Before the Rangers' Skipper Takes the Stand, the Box Score From Yesterday's Hearing
Tuesday's testimony in the Texas Rangers bankruptcy case from the court-appointed chief restructuring officer and one of the lenders revealed four potential competitors to the ownership group led by Pittsburgh lawyer Chuck Greenberg and Rangers president Nolan Ryan, whose bid for the team is $520 million, according to Chief Restructuring Officer William Snyder.
Sam Merten Rangers manager Ron Washington will step off the field and into a Fort Worth federal courtroom on Thursday.
Jim Crane and Jeff Beck, who were selected by owner Tom Hicks as the other two finalists along with the Greenberg-Ryan group in 2009, were named directly because they've been approved to place bids by Major League Baseball. Dallas Mavericks owner Mark Cuban wasn't named; however, Judge Michael Lynn noted Dallas lawyer Clifton Jessup's presence in the courtroom, claiming he was representing an undisclosed bidder. And when Glenn Kurtz, Greenberg and Ryan's attorney, asked Snyder if Cuban was in fact a bidder, Snyder grinned.
When Kurtz then asked Snyder if Cuban -- referred to as Putative Bidder One -- was financially able to place a bid, Snyder said "yes" based on "general knowledge of that person." Kurtz would later claim that Cuban has been given access to due diligence.
Both Snyder and lender Sal Galatioto acknowledged an undisclosed fourth bidder -- Putative Bidder Two. Snyder downplayed the fourth party, saying he's only had two phone calls with them and agreeing with Judge Lynn's assessment that they're "not even a tire-kicker." However, Galatioto, a 15-year veteran sports banker who rattled off a lengthy list of MLB and NBA franchise sales he's negotiated (including the recent $450 million sale of the Golden State Warriors), said he's scheduled to meet with the mystery party next week and then dropped this bombshell.
"They have the financial wherewithal to write the check," he said when asked about their ability to obtain financing.
Despite the four interested bidders, Galatioto, who's a first and second lien lender and second lien agent involved in the Rangers debt, claimed it's "murky as to whether the team is for sale" because of the purchase agreement in place with the Greenberg-Ryan group and vocal support of the sale by MLB. Bob DuPuy, MLB's president and chief operating officer, and Chuck Greenberg attended yesterday's bench trial.
Snyder said Crane has submitted a definitive purchase agreement, and he's using the lenders involved in the bankruptcy to help bridge his financing. Crane expressed his desire to be the "stalking horse" bid, Snyder testified, meaning his bid would be the starting point for the auction and would need to be bested by at least $15 million. More important, he would be paid a "breakup fee," which is set at $10 million or 125 percent of any fees accrued, whichever is greater, if he loses. The Greenberg-Ryan group is currently the stalking horse.
"He wanted to be in the lead position," Snyder said.
Beck needs "a little more time" than Crane to complete his financing, Snyder said, which includes a commitment of his own equity amounting to more than half of the Greenberg-Ryan group's equity. Beck has only agreed to an amount he'd pay for the team "in general terms," according to Snyder.
The lenders and Snyder argued that the August 4 auction date doesn't allow enough time for the interested parties to arrange their financing. Snyder suggested that the potential bidders meet with court-appointed mediator Judge Russell Nelms to determine a better date.
Kurtz introduced a series of e-mail communications from Andrew Herenstein, the managing principal of the lead creditor, Monarch Alternative Capital, into evidence. In late April e-mails to other lenders and MLB, Herenstein claimed that Greenberg and Ryan had failed to obtain proper financing, and "MLB should hold an auction."
"Give us one week to run a process," he wrote.
When Lynn asked Snyder what he'd say if the lenders suggested June 2011 as a better auction date, Snyder said he'd have to consider it if it would result in a fairer process but that it would be best if it was resolved by the end of the baseball season. Galatioto said the banks could be ready in 90 days.
Snyder also discussed the other bidders' concerns regarding the land surrounding the ballpark, which Greenberg and Ryan have agreed to purchase for $70 million, putting their total bid at approximately $590 million. The land is necessary for parking, but most would rather lease it as Hicks is required to do by a city of Arlington ordinance.
Galatioto, who's also representing Hicks in his effort to sell the Dallas Stars and his 50 percent interest in the American Airlines Center, estimated the Stars' sale to bring in about $140 million to $150 million in proceeds for lenders of HSG Sports Group, the parent company of the Rangers and Stars, and said there are three interested bidders.
Judge Lynn didn't rule on whether he'd maintain the August 4 auction date, but he tipped his hand when examining Snyder. He went point by point on at least 15 items comparing the sale procedures that Snyder had previously endorsed and the one devised by Lynn last week.
"You have a better procedure, yes," Snyder admitted early in the questioning.
HSG attorney Glenn West had been scheduled to testify, but Yolanda Garcia, an attorney for team owners, argued that the lenders needed to prove that his testimony was both necessary and not obtainable by any other source. West had e-mailed MLB in late 2009 that Crane's offer for the Rangers was between $13 million and $20 million higher than the Greenberg-Ryan group's.
West will likely testify Thursday as Lynn has other scheduled hearings today, as will Rangers manager Ron Washington, Chuck Greenberg and perhaps Nolan Ryan. Washington will appear at Lynn's request, and while the nature of his testimony is unclear, sources say he'll be asked how the bankruptcy is impacting the clubhouse.