Ever since he became Commissioner of Baseball more than a decade ago, what Bud Selig has said about what’s “in the best interests of baseball” has been the law of the diamond — until now.
The commissioner has repeatedly put his seal of approval since last December on the proposed sale of the Texas Rangers by a Tom Hicks partnership, which contains other Hicks entities as general partners, to a group led by Chuck Greenberg and Nolan Ryan. But whether that sale closes will be made not by Selig but by U.S. Bankruptcy Judge Michael Lynn, who is presiding over the Rangers’ Chapter 11 proceedings filed in Fort Worth on May 24, 2010.
At a May 26 hearing, Judge Lynn directed the following statements on the record at Rangers CFO Kellie Fischer at the conclusion of her testimony: “Until such time as it is clear to me that all creditors are to be paid in full in this case, you are fiduciaries acting for the benefit of your creditors, and you’ve got to keep in mind that it doesn’t mean that you’re acting necessarily for the best interests of Major League Baseball. ... As an officer of a debtor-in-possession, the fiduciary duty you owe to your creditors and to your equity interest holders has to come first in this court.”
Lest there be any doubt about it, during the hearing, Judge Lynn stated emphatically on the record that he and not Major League Baseball “is in charge of the sale process.”
Two questions to answer
The following two questions will be answered soon by Judge Lynn after hearing arguments from the armies of lawyers representing Major League Baseball, the Greenberg/Ryan partnership, the Hicks entities and the 40 creditors on the short end of the $525 million default by Hicks’ Rangers-related companies last year:
The first question is, if MLB wants the Rangers sold to Greenberg/Ryan at the agreed-upon price of $575 million — made up of cash and debt assumption, and such price includes the purchase of the team and some surrounding land — and it is demonstrated to the court that Greenberg/Ryan’s price was not the highest offer made for the team, and another bidder is still ready, willing and able to pay more than $575 million, must the court approve of the sale to Greenberg/Ryan? Selig has said he expects no problem getting the required 75 percent from the league’s other owners should the time come for the up-or-down approval vote.
Asked another way, in light of all pertinent considerations, and recognizing that none of the losing bidders in last year’s bid process ever expressed any interest in moving the team away from North Texas, do the Rangers have the duty to maximize the amount of proceeds made from the sale of the team? This question is raised in the context that 1) Tom Hicks has stated publicly that there was no bid made by anyone else that exceeded Greenberg/Ryan’s bid, which would have been approved by MLB, 2) HSG Sports Group’s creditors insist that there was at least one bid materially higher than Greenberg/Ryan’s bid, and 3) the shortfall between the Greenberg/Ryan bid and the total owed to the creditors by Hicks’ Ranger-connected entities is reportedly at least $30 million.
Can creditors block sale?
Question No. 2 is this: Do Hicks’ creditors have enforceable rights under their loan documents and the U.S. Bankruptcy Code that empower them to block the team’s sale unless and until they consent to it?
Asked another way, because of having defaulted on their loans, have Hicks’ now (as of May 26) involuntarily bankrupt companies, which serve as general partners of the partnership which currently own the Rangers, forfeited their right to consent to the sale of the team, and because of the defaults, has such right to approve or disapprove of the sale to the ultimate purchaser been transferred over to Hicks’ lenders?
Legal briefs arguing all sides of the parties’ different answers to these questions will be filed with the court on June 11, and then nationally renowned lawyers will present oral argument on the two issues to Judge Lynn on June 15.
How the bankruptcy judge ends up answering the two questions will determine whether he chooses to reopen the bidding process with an auction sale of the team.
If the parties fail to achieve a settlement at the upcoming mediation ordered by the court, two things are for sure: 1) the person who will determine the fate of who gets to buy the Texas Rangers is not the Commissioner of Baseball and 2) the controlling issue in making the determination of who will be selected as the team’s ultimate purchaser is not about what “is in the best interests of baseball.”
In other words, to use the game’s parlance, in this collision at home plate over who will get to buy North Texas’ Major League Baseball team, Judge Lynn is safe, and Selig is out.
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