What’s In Store for the Texas Rangers Auction

Texas Rangers

UPDATE (4pm ET): Bob Nightengale of USA Today reports that News Corp. will not be bidding for the Rangers, according to Randy Freer, president of Fox Sports Networks. Also, Dennis Gilbert has dropped out, although he had dropped off the radar some time ago, and was thought to be marrying up with Jim Crane.

Sources indicated to me early Tuesday that Mark Cuban and Jim Crane have filed bids simultaneously ahead of the 8pm CT deadline and are working together. That leaves Dallas businessman Jeff Beck as the only open question mark for tomorrow’s auction.


A bit of history will be made on Weds. when the Texas Rangers will be put up for auction, with its outcome determined at a hearing on Thurs. To place this in perspective, the last time an MLB club was auctioned out of bankruptcy was the Baltimore Orioles in 1993. Here’s some key information to know leading up to the auction:

Who’s Bidding?

The group led by Chuck Greenberg and Nolan Ryan is, of course, going to be there, but beyond that, official bidders have until 8pm CT on Tues. night to file for the Weds. auction that begins at 9am CT and will be overseen by the Honorable Russell F. Nelms. Dallas Mavericks owner Mark Cuban has filed documents with the court in attempts to gain access to the club purchase, and Houston businessman Jim Crane has been involved with mediation sessions with William Snyder, the chief restructuring officer in the case. Dallas businessman Jeff Beck is a possibility, as well. What is unknown at the time of publication is whether Rupert Murdoch’s News Corp. will be preapproved by MLB for bidding on the club, as well. If so, there could be as many as 5 groups anteing up for the purchase of the club.

Still, if no other bidders outside of the Greenberg/Ryan group show up for the auction, the proceedings will be shifted from an auction to hearing on the confirmation of the Rangers’ Third Amended Plan of Reorganization, filed July 30, 2010.

What’s the Bidding Going to Start At?

Determining the very lowest a group can bid means looking at the Greenberg/Ryan’s group offer. The approx. $520 million “stalking horse” bid is really broken down into three parts.

Rangers Baseball Express (the group led by Greenberg/Ryan) is assuming approx. $220 million in liabilities of the Rangers. Secondly, approx. $220 million is then funneled back Rangers’ Equity Owners and the creditors. After that, an approx. $80 million balance will be paid to other creditors following closing of the sale. The “stalking horse” provision of the bid process has the first bid needing to be $15 million over, so Judge Michael Lynn has said that in principle, any bidder that has at least $95 million ready in hand, can be involved in the overbid process.

That doesn’t mean $95 million is what is going to be the bid price. It means that bidders, other than Greenberg/Ryan have been given the opportunity to use “bridge funding” from creditors to cover any balance above the $95 million. Certainly, all the bidders (should more than Greenberg/Ryan be at auction on Weds) will have far more to place at bid. But, any and all funding by the bidders through bridge funding has to be paid off no later than Oct 11, more than two months from the end of the auction. Should the winner of the auction fail to reach all the funding by Oct. 11, it would likely mean that the process would be opened back up, and yet another auction could take place.

But, the focus should be on the $306.7 million cash offer Greenberg/Ryan has on the table on Weds. Once the overbid of $15 million is added as a minimum, all subsequent bids will be in $2 million increments.

What’s Up for Sale?

Given that there are still looming questions about what William Snyder, the chief restructuring officer called “insider” transactions surrounding the lease of Rangers Ballpark of Arlington, as well as the Lenders arguing that “it is impossible for…. Potential bidders – in the time allotted… — to negotiate their own separate agreements with the parties that have the right to transfer them,” Lynn is suggesting that “it is preferable that a bidder exclude tainted assets or [other parties]” that may seek to claim damages from the “eve-of-filing transaction” that involves the lease transfer and/or the $70 million separate land deal that has been brokered between Tom Hicks and the Greenberg/Ryan group. That “side deal” includes the parking around the Ballpark that is a key revenue stream for both game day events, as well as during the NFL season when the lots can be used for new Cowboy Stadium. Another side deal that has raised eyebrows is an aircraft lease.

If those aspects are removed, as Lynn has suggested, it likely means that just the Rangers will be up for sale. Sorting out the other piece, critical to the functioning of the Rangers, will be a tricky matter to undertake outside of the sales process, so it is unclear how those pieces function in the overall.

How Much is the “Breakup Fee”?

If the Greenberg/Ryan group does not win at auction, they are entitled to compensation for all the legal work done in advance that the other bidders have not had to deal with.

Judge Lynn has altered how much the group could gain back, and the amount is dependent on their decision making process.

They can elect to:

A) 125% of the group’s costs or expenses, or;

B) $10 million before the court determines which of RBE expenses and costs are allowable.

At no point will the break-up fee be allowed to exceed $13 million

Does Lynn Have to Take the Highest Bid?

