Friday, August 28, 2009

Dollars and Sense: Bankruptcy Briefs

Here at SportsJudge Blog, we usually focus on the legal side of the ongoing Phoenix Coyotes bankruptcy case. Today, our focus will shift a bit more towards the business side of the case, with an additional piece on the pending sale of the Chicago Cubs by the Tribune Co.

NHL In, Reinsdorf Out, Balsillie Still Kicking
In a somewhat surprising move, Jerry Reinsdorf has withdrawn his $148 million bid for the Phoenix Coyotes from the auction to be held by the Bankruptcy Court on September 10. At the same time, the NHL has submitted its own bid, reported to be about $140 million, for the franchise. The NHL is seeking to purchase the Coyotes and then immediately re-sell the team to a third party. This is not the first time the NHL has submitted a bid in a bankruptcy case; indeed, the NHL filed a bid in the Pittsburgh Penguins case in the late-1990s as a contingency if no buyer willing to keep the team in Pittsburgh could be found. It is also not unprecedented for a league to own a franchise; Major League Baseball owned the Montreal Expos for three years before the team moved to Washington, D.C. With Reinsdorf out of the bidding process, that leaves three bids for the auction on September 10: Jim Balsillie's $212.5 million bid, Ice Edge Holding's $150 million bid, and the NHL's $140 million bid. My money is still on Jim Balsillie winning the auction if (and that's a big if) he can resolve (1) the antitrust issues regarding relocating the franchise and (2) the ownership issues arising from the NHL's rejection of him as an owner. Resolution of those issues is ultimately in the hands of Bankruptcy Judge Redfield Baum.

Cubs To Be Sold to Ricketts Family, Bankruptcy Filing Possible
As part of its own bankruptcy case, the Tribune Co. is required to obtain court approval for the sale of any significant assets occurring outside the ordinary course of business. That means that the Tribune Co. must obtain court approval before its sale of the Chicago Cubs (an entity owned by the Tribune Co.) to the Ricketts family (Joe Ricketts is the founder of TD Ameritrade) can be finalized. Because of the precariousness of a debtor selling a large asset during the bankruptcy process, the Tribune Co. may be forced to place the Cubs into Chapter 11 to facilitate the process. Such a filing would almost assuredly be a pre-packaged case where the parties merely file a bankruptcy petition to take advantage of certain Bankruptcy Code provisions to effectuate the sale on which they have previously agreed. This would be very similar to the Los Angeles Kings bankruptcy case in 1995. In that case, the filing was essentially designed to approve the sale of the team previously negotiated and approved by the NHL. There are two other things to note about the Cubs sale. First, if the Cubs file, it will be the first bankruptcy filing by a professional sports franchise outside the NHL since the inception of the current Bankruptcy Code in 1978. Second, the $845 million price tag the Ricketts family will pay, most of which the Tribune Co. will use to pay creditors, is $155 million less than some of the previously reported $1 billion bids. While that shouldn't be anything giving the bankruptcy court cause to disallow the sale, it is still substantially less than what creditors may have been expecting.

Stay tuned to SportsJudge Blog for more ongoing coverage of these developments.

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