The Texas Rangers filed for Chapter 11 bankruptcy protection Monday in hopes of spurring completion of the stalled $575 million sale of the team – and maybe clear the decks for the new owners to make pennant-chasing decisions this summer.
The bankruptcy filing comes four months after Tom Hicks announced an agreement to sell the team to a group led by Hall of Fame pitcher and team president Nolan Ryan and Pittsburgh attorney Chuck Greenberg, the Myrtle Beach Pelicans' principal owner.
“I did not want to put the baseball future of the Texas Rangers in jeopardy or uncertainty for an extended period of time,” Hicks said. “This action is all about creating an end to the impasse in allowing this team sale to go forward.”
Under the plan to be presented at a court hearing Tuesday, the Rangers would pay the $75 million of the club's debt tied up in Hicks' financially strapped ownership group. That would remove the team from the additional claims by creditors against Hicks Sports Group that have held up the sale.
“We feel like this is the correct thing to do,” Ryan said. “We have some deadlines coming up that are obviously important to us as a ballclub, and feel like by bringing this to finality that we will then be able to do the things we feel like we need to do and push forward with the winning ways of the ballclub.”
In order for the AL West-leading Rangers to have financial flexibility at the non-waiver trading deadline July 31, the sale of the team will need to be completed. There is also the amateur draft next month.
A 21-page filing in U.S. Bankruptcy Court in Fort Worth included the top 30 unsecured creditors, a list headed by Alex Rodriguez, who is owed $24.9 million in deferred compensation six years after he was traded. The next five are also current or former players: Kevin Millwood ($12.9 million), Michael Young ($3.9 million), Vicente Padilla ($1.7 million), Mickey Tettleton ($1.4 million) and Mark McLemore ($970,000).
Even if the court approves the Rangers' bankruptcy petition, the sale would take several more weeks to complete.
“I know it will be faster than the other alternative would have been,” said Hicks, who bought the team in 1998 from a group that included former president George W. Bush.
Since the filing was made by the team, not Hicks Sports Group, the group of about 40 creditors owed money by HSG could object to the sale. Greenberg knows that's a distinct possibility.
“Given the way a couple of these renegade creditors have behaved, I'm not expecting an overnight personality transplant,” Greenberg said. “So, the odds are they won't take this well.”
Greenberg said he doesn't believe the court will disregard the process so far, “particularly since every creditor of the Texas Rangers will be paid 100 cents on the dollar.”
Young, the longest-tenured Ranger in his 10th season, is the only current Texas player listed in top 30 unsecured creditors. Others creditors listed in the filing include Tickets.com, Rawlings Sporting Goods Co., Clear Channel Outdoor and Stats Inc.
Hicks, Greenberg and Ryan met with the players before their flight Monday night to Kansas City, assuring them that they would continue to be paid on time.
“After a huge sigh of relief, the meeting went on,” Young said. “Once we knew (bankruptcy) was a way to expedite the sale, we knew it wasn't that big of a deal.”
New baseball players' union head Michael Weiner said he has “been assured that all contractual commitments to players will be honored in full.”
After an agreement in principle was announced Jan. 23, after more than a month of exclusive negotiations, Greenberg's group had hoped to have control of the Rangers by opening day. But the deal was slowed by concerns from Hicks' lenders after Hicks Sports Group defaulted on $525 million in loans last year.
Hicks said it became apparent about a month ago that the Chapter 11 bankruptcy would be the only way to break the stalemate.
The filing is not the first in baseball.
The Chicago Cubs briefly filed for Chapter 11 protection last year in a step that allowed their new owners to avoid potential claims from Tribune Co. creditors. The Baltimore Orioles were sold in a bankruptcy auction in 1993 after owner Eli Jacobs filed for Chapter 11.
Once the bankruptcy issue is settled and the sale proceeds, at least 75 percent of baseball's owners have to approve the transfer of ownership from Hicks. In a letter included with the bankruptcy filing, commissioner Bud Selig said he intends to recommend the approval of the sale.
Major League Baseball has agreed to give the Rangers a new credit facility while it waits for the deal to be completed, the team said.
This is the 50th season of the franchise that began as the Washington Senators in 1961, and moved to Texas in 1972. The Rangers won their only three AL West titles in a four-year span at the end of the 1990s, and have never won a playoff series.
Court records show that the team's cash flow problems began in 2005. Hicks provided more than $100 million to the Rangers in his tenure, but problems have mounted over the years.
“Due to the unprecedented downturn in the U.S. economic and housing industry and global economic recession, other commitments and contractual restraints, Mr. Hicks was no longer willing to provide the same material financial support he had in the past,” Kellie Fischer, the Rangers' chief financial officer, wrote in a separate filing Monday.
Rodney Fort, a professor at the University of Michigan and vice president of the International Association of Sports Economists, dismissed the notion that escalating player salaries played a role in forcing the bankruptcy filing.
“That's the silliest of all economic logic – to blame your employees because you can't manage the asset in such a way that you can make a go of it,” he said. “It's unlikely that even if it were true that high salaries were causing problems for the Rangers, that the answer is declare bankruptcy and sell the team.”