This is the $64,000 question in all of this: Does Judge Lynn have to accept the highest bid, or is this a matter of seeing that there was a fair process in play? The answers to this will come out of the bidding on Weds. and from how Lynn interprets matters when the outcome of the auction is covered during hearing on the Thursday after auction.

When Will The Club Sale Be Approved By MLB?

Having MLB’s owners vote to approve ownership transfer is part of the league’s constitution. Article V, Section 2 of the Constitution (see it here) goes on to say that three-fourths of the leagues owners must approve, “The sale or transfer of a control interest in any Club”.

The league has said that if the preferred group of Greenberg/Ryan is selected through the auction process, they can have the ownership approval completed by Aug. 12, the day that funding commitments tied to the Asset Purchase Agreement reached between the Rangers and the group is set to expire. If another bidding group comes out on top, the league has said it could be as long as 9 months (although, sources close to The Biz of Baseball repeatedly said that it would likely be 3 months), before owners would vote, citing the need for each owner to conduct due-diligence on the prospective owner.

Mark Cuban, who has verbally said that he is going to actively pursue purchase of the club through the auction, is seeking to have MLB go through the approval process no later than Aug. 16, saying that must close on or before the date. The filing does not elaborate as to why Cuban is in need of MLB’s approval by vote less than two weeks after the auction will have been completed.

Could a Marriage Occur?

Whether it’s posturing or alliances being truly forged, there has been word that Cuban could be possibly aligning himself with Jim Crane. Crane had been portrayed by the creditors as having a “significantly higher bid” when they were maneuvering to get the auction to occur. As of early Tues. sources indicate  that the two are, indeed, working together making them a formidable pairing in terms of funding. It should be noted, the league has not looked favorably upon Crane since he backed out of the purchase of the Houston Astros several years ago at the 11th hour.

What Happens if the League Does Not Approve a Bidder?

If the league does not approve the winner of the auction, one could surmise that the club would become “wards of the state”, with MLB taking over the operations of the club until the smoke had cleared in the courts. The last time this occurred was with the then Montreal Expos in Nov. of 2001. The Lenders would most assuredly challenge MLB’s league constitution saying that the bankruptcy process to pay back lenders supersedes that of the league.

Will it All be Over Soon?

The short answer is, no. In some form, the Rangers sale will continue to drag on in the courts. If the creditors lose out, they have said they will appeal to the U.S. Court of Appeals for the 5th Circuit in New Orleans. The basis of the appeal would be centered on Judge Lynn not granting enough time for competitive bidding. Should the Greenberg/Ryan group lose, it seems very possible the lawsuits will be filed there, as well.

But, those are likely to be actions on the periphery. The focus is really now on two dates: Aug. 12, should the Greenberg/Ryan group win, and Oct. 11 for any other groups in the hunt. On the latter, if the funding is reached in time, the focus will then move to MLB’s approval process.

So, while Tues., Weds. and Thurs. will set into motion how the ownership of the Texas Rangers could wind up, the sports and business pages will be sprinkled with the bankruptcy case, likely for many months to come.



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Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, as well as a contributor to FanGraphs and Forbes SportsMoney. He is available for freelance and looks forward to your comments.


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MikeS
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MikeS
6 years 27 days ago

After reading this I am officially rooting for the Rangers to win the World Series. Imagine the uproar. Fans tend to hate ownership and blame them for not spending enough money to make their teams as good as the Yankees. So here’s a bankrupt team with no ownership at all that manages to add Cliff Lee at the deadline. If they could win it all, the hoopla that followed would be more fun to watch than any disaster film I can think of. Just get some popcorn and settle in!

Texas_Dawg
Member
Texas_Dawg
6 years 27 days ago

Maury Brown is a hack that has shamelessly shilled for MLB and Greenberg/Ryan throughout this process.

And he has been dead wrong with his predictions. Brown repeatedly said in March, April, and May that Greenberg/Ryan would “very soon” be owners of the team. He was directly told by several commenters at his blog and other sites where he has posted that there were serious concerns with the lack of cash behind the Greenberg/Ryan deal (Greenberg and Ryan are only putting in a few million dollars of their own money, combined), and he flippantly dismissed these as comments.

He’s been very quick to trumpet every bogus fear-mongering attempt by people like Nolan Ryan, such as the laughably false claims the Rangers are having scouts poached by other teams and that they wouldn’t be able to go to arbitration with Josh Hamilton.

Brown repeatedly said that bankruptcy court would be “suicide” for the creditors. Brown at his blog on April 22: “This deal has exceptionally long odds of going into bankruptcy. Eats mightily into Monarch’s profits.” Brown at his blog on June 12, about Judge Lynn opening the process up to new bidders:

“Much like Judge Baum in the Coyotes bankruptcy case, he was unwilling to stick his fingers in the waters around league consent. If he does, and the league does not approve Crane, there would be an incredible legal battle around consent rights… I just don’t see that.”

