In effort to complete its $575 million sale of the team to a group of investors, baseball’s Texas Rangers have recently filed for Chapter 11 bankruptcy protection. With this plan, the team is required to pay $75 million of its debt, which would exclude the Rangers from any additional claims by creditors, which have slowed the process of selling the team.
The filing includes the top 30 unsecured creditors, including all-star third baseman, Alex Rodriguez’ $24.9 million in deferred compensation, six years after he was traded from the Rangers. Also on the list are players, past and present, individually due compensation in the high six-figure to eight-figure ranges. Though a court hearing is slated for June 1st, the entire process may take weeks to finalize.
Present owner, Tom Hicks of Hicks Sports Group, bought the team in 1998 from a group which included former president George W. Bush. Hicks said last month, it became evident filing for Chapter 11 bankruptcy “would be the only way to break the stalemate created by creditors.” Hicks Sports Group defaulted on $525 million in loans last year. Hicks agreed to sell the 153+ acres surrounding the stadium in order to facilitate the agreement, and consequently, the land is now a part of the $575 million price tag.
It is interesting to note this will not be the first Chapter 11 filing in baseball. The Chicago Cubs also filed for Chapter 11 protection in 2009, The Baltimore Orioles were sold at a bankruptcy auction in 1993 and The Seattle Pilots went through the same process after its 1969 season—prior to the new owners’ decision to move the team to Milwaukee and rename them, The Milwaukee Brewers.
Alex Rodriguez was with the Rangers from 2001-2003 after signing a record, $252 million 10-year contract. When he was traded to the New York Yankees, this contract was replaced by an even larger one. Other creditors listed include Tickets.com. Rawlings Sporting Goods Co. and Stats Inc..
The group in line to purchase the team includes mostly local investors as well as pitching legend, Nolan Ryan (who spent a good portion of his career in the state of Texas). Once the bankruptcy and the team’s sale are settled, at least 75% of baseball’s owners will need to approve the transfer of ownership. Major League Baseball agreed to allow the Rangers a new credit facility, while waiting for the deal to be completed.
Sports economist, Andrew Zimbalist, from Smith College said, “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…They’re in first place. They’re projected to be profitable.”