The Chapter 11 case of Texas Rangers Baseball Partners (“TRB Partners”) continues to take fascinating turns, and is fast becoming a cautionary tale about the risks of using the bankruptcy process to achieve a quick result without the consent of all major parties.   

As previously described, the team’s indirect owner Tom Hicks and Major League Baseball both wanted the team to be sold to a group headed by legendary pitcher Nolan Ryan for $575 million. Lenders owed $525 million by entities (the “HSG Group Entities”) controlled by Hicks opposed the sale because it would not fully pay off the debt owed by those entities, and they believed that there were other prospective buyers willing to pay more. 

The impasse between the lenders, Hicks and Major League Baseball led to the Chapter 11 filing by TRB Partners, the partnership entity that owns all team assets (including the Rangers’ franchise rights from Major League Baseball). TRB Partners has guaranteed $75 million of the HSG Group Entities’ debt. TRB Partners hoped to avoid the need to have a competitive bidding process for the team assets by submitting a “prepackaged” plan of reorganization that proposed to pay the lenders the $75 million guaranteed by TRB Partners, pay all other unsecured creditors (including deferred salary owed to Alex Rodriguez) in full, and upstream the remaining sale proceeds to the HSG Group Entities to pay over to the lenders. The lenders immediately objected to the proposed plan, and also took steps to try and force certain of the HSG Group Entities which directly owned TRB Partners (“Rangers Equity”) into bankruptcy as well. 

It looked a couple of weeks ago as though the lenders’ opposition had failed, and that they were going to be forced to accept the sale to Ryan’s group. U.S. Bankruptcy Court Judge Michael Lynn ruled that, upon the making of a few modifications, the lenders would have no right to vote to approve the plan, since it would pay the full amount of that TRB Partners had guaranteed.    

However, Judge Lynn also ruled that the Rangers Equity entities would be impaired by the plan, and appointed William K. Snyder, a well known turnaround professional, to make the determination on behalf of those entities as to whether such entities could vote to approve the plan consistent with whatever fiduciary obligations they might owe to the lenders. This effectively placed Snyder in a controlling position. A motion filed earlier this week to approve an auction process succinctly stated: 

“Subsequent to the appointment of the CRO in the [Rangers Equity] involuntary cases,it became clear to the Debtor following discussions with the CRO, that the CRO would be more likely to support and vote to approve the Prepackaged Plan following an auction process.” 

The motion proposed an auction to be conducted on July 16, and initially had Snyder’s support. However the motion has been withdrawn. The notice filed yesterday withdrawing the motion states only that

“Rangers Equity, by and through William Snyder, their CRO, have withdrawn their support for the sale procedures described in the Motion. The CRO has advised the Debtor that he intends to recommend a modified sales process with the intention of seeking approval fromthe Court on an expedited basis.”

A status conference is taking place this morning before Judge Lynn. Probably the only safe prediction that can be made at this point is that there will be no swift conclusion to the case unless a consensus among all major parties can finally be reached.