He has repeatedly and erroneously referred to Monarch Capital as a “predatory hedge fund.”

Maury Brown is a hack in love with his MLB sources and thus willing to shill for them, even though they’ve led him into being completely dead wrong throughout this whole process.

Snorkel
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Snorkel
6 years 27 days ago

I’ll go you better MikeS.

If Rangers somehow did make the World Series, I’ll bet that the national audience for the Series would rise noticeably as a lot of people all over the country are really interested in this soap opera. If Rangers made it, I’ll bet a lot of people would root for them, just because of all the negative notoriety.

Viewership of the Series has tracked downhill since the Red Sox broke their jinx. Add this legal drama to the Rangers “Curse of the Washing Senators” and you have a recipe for a lot of interest among even the benign baseball fans.

Pat
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Pat
6 years 27 days ago

The article above is interesting, as a fan I am simply anxious to see a resolution. What concerns me is that fans were thinking a resolution would come this week, but it appears that will be followed by more litigation.

Snorkel – I agree, I think the trials and tribulations of the Rangers in the courtroom would make for an intriguing sublot in the playoffs.

And to Texas Dawg…wow…you have some mighty strong opinions about the author. He must have pissed you off at some point.

t ball
Member
t ball
6 years 27 days ago

I don’t think Maury pissed him off, he talks down to everyone like that.

Texas_Dawg
Member
Texas_Dawg
6 years 27 days ago

It only “appears it will be followed by more litigation” because you are taking that from Maury Brown and the Greenberg/Ryan/MLB side.

Monarch and the parties in the background have no media presence. So MLB gets to largely control the story in the media, thanks to people like Maury Brown who have duped less interested readers and outlets (like FanGraphs) into believing they are unbiased parties just providing the honest details.

Maury Brown has been dead wrong on the whole story because he was simply advancing MLB’s spin on every new detail on the topic… and MLB has not gotten what it wanted. So knowing that, when Maury Brown now tells you a Greenberg/Ryan loss in the auction will mean a lot more litigation… I’d say it’s a pretty safe bet that a Greenberg/Ryan loss in the auction will lead to a much quicker resolution of all this.

jackson
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jackson
6 years 27 days ago

I think TexasDawg works for Crane.

Texas_Dawg
Member
Texas_Dawg
6 years 27 days ago

I don’t work for anyone involved and have friends on opposing sides of the deal.

I just find it lame when someone presents himself as an unbiased “journalist” while shilling for one side and pandering to popular opinion.

Back in the spring, I saw Maury regularly dismissing people who were correcting him or even just asking genuine questions that didn’t fit the party line MLB and Greenberg/Ryan were feeding him. So it’s kind of fun to sit here now, reminding him how badly he has been wrong about pretty much everything related to this issue.

Texas_Longhorn
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Texas_Longhorn
6 years 27 days ago

I think Texas_Dawg is a foreigner and should worry about the Braves instead of the Rangers. Go shill for Cuban and Crane somewhere else. Woof woof.

gatorbait
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gatorbait
6 years 27 days ago

And who is paying you, Texas-Dawg? Are you one of Crane’s lap dogs?
What I don’t understand is your venom against Nolan Ryan. Rangers fans have spoken, and it’s clear that they like and will support a team run by Nolan and Jon Daniels.
Anyone who runs off Ryan/Daniels will alienate the paying customers. Don’t you see that, you biased dumbwad?
Maybe you’re one of those yankee lawyers and you consider it your New York duty to sabotage one of the pinstripers’ baseball competitors? Very cowardly, when you get right down to it.
I have no problem with Maury Brown’s commentary or his reporting. The story seemed to change with the wind, anyway.
Lastly, check your law journals. Baseball’s power to control its ownership partners has passed courtroom tests repeatedly. The Supreme Court has said time and again that only Congress can change MLB’s ownership rights.

Yankee go home, Texas-Dawg.

Texas_Dawg
Member
Texas_Dawg
6 years 27 days ago

Ha.

Great demonstration of why Maury Brown’s shilling has found such a receptive and completely uncritical audience.

Wonko The Sane
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Wonko The Sane
6 years 27 days ago

Actually, Texas_Dawg claims to be tight with the Hicks family.

Texas_Dawg
Member
Texas_Dawg
6 years 26 days ago

Do you realize that Hicks has done everything he could to get the team to the Greenberg/Ryan group (which is why they’ve consistently followed the advice of his lawyers), the group Maury Brown has shilled for?

Texas_Dawg
Member
Texas_Dawg
6 years 26 days ago

You have no idea what you are talking about, Maury. None.

Hicks was not “working with Crane.” HSG and its lawyers continued to talk to Crane in attempt to appease the creditors and to give the HSG/Greenberg/Ryan team a better position with the court, showing that they had fairly entertained Crane’s best offers.

