Lenders holding $525 million in Hicks Sports Group debt could force the Texas Rangers into bankruptcy if Major League Baseball (MLB) seizes control of the team.
“If MLB seizes the Rangers the creditors are left out in the cold because their agreements are with Tom Hicks and his sports group,” said Bob Jarvis, a professor in the Nova Southeastern University Law Center that specializes in sports law. “They would still have their claims against Hicks, but that would obviously be of little immediate comfort.”
Forty lenders, led by hedge fund Monarch Alternative Capital, would still get money from any sale; but they are not satisfied by how much money the sale would generate. And while pushing the Texas Rangers into bankruptcy would cost millions of dollars, some analysts believe that the lenders may be willing to take their chances. How could a forced bankruptcy sale work out for lenders? Well, if the bankruptcy case of the Phoenix Coyotes has taught us any lesson it is that some bankruptcy judges believe that sports leagues have the right to decide who owns its teams not creditors.
Last year, in a case involving the Phoenix Coyotes, a U.S. bankruptcy judge decided that the NHL had the right to decide who owns its hockey teams. The league’s board of governors rejected a bid from billionaire Jim Balsillie, who wanted to buy the team and move it to Hamilton, Ontario.
And while it is the job of the bankruptcy trustee to make sure creditors get paid, they also have the right to cancel certain contracts and agreements which could mean that creditors would experience a significant reduction in the amount of money they even had the right to collect.