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Texas Rangers Auction

This link is to a blog from a reporter who is on the scene following the events in the Fort Worth Courtroom and posting information often by the minute.

That author, NBCDFW reporter Grant Stinchfield, makes a couple of observations about the process thus far in the following quotes: that the auction started some 5 hours late; that Cuban has claimed to have made the high offer (allegedly 25 million more than the other one); that there are only two qualified bidders (Mark Cuban on one hand and the Nolan Ryan - Chuck Greenberg group on the other); that Cuban has made revisions to his offer and the other players are taking time to review the revised offer; and that the Judge has asked that the A/C be left on in the Courthouse until midnight. That link provides the most up to date information about the auction process.

Now, some background: Judge Lynn aptly set out the background of the case and the parties to it in a recent opinion:

"Faced with an impasse, in that the Lenders would not consent to the sale to Express and the BOC [Office of the Commissioner of Baseball ("BOC")] would not agree to seek and consider alternate offers for the Rangers, Debtor filed this chapter 11 case. Upon filing, Debtor also filed the Plan, by which it proposes to consummate the APA [the proposed Asset Purchase Agreement ("APA")]. Under the Plan, the Lenders are to be paid $75,000,000 "in full satisfaction, settlement, release, and discharge of . ." their claims. Plan §§ 4.2(b) and 4.3(b). As this is the maximum Debtor can be required to pay the Lenders (Amended and Restated First Lien Credit and Guaranty Agreement (the "Loan Agreement") §§ 7.1 and 7.2), Debtor contends the Lenders are unimpaired under section 1124(1) of the Bankruptcy Code (the "Code")11 and not entitled to vote on the Plan. Plan §§ 4.2(a) and 4.3(a).

The Lenders, however, insist that, due to HSG'S [The Rangers Equity Owners are indirect subsidiaries of HSG Sports Group, LLC ("HSG") which, through other subsidiaries, has interests in other professional sports franchises] default, no sale of the Rangers can be agreed to by the Rangers Equity Owners other than through Chase'S [JP Morgan Chase Bank, N.A., as agent for the first lien lenders ("Chase")] action. They further argue that payment of the capped amount of $75,000,000 does not equate to unimpaired treatment under section 1124(1) of the Code."

Judge Lynn (a smart and very quick witted Judge) authored this opinion on June 22, 2010. In it, the Court addressed some threshold legal questions about the Rangers case. The Court addressed the legal duties of the debtor to its creditors if it indeed pays 100% of their claims, the duties of two related equity owners of the club, who may speak for the equity owners and whether the owners and/or the lenders are "impaired" under the terms of the pre packaged plan.

Here is a link to that 26 page opinion where all of these issues are explained and addressed:

Please note that this is not legal advice and may not be relied upon. That being said, here are a couple of general thoughts on the bankruptcy auction process: the Court is obligated to take the highest and best offer made for the assets being sold. However, it is often quite hard to determine who the high bidder really is as the terms of competing complex offers can vary greatly. For example, this author was involved in one such sale where the low bidder, dollar wise, was actually a much higher and better offer as that "low" bidder undertook to clean up some environmental waste which was otherwise the debtor's/seller's obligation. Also, although the sale is first subject to Bankrutpcy Court approval, there are often third parties who have a veto, barring unusual circumstances. In one sale where this author represented a national franchise, the franchiser essentially held a veto over who could buy the various stores. Frequently, there are also governmental approvals which must be obtained in order to effect the sale even after the Court approves it. Finally, although there is typically a detailed bid procedure in place before the auction, the terms of these are routinely ignored in order to get the best offer. The Judge and the creditors are always after the best price/deal and if, in order to get that, the terms of a previous order setting out the conditions under which the sale may proceed have to be altered, then so be it.