Tom Hicks, Debt-to-Value, and the Leveraging of the Texas Rangers
by Adam J. Morris on Dec 1, 2009 11:22 AM CST
118 comments
Yesterday's discussion of the Rangers' operating income, and what that does and does not mean for the franchise, prompted me to take a look at another relevant bit of data regarding the current Rangers situation...
I think everyone knows that the Hicks Sports Group has defaulted on a bunch of loans, which is what has led to the current situation where MLB is having to front the Rangers money and Tom Hicks (or, technically, HSG) is having to sell the team.
The 2009 Forbes data supports the notion that the Rangers are a highly leveraged franchise...the team's debt to value ratio is 66%, the third highest in baseball, with only the Yankees and Mets (both of whom took on a bunch of new stadium debt the previous offseason) with higher ratios. The Washington Nationals, at 62%, are fourth, and they obviously have a new stadium (and, I believe, associated stadium debt).
The Padres are sitting at 60%, and of course were just purchased by the Moorad group. The Dodgers are at 58% and, reportedly, the purchase by the McCourts was almost completely debt-financed, so it makes sense that they'd have a high debt to value ratio. The Tigers are at 57% (also with a relatively new stadium), the recently-purchased Diamondbacks are at 51%, and the St. Louis Cardinals are at 50%.
Every other team has a debt to value ratio of 38% of lower, with half of MLB teams having a debt to value ratio of less than 30%.
The Rangers are something of an outlier, having an extremely high debt/value ratio, and having not been recently purchased or incurring significant stadium-related debt recently.
In any case...according to the April, 2009, Forbes data, the Rangers, valued at $405 million, are saddled with $265-270 million in debt.
What is particularly interesting to me, though, is that this huge debt level for the Rangers was only recently incurred. In April, 2002 -- just a few years after Hicks bought the Rangers -- the team's debt/value ratio was 40%. With a value of $356 million, that meant the team, in April, 2002, had around $140-145 million in debt.
But that increase in debt, that was because of the ARod contract, the Juan Gonzalez contract, and all that other spending in the early 2000s, right? That explains why debt increased by over $100 million over a 7 year period, surely...
Except...in April, 2005 -- one year after ARod was traded and the payroll was slashed and Hicks became fiscally conservative, at a time when the debt should have been at its highest, the level of debt was the same as it had been in 2002. The team had diminished in value, to $326 million, meaning that debt/value was up to 44%, but that still put the total debt in the $140-145 million range. According to the Forbes data, the Rangers debt, after the spending spree of the early 2000s, was no higher than it had been at the beginning of that period.
So what happened? It 2006, the debt level based on the Forbes figures was around $160 million. Still not unreasonable.
Then in 2007, Forbes reported the Rangers at a debt/value ratio of 73%, the third highest in baseball. Valued at $365 million, that meant that the Rangers were carrying $265-270 million in debt -- over $100 million increase in debt in one year.
And of course, as I wrote yesterday, the team over the past five years has generated a significant amount of operating income, so the baseball operations shouldn't have been going into the red there.
So what happened between April, 2006, and April, 2007, that caused the debt to value ratio to skyrocket, and that led to the Rangers being so heavily leveraged that they've spent the past year hamstrung in terms of being able to spend money, turning into a ward of the MLB state and forcing a sale?
One can only speculate, but this seems like the most obvious cause:
Wednesday, 07 February 2007 Americans George Gillett and Tom Hicks buy Liverpool Football Club
US business tycoons George Gillett and Tom Hicks have negotiated a deal to buy Liverpool Football Club and will be co-chairmen, but current chief executive Rick Parry will retain his position too.
"If you have a chance to get a great player, you get a great player," Tom Hicks said after confirming their takeover, and he added: "We're not going to put a budget on what we're going to do."
Liverpool FC chairman David Moores, who now becomes an honorary life president, said: "This is a great step forward for its shareholders and its fans."
Tom Hicks, who owns the Dallas Stars ice hockey club and the Texas Rangers baseball team as well, joined forces with George Gillett to outdo the competition from Dubai International Capital and it was Tom Hicks and George Gillett who won.
George Gillett and Tom Hicks are reported to have guaranteed an investment of over £200m in Liverpool Football Club, but they have declined to discuss this, although they said they will make funds available, both for supporting the team and for the building of the club's new stadium in Stanley Park.
Hicks, the leveraged buyout king, dumps millions into Liverpool right around the same time as the Rangers' debt increases by $100 million.
And now, Hicks has stopped paying the Hicks Sports Group creditors, and the once financially-healthy Rangers, a franchise that has been generating significant cash for the past half-decade, and that should currently be in a position to ramp up payroll to add pieces to the young talent that is starting to blossom, instead have turned into a fiscal embarrassment, and the organization is forced to sit on its hands in a crucial offseason rather than make moves to improve the team.
