Dissatisfied with the pre-packaged bankruptcy plan proposed by the Texas Rangers, creditors have moved to file an involuntary bankruptcy on two holding companies belonging to Tom Hicks. The lenders who filed the involuntary bankruptcy hold about $525 million in debt in the Texas Rangers’ equity company which is controlled by Tom Hicks. The creditors say that by filing the involuntary bankruptcy they can force the debtors to maximize the value of the assets by finding a better deal for the sale of the Texas Rangers. But the Texas Rangers insist that the creditors’ latest move at forcing the equity company into bankruptcy is just an effort by creditors to position themselves during the Texas Rangers’ Chapter 11 bankruptcy.
The bottom-line is that loans that were used to benefit the Texas Rangers were actually loans to the Hicks Sports Group. Because the MLB has rules limiting how much debt any team can carry, the Hicks group overstepped that rule by having lenders extend credit to them instead of the Texas Rangers directly. The result is that the Hicks Group, and by extension the Texas Rangers, became over-leveraged causing the Hicks Group to default n $525 million in debt.
This is why both the Texas Rangers and the Hicks Group must reorganize in Chapter 11 bankruptcy. Creditors in the Chapter 11 bankruptcy understand this and want to maximize their chances of recouping their money they loaned this company by making sure that the company is sold to a buyer who offers them the most benefit. As we have already seen, lenders in the bankruptcy have unsuccessfully tried to supplant the sale of the team to Greenberg and Ryan saying that the deal is not the best the Texas Rangers could get. The bankruptcy judge will soon hear all sides so that he can either approve or disapprove of the Texas Rangers’ sale as part of the Chapter 11 bankruptcy plan; but if things go as they have been we can expect delays and fights to erupt over any decision that is made.