The Work

July 13, 2010 4:55 PM

White & Case Joins Rangers Bankruptcy Case

Posted by Brian Baxter

The Texas Rangers may have bolstered their roster for a playoff run with the recent additions of Cliff Lee and Bengie Molina, but a civil suit filed in connection with the franchise's Chapter 11 case has plunged the team's ownership situation into further disarray.

According to a 36-page complaint filed in U.S. bankruptcy court in Fort Worth, White & Case global financial restructuring and insolvency chair Thomas Lauria and bankruptcy partner Craig Averch are now the latest lawyers to land roles in the high-profile case, advising the prospective ownership group led by Pepper Hamilton partner Charles Greenberg and current Rangers president--and Hall of Fame pitcher--Nolan Ryan.

While the Greenberg-Ryan group appeared to have clinched a deal for the team earlier this year, the transaction required the approval of both Major League Baseball and a group of roughly 40 creditors holding $525 million in debt owed by Rangers owner Thomas Hicks. (Hicks retained Weil, Gotshal & Manges last year to advise on an expected sale of the team; the firm subsequently advised him on the divestiture of several other professional sports assets.)

When negotiations with lenders and their lawyers at Clifford ChanceLatham & Watkins and Milbank, Tweed, Hadley & McCloy broke down in late April, Hicks voluntarily put the team into bankruptcy to help expedite a sale to the Greenberg-Ryan group, known as Rangers Baseball Express LLC (RBE).

But though the Rangers continue to win on the field, the franchise hasn't been able to duplicate that success in court. A bankruptcy judge issued a ruling late last month that stalled the proposed sale to RBE, and the Rangers are now set to go on the auction block next week.

The suit filed Monday represents an attempt by RBE to scuttle the auction and allow its acquistion of the team to proceed. In its complaint, RBE accuses the Rangers of breaching a purchase agreement for the deal already in place. (The Rangers's creditors want an auction attracting other bidders that might top the Greenberg-Ryan offer--and increase the amount to be recovered via bankruptcy proceedings.)

According to the complaint, RBE also claims that court-appointed chief restructuring officer William Snyder tried to "hijack the proceedings" by agreeing to support the team's bankruptcy plan after the Greenberg-Ryan group "agreed to a limited waiver of its exclusivity rights" on the condition that the Rangers "implemented the specific bidding procedures."

RBE claims Snyder then began pursuing negotiations with other prospective bidders for the Rangers, one of whom allegedly attended a mediation session last week after being invited by Snyder, according to The Associated Press. The suit further claims that because the final bidding terms were not in place, RBE's exclusivity rights were still in place and the Rangers breached their duty by entertaining other offers for the team.

As previously reported by The Am Law Daily, one of those bidders, Houston businessman Jim Crane, was advised by Proskauer Rose and former Wachtell, Lipton, Rosen & Katz attorney George Postolos, now a prominent sports consultant.

Neither Lauria nor Averch, who heads White & Case's Los Angeles-based bankruptcy group, responded to requests for comment on the suit. Lauria is a veteran of the Chrysler bankruptcy battles who recently got the call to depose Sam Zell in the Tribune Company's Chapter 11 case.

Foley & Lardner sports industry chair Mary Braza, well-known in baseball circles, is advising RBE on its proposed acquisition of the Rangers along with the head of Foley's bankruptcy group, Michael Small. Henry Simon, Jr., and Robert Simon from Fort Worth bankruptcy boutique Barlow Garsek & Simon are serving as local counsel to Greenberg and RBE. (Braza said in an e-mail that the group was not authorized to comment at this time.)

Greenberg, who heads Pepper Hamilton's sports practice from Pittsburgh and holds ownership interests in several minor league baseball teams, did not immediately return a phone call seeking comment. Nor did the lead lawyer for the Rangers, Weil business finance and restructuring partner Martin Sosland in Dallas, who is being assisted by bankruptcy partner Ronit Berkovich in New York.

The suit filed on Monday by RBE, which has Ryan suing his current employer, marks just the latest nasty twist in a case that has grown increasingly contentious. Last week the U.S. trustee urged that the Rangers replace Weil as its bankruptcy counsel because of a purported conflict of interest by the firm. On Monday, UPI reported that Snyder, the turnaround professional trying to resolve differences between the team and its creditors, had received threatening phone calls from Rangers fans because of his role in the case.

At a bankruptcy hearing on Tuesday to deal with the auction issue, Bloomberg reports that the Rangers proposed having an auction in nine days in which the Greenberg-Ryan group would be the lead bidder for the franchise, while requiring other competing bidders to gain the approval of MLB before submitting ownership bids. Financing for the RBE bid by Greenberg and Ryan expires on August 12.

U.S. bankruptcy judge Michael Lynn has scheduled a confirmation hearing for July 22, during which the team is expected to exit Chapter 11 under new ownership.

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