Thank you, Tom Hicks.
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Fuck soccer
and Tom Hicks
"I was going to say, 'You’re gay for Elvis.' But then I realized that I, too, am gay for Elvis." ~Adam J. Morris.
by Kinslerhomer on Dec 1, 2009 11:24 AM CST reply actions 12 recs
no need to fuck soccer
but yeah, as Lil Wayne would say, fuck him with an **** dick.
What is this, Horseville? Because I'm surrounded by naysayers.
But, but what about the potential involvment
of Roger Staubach with Tom Hicks in a new ownership group?
Isn’t that supposed to be “exciting” for Ranger fans?
"Dying ain't hard. It's living that's hard."
"Ranger players, especially veterans, weren’t surprised that Daniels couldn’t find a deal"
"Business as usual." - Tom Hicks on the Ranger off-season 11/19/09
wtf does that mean?
"Sometimes you just want to sit back and watch somebody throw 100." - Jeff Passan on Neftali Feliz
it's a really lame attempt
at taking a shot at the newberg
"He will not coddle them. Nolan Ryan doesn’t coddle." - Jeff Passan
by Dirk Diggler on Dec 1, 2009 12:26 PM CST up reply actions
Is it really lame?
Not to derail the discussion from the colossal screwing we’re taking from HSG, but isn’t Josey’s point valid? In this case, Staubach is part of the Hick’s group.
No
I think you can easily separate the two issues. Being excited about Staubach being part of the ownership doesn’t necessarily mean you’re supporting Hicks. You can be excited about one part of the ownership and not the other.
He’s putting words in Jamey’s mouth.
"He will not coddle them. Nolan Ryan doesn’t coddle." - Jeff Passan
Jamey
said two weeks ago that the prospect of Roger Staubach being involved with the Rangers (with Hicks retaining ownership) “excited” him.
To the very end, Jamey not only refuses to say a critical word of Tom Hicks but also wants him to still be the owner.
"Dying ain't hard. It's living that's hard."
"Ranger players, especially veterans, weren’t surprised that Daniels couldn’t find a deal"
"Business as usual." - Tom Hicks on the Ranger off-season 11/19/09
Are you taking that out of context?
you do have a habit of doing such…
"Sometimes you just want to sit back and watch somebody throw 100." - Jeff Passan on Neftali Feliz
All Jamey said was that
the idea of Staubach at least partially owning the team excited him. The statement had nothing to do with Hicks but of course Josey has since restated it as Jamey blindly defending Hicks. And I’m sure this has nothing to do with Jamey banning Josey from his site for being a prick.
By 2028, Mark Teixeira will be in the HOF.
"I am one of the biggest Texas Ranger fans out there but I'm also one of the smartest. Deal with it."
-The Outlaw
My two cents is, Jamey
is a reasonable, perhaps optimistic sports writer. If he takes the position that present ownership sucks, that would not serve him well. Or anyone one of us. Without such access, he has less ability to deconstruct all-things Rangers.
P S – Hicks is a charming person. Deal Makers usually are…
Staubach being involved with the team
means that lying sack of shit Tom Hicks would still be involved with the team.
I admire Roger Staubach greatly and think he would be an asset but hell no if his involvement means Tom Hicks is still here.
"Dying ain't hard. It's living that's hard."
"Ranger players, especially veterans, weren’t surprised that Daniels couldn’t find a deal"
"Business as usual." - Tom Hicks on the Ranger off-season 11/19/09
Great post....but If you're trying to get me to hate Tom Hicks more than I do...
…you failed, bc it is impossible for me to hate another human being as much as I already hate Tom Hicks.
"Sometimes you just want to sit back and watch somebody throw 100." - Jeff Passan on Neftali Feliz
this
I reject your reality and substitute my own.
by GhostofSteveFoucault on Dec 1, 2009 11:41 AM CST up reply actions
I thought Liverpool was separate from HSG?
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
Could he not borrow against the Rangers (100mm) to put the money up for L-Pool?
Kinda like a Home Equity Loan?
"Sometimes you just want to sit back and watch somebody throw 100." - Jeff Passan on Neftali Feliz
what we were all made to believe
i bet you can find a post from others on this board telling us that. maybe even adam?
Here are the sports assets of HSG
http://www.hickssportsgroup.com/portfolio/
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
But there's also this:
HSG, including Major League Baseball’s Texas Rangers; the National Hockey League’s Dallas Stars; a 50 percent ownership interest in the American Airlines Center, in Dallas; and a 50 percent ownership interest in Liverpool Football Club of the English Premier League.
by Anonymous New Guy on Dec 1, 2009 12:49 PM CST up reply actions
That's Hicks Holdings, LLC
That’s the entity above HSG. Hicks Holdings, LLC owns HSG and the Liverpool interest as separate entities.
