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April 15, 2010

Baseball’s Texas Rangers Said to Face Bankruptcy

The Texas Rangers may be forced into bankruptcy unless the terms of a planned sale of the Major League Baseball team controlled by billionaire Thomas Hicks are improved or another buyer is found, according to two people familiar with the matter.

Creditors led by Monarch Alternative Capital may block Hicks Sports Group LLC, which defaulted on $525 million of debt last year, from selling the Rangers and try to put the team into bankruptcy, said the people, who declined to be identified because the debt talks are private. The creditor group, which includes CIT Group Inc. and Galatioto Sports Partners LLC, is seeking at least $30 million more from the team’s sale, one of the people said.

“Hicks Sports Group has worked diligently with Major League Baseball and HSG’s lenders over the past six months and brought to the table outstanding potential buyers for the Texas Rangers,” Hicks Sports Group spokeswoman Lisa LeMaster said in an e-mailed statement.

Hicks, who was chairman of private equity firm Hicks, Muse, Tate & Furst Inc. from 1989 through 2004, is being forced to sell the franchise at which he signed Alex Rodriguez to a then- record $252 million, 10-year deal in 2000.

The 64-year-old Hicks is also exploring the sale of 18-time English soccer team Liverpool, which he co-owns with George Gillett, a person familiar with the matter said April 12. Dallas-based Hicks Sports said in a statement in February that it’s also exploring a possible sale of the Dallas Stars of the National Hockey League.

Negotiations Ongoing

Negotiations with creditors are ongoing and a resolution could be reached with the Rangers’ current owners, the people said. If creditors were to file an involuntary bankruptcy, it could be contested in court.

CIT spokesman Curt Ritter, Sal Galatioto of Galatioto Sports and a representative of Monarch declined to comment on the Rangers sale.

Hicks in January agreed to sell the Rangers to Hall of Fame pitcher Nolan Ryan and Pittsburgh attorney Chuck Greenberg. Less than half of about $570 million in sale proceeds would go to the group owed for loans, according to the people.

“HSG is committed to the transaction,” LeMaster’s statement said. “It is entirely in the hands of Major League Baseball, the lenders and the selected ownership group to resolve their differences and allow for an orderly transition.”

Hicks Would Remain

Hicks cut the deal alongside a separate sale of 153 acres of land around the team’s Arlington, Texas, ballpark to Ryan and Greenberg in exchange for cash, notes and a stake in the team, the people said.

“The discussions are between the Hicks Sports Group and the creditors,” said Kevin Sullivan, a spokesman for Greenberg. “Chuck says good things are worth waiting for.”

If creditors block a sale and pursue a bankruptcy filing, the club could become the second major league team to enter bankruptcy in less than a year. The Chicago Cubs in October joined owner Tribune Co. in Chapter 11 as part of that team’s sale.

Hicks, who would remain chairman emeritus of the club, can’t proceed with the sale without creditors’ approval after defaulting on debt related to the Rangers and Stars and is negotiating revised debt terms with creditors, according to the people.

Exploring Other Bidders

Creditors may also push Hicks to explore other bidders, including Jim Crane, the founder of Houston-based freight forwarder EGL Inc., the people said. Crane’s proposal for the team was rejected by Hicks. George Postolos, a spokesman for Crane, declined to comment in a telephone interview.

John Blake, an executive vice president of the Rangers, which ended the 2009 season with an 87-75 record, declined to comment. Any sale of the club must be approved by major league team owners.

Hicks bought the Rangers for $250 million in 1998 from a group that included then-Texas Governor George W. Bush. The value of the team fell to $405 million last year from $412 million in 2008, Forbes magazine reported this month.

The franchise, which began play in 1961 as the expansion Washington Senators, moved to Texas for the 1972 season. The team has made the playoffs three times, never going past the first round.

Courting A-Rod

Hicks courted Rodriguez in an effort to make the Rangers pennant contenders to build the value of the franchise and the real estate around the ballpark.

Texas finished last in the American League West all three years of Rodriguez’s stay. When he was traded to the New York Yankees in 2004, the Rangers were still obliged to pay $67 million of the $179 million remaining on his contract. The team wound up paying less when Rodriguez voided the deal to sign a new one with the Yankees in 2007.

“It was a big mistake,” Hicks said in a January 2010 interview with mlb.com. The Rangers currently have MLB’s fourth- lowest payroll, according to an Associated Press analysis of opening-day rosters.

Sometimes, debt can be overwhelming, and bankruptcy becomes necessary.
Bankruptcy can sometimes be difficult. If you are considering bankruptcy, contact the Houston bankruptcy lawyers of Weston & Associates, PLLC at 713-623-4242

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