The Texas Rangers baseball team filed for Chapter 11 bankruptcy protection on Monday to ease the sale of the team to a group led by team president and Hall of Fame pitcher Nolan Ryan for about $575 million.
The voluntary filing calls for creditors to be paid in full, and has the support of Major League Baseball, current Rangers ownership and Ryan's group.
Texas Rangers Baseball Express, the group led by Ryan and his partner Chuck Greenberg, a Pittsburgh-based lawyer at Pepper Hamilton LLP, is also buying the lease for the Rangers' Ballpark in Arlington, as well as nearby land.
A sale could break a stalemate between team owner Thomas Hicks and his lenders that has existed since January, when Ryan's group agreed to buy the team. It is unclear whether creditors favor the plan, which the Rangers called pre-packaged.
The team said the plan would fully pay Rangers creditors, and allow them to recover all debt issued by Hicks' HSG Sports Group and guaranteed by the Rangers.
Kellie Fischer, the debtor's chief financial officer, in a court filing said there are no impaired classes of creditors or equity holders under the bankruptcy plan.
HSG bought the team in 1998 from investors including then-Texas Governor George W. Bush. Hicks co-founded private equity firm Hicks, Muse, Tate & Furst Inc.
The bankruptcy filing is the best way to complete the sale and smoothly transition to new ownership, which we expect will occur by midsummer, Ryan, 63, said in a statement. He said the bankruptcy will not affect day-to-day operations.
In a statement, Baseball Commissioner Bud Selig added that the filing serves the best interests of the team, its fans, Major League Baseball and all other parties.
The Rangers filed for protection from creditors with the U.S. bankruptcy court in Fort Worth, Texas.
Alex Rodriguez, now the New York Yankees' third baseman, is the team's largest unsecured creditor, the filing shows.
According to court records, the Rangers have experienced cash flow shortfalls since 2005, and the global recession left Hicks unwilling to sustain his financial support for the team.
Hicks fell off Forbes magazine's annual list of billionaires in March. He is also trying to sell his half-interest in the English Premier League's Liverpool soccer club.
Lenders to the Hicks group had declared a default on $525 million of loans in April 2009.
Earlier this month, The New York Times said the top lender, Monarch Alternative Capital LP, told baseball owners that lenders would not agree to a sale to Ryan's group at a price below fair market value.
Monarch, a New York-based hedge fund firm with about $3 billion under management, had no immediate comment.
This probably represents that Monarch was continuing to play hardball, said Robert Jarvis, a sports law professor at Nova Southeastern University in Florida. It sounds like a voluntary bankruptcy to get Monarch off the Rangers' backs and allow the sale that Major League Baseball wants.
CUBS ALSO FILED BANKRUPTCY
The Rangers are the second Major League Baseball team to seek bankruptcy protection in the last year.
In October, the Chicago Cubs filed for court protection in connection with the team's $845 million sale by Tribune Co to the family of Tom Ricketts, whose father founded the brokerage TD Ameritrade Holding Corp.
Forbes magazine last month estimated the Rangers and the ballpark lease were worth a combined $480 million.
According to the bankruptcy filing, the debtor has between $100 million and $500 million of assets and between $100 million and $500 million of liabilities. Hicks would become Rangers chairman emeritus if the team's sale went through.
Rodriguez signed a 10-year, $252 million contract with the Rangers in 2000. The team traded him to the Yankees in 2004, but agreed to pay an estimated $67 million of the balance due.
Scott Boras, the agent for Rodriguez, declined to comment.
Ryan pitched in the major leagues for 27 years, including five for the Rangers, and holds the career strikeout record. Known as the Ryan Express, he retired after the 1993 season.
The case is In re: Texas Rangers Baseball Partners, U.S. Bankruptcy Court, Northern District of Texas, No. 10-43400.
(Reporting by Jonathan Stempel in New York; Additional reporting by Santosh Nadgir in Bangalore; Editing by Robert MacMillan, Gerald E. McCormick and Matthew Lewis)