Do you think Chuck Greenberg is an idiot? Why would he be working directly with Hicks and HSG’s lawyers at this point if Hicks had been going behind his back as you allege?

You are completely clueless on this. It’s a shame great sites like this one are still falling for your crap.

Chad R
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Chad R
6 years 26 days ago

In the made-for-tv movie of all of this, I think Nolan will played by Robert Duvall, Cuban will be played by Bronson Pinchot from perfect strangers, Maury will be played by Mickey Rourke (sorry Maury), JD played by Freddy Prinze Jr, and Texas_Dawg will be played by a talking douchebag.

A Stephens
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A Stephens
6 years 26 days ago

I believe I’ve read pretty much every article written by anyone regarding the Ranger bankruptcy. While it’s probably human nature that most of us would have chosen one side or another in this drama, and while there were some who were guilty of shoddy reporting (they ultimately stood up and admitted as much), Mr. Brown, you’ve been fair and forthright in your reporting. You’ve indicated when something was opinion, and you typically tried to provide sourcing or context for what you were writing. Thank you for the professional manner in which you’ve conducted yourself.

Texas_Dawg, while I may or may not have a rooting interest in who ends up owning the Rangers, I’m reasonable enough, and hopefully mature enough, to understand that at the end of the day it’ll be what it’ll be. I imagine Mr. brown doesn’t give it even that much thought.

Greg
Guest
Greg
6 years 26 days ago

I think Texas_Dawg makes some good points, but would like to know where all his information comes from and his qualifications for where his insight comes from. To be honest, Texas_Dawg, you don’t sound completely unbiased yourself. Are you shilling for someone? What I would really like to do, though. is commend Maury Brown for letting Texas_Dawg make his comments and not removing them, since they are highly critical of Maury on his own blog. Way to go, Maury. That says alot about you and your credibility. Thumbs up.

Greg
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Greg
6 years 26 days ago

Oops. this is actually FanGraphs, not Maury’s blog, but I bet Maury would be the same either way.

MLBLender
Guest
MLBLender
6 years 26 days ago

Texas_Dawg, you’re absolutely right, but don’t be too harsh. Maury has just repeated everything that his MLB sources have told him all along the way, and MLB has been dead wrong all throughout the process (Selig was in CONTROL of the sale process, right, RIGHT!), so you can only expect Maury’s reporting to look ridiculous in retrospect. My favorite gaff was in April when he kept telling people that the lenders would have no ability to contest the sale because the price was above the lien, and that it would be suicide for lenders to let the $30mm delta be wasted away by legal expenses in court. Here’s a wager — the final auction price will be above $300 million cash, which I bet was the creditors’ objective from the beginning.

Texas_Dawg
Member
Texas_Dawg
6 years 26 days ago

I realize that, MLBLender.

Maury has just been a “useful idiot” for them… and willing to do their spin for them given the nice quid pro quo arrangement this is for him. It’s just disappointing to see him now showing up at otherwise great sites like this one.

MLBLender
Guest
MLBLender
6 years 26 days ago

And Maury isn’t alone on this issue, since the entire media gives Nolan Ryan a complete hall pass because … he’s Nolan Ryan, but not one journalist has critically questioned Nolan Ryan’s role in this process. He is the president of the company, has a fiduciary obligation to its creditors, and all he has done is leverage his name and connections with MLB to steal (er, purchase) the team from the creditors on the cheap. None of this would have been an issue if Ryan/Greenberg had participated honestly and bid more than Crane last December. Instead, Ryan/Greenberg got MLB to kick everyone else out of the playground so that they could have the sandbox to themselves. All the fans care about is continuity of the Ryan/Daniels administration, I understand. Ryan would have served the fans better if he didn’t try to buy it himself, and actually just did his job and found a way to work with whomever the new owner is.

Texas_Dawg
Member
Texas_Dawg
6 years 26 days ago

Exactly.

And to be clear, Jon Daniels put this entire thing together. Nolan Ryan was just a nice PR move… and a guy who showed up well after Daniels and Thad Levine and others had their brilliant plan under way.

A Stephens
Guest
A Stephens
6 years 26 days ago

Suggestion Mr. Brown, may want to rename the comments area as “spin room”.

MLBLender
Guest
MLBLender
6 years 26 days ago

Stephens, that a better name for Maury’s blog, but insert “MLB” in the front.

Jay84
Guest
Jay84
6 years 25 days ago

Rangers100 –

Sorry you were wrong about, well, EVERYTHING, lil’ buddy! Hope you’ll still come out and party with the rest of us. Even if it means driving aaaalllll the way out to Arlington, kid. :)

Miles Pondexter
Guest
6 years 18 days ago

All in all, its a good post, but you could have spent a littlemore time on it. but a good post

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