The Chapter 11 case of Texas Rangers Baseball Partners (“TRB Partners”) has devolved into a slow motion train wreck.
It appeared that order might finally emerge from chaos earlier this week when Judge Michael Lynn of the U.S. Bankruptcy Court for the Northern District of Texas scheduled an auction for August 4, approved the bid of Rangers Baseball Express LLC (“RBE”), the group headed by Hall of Famer Nolan Ryan, as the “stalking horse” bid, and authorized procedures for the consideration of competing bids. However, last evening the lenders owed $525 million by entities (the “HSG Group Entities”) controlled by Rangers’ indirect owner Tom Hicks, who have opposed the sale to RBE because it would not fully pay off the debt owed by the HSG Group Entities, filed an emergency motion asking Judge Lynn to reconsider his approval of the bidding procedures. The hearing on the lender’s motion will be held on July 20.
First there was to be a sale to RBE, whose bid has the strong support of Major League Baseball, pursuant to a plan of reorganization for cash and certain specified assumed liabilities totaling $575 million. It was structured both to avoid a competitive bid process and to obviate any objection from the lenders by paying them the full amount of the portion of the HSG Group Entities’ debt ($75 million) guaranteed by the team. The lenders sought to derail the proposed plan, and also took steps to try and force certain of the HSG Group Entities which directly own TRB Partners (“Rangers Equity”) into bankruptcy as well.
Judge Lynn effectively turned aside the lenders’ efforts regarding the plan, but appointed a chief restructuring officer, William Snyder, for Rangers Equity. After Snyder expressed concern regarding the lack of a competitive bid process, TRB Partners agreed to hold an auction, and filed a motion for the auction to be held on July 22 and for approval of bid procedures with RBE as the stalking horse bidder.
Snyder initially supported the bid procedures but subsequently withdrew his support (evidently believing that they were too favorable to RBE’s bid), and TRB Partners withdrew the motion.
At the beginning of this week, RBE sued TRB Partners, alleging a breach of the purchase agreement and seeking an injunction against the Rangers. TRB Partners then filed a new motion for an auction and bidding procedures.
Finally, on Tuesday, Judge Lynn ordered an auction for the team to held on August 4. Although still opposed by Snyder and the lenders, Judge Lynn appeared satisfied that there will be sufficient opportunity for alternative bids to be presented by such date. At least two other prospective bidders have already obtained clearance from Major League Baseball to participate. The judge also sought to address concerns previously expressed by the lenders and Snyder by making clear that he, and not Major League Baseball, would have the final say as to who could participate in the auction and who would be the ultimate winner.
The lenders, in their motion for reconsideration, contend that they had no meaningful opportunity to consider the proposed bidding procedures prior to Tuesday’s hearing and no notice until immediately prior to the hearing that the procedures were going to be adjudicated.
The day prior . . . Rangers Baseball Express LLC (the “Proposed Purchaser”) filed an emergency motion for a preliminary injunction and temporary restraining order (the “TRO Request”) . . . The Proposed Purchaser was seeking an emergency hearing on the TRO Request on 24 hours’ notice, which was granted. There was nothing in the TRO Request to indicate that the hearing with respect thereto would deal with the substance of the bidding procedures for the sale of the [TRB Partners] Assets. . . Nevertheless, to the Lender Parties’ surprise, at the hearing on the TRO Request . . . the Court, sua sponte, proposed its own bidding procedures[.]”
They further argue that there are no exigent circumstances at this point requiring an expedited auction (and point to the Rangers’ recent trade for star pitcher Cliff Lee).
This extraordinary schedule is not justified by the facts of this case. While this case continues to receive outsized publicity given the Debtor’s industry, it is not Lehman Brothers, Chrysler, GM, or any of the other cases where the debtor’s very existence, or the United States’ economy, hung in the balance. . . The Court has not received any evidence that the fact that the Texas Rangers have operated while in bankruptcy for the past several months has had any negative effect on the team’s value. Quite to the contrary, since filing for bankruptcy, the Debtor (i) has obtained guaranteed financing for the remainder of the season, (ii) has obtained significantly cheaper credit than pre-petition (thanks to the benefits of a Court-sanctioned DIP financing auction), (iii) has demonstrated the operational and financial flexibility to engage in some of the most significant trades to occur in baseball this year, and (iv) continues to win at an almost historical pace. The Debtor is fundamentally sound and there is absolutely no need for unreasonable speed to ensure its continued existence – there is no proverbial melting ice cube here.
It is possible that the end of the TRB Partners’ bankruptcy saga may indeed finally be in sight. However, it will not come absent a consensual resolution that has so far eluded the parties in this case (RBE has already filed a response to the lenders’ motion in which they decry the lenders’ arguments as “myopic, one-sided and wreckless [sic]”), without there first being at least one more contested hearing before Judge Lynn, and then likely an expedited appeal.