Now, say HSG went bankrupt and didn’t have enough money to pay its creditors. As a creditor you could claim that HSG is not truly separate from Hicks Holdings because Tom was commingling funds between all the entities and you could make a run at Hicks Holdings assets including the Liverpool interest.
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
The above quote is from the Hicks Holdings website
but it’s listing what makes up HSG.
by Anonymous New Guy on Dec 1, 2009 1:51 PM CST up reply actions
Nope.
Check my link above for HSG’s portfolio.
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
I know
I saw it, but the quote I posted above says otherwise. It’s not like I made it up…
by Anonymous New Guy on Dec 1, 2009 2:19 PM CST up reply actions
It doesn't say otherwise - got to read the previous paragraph. Here's the whole quote
Hicks Holdings currently consists of four principal business units:
HSG, including Major League Baseball’s Texas Rangers; the National Hockey League’s Dallas Stars; a 50 percent ownership interest in the American Airlines Center, in Dallas; and a 50 percent ownership interest in Liverpool Football Club of the English Premier League.
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
Correction - check that
That does list four different business units and seems to imply that HSG includes Liverpool. But that contradicts the specific information regarding HSG here:
http://www.hickssportsgroup.com/
Don’t know what to say.
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
But that contradicts the specific information regarding HSG here:
That was my point in the original post.
by Anonymous New Guy on Dec 1, 2009 2:40 PM CST up reply actions
Punctuation
The 4 business units are:
-HSG, including Major League Baseball’s Texas Rangers
-the National Hockey League’s Dallas Stars;
-a 50 percent ownership interest in the American Airlines Center, in Dallas;
-and a 50 percent ownership interest in Liverpool Football Club of the English Premier League
HSG is separate from the other three.
No...
the four principal business units are:
HSG
Hicks Equity Partners
Hicks Real Estate Holdings
Hicks Trans American Partners
by Anonymous New Guy on Dec 1, 2009 4:07 PM CST up reply actions
Yup
HSG owns that 50% in the American Airlines Center and is the holding company for the Rangers and Stars.
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
That's what I was thinking.
That whole thing about the budget for the Stars not impacting the budget for the Rangers not impacting the budget for the Scousers. How the hell can you say that if you are taking out a loan on one team to help pay for another?
If Brad Pitt is playing Beane who do you want playing you?
JD: Eddie Guardado.
by GhettoBear04 on Dec 1, 2009 11:42 AM CST up reply actions
A report on the default
According to the reports, the loan is partially secured on the Texas Rangers and Dallas Stars baseball teams owned by Hicks. But the loan is not secured on Hicks’ 50 per cent stake in Liverpool or by the American businessman’s personal assets.
http://www.liverpoolbanter.co.uk/2009/04/liverpool-fc-owner-tom-hicks-s.html
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
Wait a minute
Never mind. That’s why the Rangers debt/value ratio increased so much. He used the Rangers as collateral to raise the $100 MM to buy 1/2 of Liverpool. But his stake in Liverpool wasn’t used as security/collateral for the additional loans.
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
Liverpool & HSG
HSG is completely separate from Liverpool FC. Hicks and Gillette formed a new company, Kop Holdings, LLC, to finance the purchase of Liverpool.
Now as for the Rangers being used as collateral to fund Hicks’ share of the Liverpool purchase, that’s correct. Gillette did the same with the Canadiens, IIRC.
"Just remember what ol' Jack Burton does when the earth quakes, and the poison arrows fall from the sky, and the pillars of Heaven shake. Yeah, Jack Burton just looks that big ol' storm right square in the eye and he says, "Give me your best shot, pal. I can take it."
because they are worth alot of money
"He will not coddle them. Nolan Ryan doesn’t coddle." - Jeff Passan
They're worth a lot of money
I also wouldn’t want to risk losing them. I obviously can’t relate to the big business aspect here, but that’s mind boggling to me.
This is what big businesses do
they leverage assets.
"He will not coddle them. Nolan Ryan doesn’t coddle." - Jeff Passan
The degree of leverage,
has hugely increased in the last 30-40 years.
"I don't condone steroids or any other type of growth hormones or anything else, but I could care less, and, for the most part, I don't think the fans give a (bleep). The people that care about it are the people that probably don't like baseball," - Jim Leyland
The Canadiens
Gillett sold the Canadiens back in June to Molson, so they’re no longer tied to Liverpool’s finances.
"Just remember what ol' Jack Burton does when the earth quakes, and the poison arrows fall from the sky, and the pillars of Heaven shake. Yeah, Jack Burton just looks that big ol' storm right square in the eye and he says, "Give me your best shot, pal. I can take it."
