The Texas Rangers Baseball Partners (“TRB Partners”) Chapter 11 case descended into the realm of the bizarre several weeks ago. Even by the standards of this case, however, the latest line of attack by the lenders seeking to delay the sale of the team is an eyebrow raiser.
Bankruptcy cases regularly feature litigation over transfers of assets by a debtor prior to the start of the case. Creditors are often concerned that an insolvent debtor may have sought to place valuable assets beyond their reach by conveying it for less than “reasonably equivalent value”, and can take steps to have the transfer voided by the bankruptcy court so that such assets can be recovered for the benefit of the debtor’s bankruptcy estate.
Naturally, therefore, in the Through the Looking Glass world of TRB Partners, the lawsuit commenced by the lenders alleges that a valuable asset was improperly transferred into the bankruptcy estate.
The complaint states that Rangers Ballpark LLC (“Rangers Ballpark”), an affiliate of TRB Partners, held the tenant’s interest under the lease agreement for Rangers Ballpark in Arlington, the team’s stadium, and pledged that interest in support of its guaranty of the debt owed by the entities controlled by the Rangers’ indirect owner, Tom Hicks. According to the complaint, shortly prior to the bankruptcy filing, Rangers Ballpark assigned the leasehold interest to TRB Partners. The lenders allege:
As a result of the Leasehold Assignment, the rights of Rangers Ballpark – a guarantor whose obligations under the First Lien Credit Agreement are uncapped – under the Ballpark Lease were transferred to the Debtor – a guarantor whose obligations under the First Lien Credit Agreement were capped at $75,000,000.
The Leasehold Assignment impaired plaintiffs’ ability to practically realize the full value of its security interest under the Leasehold Mortgage by transferring this valuable asset – the lease to the stadium in which the Texas Rangers play their home games – from a party who had guaranteed the payment of all obligations owing under the First Lien Credit Agreement to a party whose guaranteed obligations was limited to $75,000,000.
This lawsuit, of course, is an ancillary salvo to the main dispute as to how and when the team is going to be sold. Judge Michael Lynn scheduled the auction for August 4, but the lenders’ motion for reconsideration will be heard tomorrow. An appeal by whichever side loses looms likely.