This is getting messy.
Federal bankruptcy court judge D. Michael Lynn decided on Tuesday that the sale of the Texas Rangers will be accomplished via auction on August 4th. This decision comes down in the wake of ongoing controversy over the team’s future.
Until now, the most notable bidders have been the Rangers Baseball Express, a group of investors led by former Texas pitcher Nolan Ryan and Pittsburgh sports attorney Chuck Greenburg. In fact, it appeared that the sale was all but finalized after MLB endorsed the bid offered by the Greenburg-Ryan group. The Express emerged as the frontrunner after a lengthy bidding process involving 6 suitors last year, and for the past few months has been poised to assume ownership as soon as the deal was finalized.
But an array of legal problems has prevented that from taking place.
The team’s former ownership group, led by Tom Hicks, was in significant debt, which was a driving factor in the sale of the organization. During negotiations, creditors repeatedly expressed concerns over various aspects of the potential sale, which continually stalled the process and kept Greenburg and Ryan waiting. In an attempt to satisfy these creditors, the team filed for Chapter 11 bankruptcy protection in May and developed a financial plan that included repayment of $75 million in debt as part of the sale to the Express.
But even that wasn’t enough to settle the issue.
Ryan is going to need plenty of Advil to get through this craziness
Attorneys representing key creditors and lenders argued that the Greenburg-Ryan bid was not the highest that the team could secure, and with the case in the hands of the bankruptcy courts, that objection successfully delayed the sale. The court-appointed restructuring officer , William K. Snyder, who was put in charge of overseeing the bankruptcy process, then recommended that the team reopen negotiations with other bidders to secure a larger amount.
In response, the Express filed suit against the team, arguing breach of contract. Attorneys for Greenburg and Ryan said that attempts to reopen the bidding would violate the existing purchase agreement that existed as a result the the Express being the winning bidder last year. But the group also suggested that it would table this suit if the courts agreed to sell the team at auction before August 12th, the date that the Greenburg-Ryan group’s financing guarantee expires.
The Express wants an auction because it keeps the timeline short and will likely prevent other bidders from arranging sufficient financial backing. For this same reason, lenders oppose the auction process. Evidently, the courts believe it is an appropriate way to settle the matter.
Major League Baseball has tried to allay the lenders’ concerns by informing them that at least 2 other bidding groups have been approved, implying that this more than just a formality for Greenburg-Ryan. These groups, led by Houston businessman Jim Crane and Dallas-based investor Jeff Beck respectively, were 2 of the 5 that lost out in last year’s bidding process. They’ll get another crack at buying the team on August 4th,
Judge Lynn set forth some key guidelines on how the auction will be conducted, changing some of the procedures involved. The group with the highest bid garnered at auction will earn the initial right to take over the team, but Major League Baseball will have the option of rejecting that bid and approving the next highest bid if the commissioner determines it is in the best interests of the game.
Of course, potential lenders who might back the transaction oppose this option because it could result in a weaker winning bid, financially. As a compromise, Judge Lynn reserved the right to review MLB’s decision to determine if the commissioner’s office acted in good faith.
Greenburg's group should still come out on top, but things are far from certain
So what does all of this mean? No side is exactly happy. But all sides are getting some concessions. In that way, it was probably a wise decision by the courts.
It’s somewhat of a win for the Express because the group has guaranteed financing in place that another bidder will be unlikely to overcome. But it’s clearly not as direct a path as the group wanted to take. It’s also somewhat of a win for lenders and creditors, because it at least has the appearance of propriety; the goal of the auction is to secure the best financial offer.
Though the move makes some sense and though Judge Lynn’s stipulations restored order to a chaotic situation, the end result should be the same as it would have been months ago. After all is said and done, the Express should be the new ownership group for the Rangers. It will just require jumps through more legal hoops than anyone expected.
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