April 20, 2010 2:59 PM
Three Sports Teams on the Block, Three Deals for Weil
Posted by Zach Lowe
The well-documented troubles of Tom Hicks have moved the Texas magnate to try and sell three different pro sports teams, and Hicks has retained Weil, Gotshal & Manges to lead all three deals, lawyers on the deal say. Hicks put two of the teams on the block only in the last few weeks: the National Hockey League's Dallas Stars and Liverpool, one of the gem's of England's Premier League. (That's soccer, for the uninitiated.) Those teams haven't been on the block long enough for any super-thorny legal issues to emerge.
Such is not the case with Hicks's Major League Baseball team, the Texas Rangers, which Hicks agreed earlier this year to sell to a consortium of investors that includes famed pitcher Nolan Ryan and Pepper Hamilton sports law partner Chuck Greenberg. Under the terms of the deal, worth more than $500 million, Greenberg would take over as the Rangers's managing partner and CEO. Greenberg, a well-known sports attorney in Pittsburgh, has not returned several Am Law Daily requests for comment.
One problem: Tom Hicks owes creditors more than $500 million, and those creditors aren't satisfied with the terms of the Rangers sale, according to The New York Times and this story (subscription only) in the Sports Business Journal. JPMorgan Chase, represented by partners David Teh and Ronan Wicks of Latham & Watkins, is the agent bank behind the debt, but an ad hoc committee of various funds and debt holders represented by Milbank, Tweed, Hadley & McCoy's Andrew LeBlanc, has taken control of the negotiating process with Hicks, according to sources familiar with the deal. LeBlanc declined to comment; Wicks and Teh have not responded to several requests for comment.
Press reports have suggested creditors are upset that Hicks is scheduled to receive money from a separate deal in which he and others will sell a parcel of land near the Rangers stadium to the Greenberg group for $90 million. (Creditors will receive all the proceeds from the sale of the team itself.) West says the land deal is not the issue; rather, creditors are concerned that Hicks could have gotten a better deal from a rival bidder. As we've previously reported, Greenberg's group beat out two finalists, including a group represented by Proskauer Rose.
This is where Major League Baseball comes in. The league, represented by Jordan Yarett of Paul, Weiss, Rifkind, Wharton & Garrison, has made it clear throughout the process that it prefers the Greenberg/Ryan bid, according to four sources familiar with the matter. Yarett, who has represented MLB in financing work before, declined to comment. A sale cannot take place without the league's support; the league and three-quarters of individual team owners must approve any new owner, and buyers who get an early vote of confidence usually win out.
The league's push for the Greenberg team isn't sitting well with the Hicks creditors, who simply want the most money possible out of the deal, the sources say. Some on the creditors side have raised questions about whether Greenberg's move to retain Foley & Lardner partner Mary K. Braza, longtime outside counsel to the league, has given Greenberg an unfair advantage in the deal talks, the sources say. Braza declined to comment when we reached her today. But sources outside the league tell us Braza signed a strict nondisclosure agreement early in the process that bars her from talking to MLB officials without permission from the Hicks side.
In any case, this marks the latest clash between sports leagues, their arcane ownership rules, struggling owners, and creditors. Recall the now famous case of the NHL's Phoenix Coyotes, whose owner included the team in a Chapter 11 filing and tried to sell the team through the bankruptcy court to a Canadian businessman with plans to move the club to Ontario. That prospective owner, Jim Balsillie, offered nearly $100 million more for the team than any other bidder, and the Coyotes bankrupt owner preferred Balsillie's deal. But the NHL (represented by Skadden, Arps, Slate, Meagher & Flom) thought Balsillie unfit to be an NHL owner and opposed the plan to move the team to Canada. The league claimed authority over any franchise move and accused the Coyotes and Balsillie of using the bankruptcy courts to get around league rules. The debtors countered (in part) by simply pointing out that Balsillie's deal offered the most money for creditors and thus should win the day.
In other words: Another clash of traditional business interests with a sports league's desire to control who owns its teams. It's a clash we're seeing now in the battle over the Texas Rangers.
Weil--and Hicks--can only hope the Stars and Liverpool sales go more smoothly.Make a comment