago that the Chapter 11 bankruptcy would be the only way to break the stalemate created by creditors.

The filing is not the first in baseball.

The Chicago Cubs briefly filed for Chapter 11 protection last year in a step that allowed its new owners to avoid potential claims from Tribune Co. creditors. The Baltimore Orioles were sold in a bankruptcy auction in 1993 after owner Eli Jacobs filed for Chapter 11; the same step happened to the Seattle Pilots after the 1969 season, before the new owners moved the team to Milwaukee and changed its name to the Brewers.

While there is the possibility that creditors could go to bankruptcy court to put in their own bid for the team, Greenberg said his group was "very confident" that will not happen.

"This was an open and fair process that took place over many months, we won the bidding fair and square," Greenberg said. "We came to a final agreement in a very fair and open fashion. … We have no reason to expect that the court will disregard the process and all of the events that have taken place thus far, particularly since every creditor of the Texas Rangers will be paid 100 cents on the dollar."

Rodriguez played for Texas from 2001-03 after signing what was then a record $252 million, 10-year contract. He was traded to the New York Yankees before the 2004 season, and that contract has since been replaced by an even bigger deal from the Yankees.

Young, the longest-tenured Ranger in his 10th season, is the only current player among creditors listed in the filing. Neither Tettleton and McLemore have played for the club since the 1990s. Others among the top 30 listed in the filing are Tickets.com, Rawlings Sporting Goods Co., Clear Channel Outdoor and Stats Inc.

The Greenberg-Ryan group includes about a dozen mostly local investors. An agreement in principle to buy the team from Hicks was announced Jan. 23, more than a month after the two sides entered into exclusive negotiations.

Once the bankruptcy issue is settled and the sale proceeds, at least 75 percent of baseball's owners will then have to approve the transfer of ownership from Hicks. In a letter included in the bankruptcy filing, commissioner Bud Selig said he intends to recommend the approval of the sale to the baseball owners.

Major League Baseball has agreed to give the Rangers a new credit facility while it waits for the deal to be completed, the team said.

Texas is in first place in the American League West, and the team was at pains to say the sale and the bankruptcy filing would not hinder efforts to remain a contender.

"Our goal is to move forward with our plan to create a long-term record of success and championships," Ryan said.

This is the 50th season of the franchise that began as the Washington Senators in 1961, and moved to Texas in 1972. The Rangers have never won a playoff series, going 1-9 in the postseason — all against the Yankees — after winning their only three AL West titles in a four-year span at the end of the 1990s.

The Rangers finished second in the division last year with only their second winning record in 10 seasons.

Rodney Fort, a sports economics professor at the University of Michigan and vice president of the International Association of Sports Economists, dismissed the notion that escalating player salaries played a role in forcing the bankruptcy filing.

"That's the silliest of all economic logic — to blame your employees because you can't manage the asset in such a way that you can make a go of it," he said. "That's not to say that the high cost of baseball players doesn't lead owners annually to re-assess, 'How good a team should I put on the field, so that I can make some money in the process?'

"It's unlikely that even if it were true that high salaries were causing problems for the Rangers, that the answer is declare bankruptcy and sell the team. The answer is look more like Kansas City than you do the Yankees."

Andrew Zimbalist, a sports economist at Smith College, agreed.

"The Rangers, by declaring bankruptcy here, are attempting to get the judge to agree to a prepackaged plan, basically that would force the creditors to give up their liens on the Rangers and allow the sale to go through," he said. "The Rangers are doing fine as a team. They might have some cash flow issues, but those are not terribly pressing or relevant. They're in first place. They're projected to be profitable."

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