Im not sure if the connection between the two is that straight forward
Maybe Forbes just estimated that the Rangers debt increased because of the Liverpool purchase…
Idk, the Rangers are technically owned by HSG and Hicks Holdings right? And because Tom owns these, then he is the head of it?
I think he bought Liverpool under his own name, with creditors backing him, not HSG, and the two debts he has are seperate… He has like 800 Mill pound debt with some dutch bankers because of Liverpool, and those he owns himself. HSG has $500 mill in debt to US bankers, due to the Rangers, and I believe those fall on the company, not the man…
But, if you want to look at it this way, since Tom is head of HSG, you could say that in total, he has $1,000,000,000 in debt.
Happy Tuesday!
TCU AD/PR Student: I Need A Job
Hicks' debts
As I understand it:
HSG owns the Rangers; any debts incurred are on HSG and/or Hicks
Kop Holdings, LLC, owns Liverpool; any debts incurred are on Kop Holdings and/or Hicks and Gillette (who each own half the club)
"Just remember what ol' Jack Burton does when the earth quakes, and the poison arrows fall from the sky, and the pillars of Heaven shake. Yeah, Jack Burton just looks that big ol' storm right square in the eye and he says, "Give me your best shot, pal. I can take it."
See, this is a far, far better analysis
of why we don’t want Tom Hicks as an owner. While he’s a genius at buying and selling companies in some industries, he simply isn’t good at sports clubs.
Absolutely nothing in there about him greedily eying the Rangers for future profits to milk though. He screwed up. He was a guy who had a couple of good assets and unwisely leveraged them in some investments he really couldn’t afford. That applies to probably half the rich in this country.
Go Rice Owls!
Its hard to deny that Hicks is good at what he does
If the economy doesn’t collapse, this is probably more of a non-issue and Hicks still has time to work out a way to keep the Rangers. Now even with the recession, he still can own Liverpool and be filthy rich but just has to sell off the Rangers.
By 2028, Mark Teixeira will be in the HOF.
"I am one of the biggest Texas Ranger fans out there but I'm also one of the smartest. Deal with it."
-The Outlaw
Except what he does
is one of the reasons the economy collapsed.
The increased leveraging of America and the debt bubble that accompanied it is why the housing market collapse spread into the entire economy.
"I don't condone steroids or any other type of growth hormones or anything else, but I could care less, and, for the most part, I don't think the fans give a (bleep). The people that care about it are the people that probably don't like baseball," - Jim Leyland
Let's do it again. The next bust won't be for another 25 years, anyway, right?
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 2:41 PM CST up reply actions
We had what
80 years between debt bubbles? Except, I’m not sure I see us learning the lesson that we learned in the 30s.
"I don't condone steroids or any other type of growth hormones or anything else, but I could care less, and, for the most part, I don't think the fans give a (bleep). The people that care about it are the people that probably don't like baseball," - Jim Leyland
Especially post-internet.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 2:45 PM CST up reply actions
Except if we don't learn the lesson
than I doubt it will be 80 years until it happens again.
"I don't condone steroids or any other type of growth hormones or anything else, but I could care less, and, for the most part, I don't think the fans give a (bleep). The people that care about it are the people that probably don't like baseball," - Jim Leyland
You still don't understand this point.
Absolutely nothing in there about him greedily eying the Rangers for future profits to milk though.
I would let it go or re-read the other thread more closely.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 2:38 PM CST up reply actions
I stand by everything I said in the previous thread
I have still seen no evidence to demonize Hicks for being anything other than a foolish investor and bad businessman (of which there is plenty of evidence when it comes to his sports investments). To insinuate he wants to “adopt the Florida model of maintaining low payrolls and not really trying that hard to compete, while maintaining profitability through mediocre attendance and MLB’s other revenue streams.” is simply ludicrous.
Go Rice Owls!
Ugh Ugh Ugh.
I’ll spell it out.
He never cared about the Rangers. He was holding them long enough to raise money for Liverpool. He didn’t have a long-term interested in being the Marlins because he’ll make 10x more elsewhere.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 2:51 PM CST up reply actions
He never cared about the Rangers?
Yeah im sure it was his master plan back in 2000 to spend a quarter billion dollars on a team and then another quarter billion dollars on one player so that in 6 years he could go buy a soccer team.
Bryan Smith (12:17:17 PM PT): Justin Smoak and Josh Hamilton. The AL West might just have found their Bash Brothers, v. 2.0.
Move along. You haven't a clue what you're talking about, here.
And I won’t waste more effort helping you.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 4:49 PM CST up reply actions
Ah because you are the business professor of this site huh?
Bryan Smith (12:17:17 PM PT): Justin Smoak and Josh Hamilton. The AL West might just have found their Bash Brothers, v. 2.0.
No, dumbass.
I’ve got a degree in it, working on a 2nd, and I’ve paid extremely close attention to the situation because I’m interested in it on many levels.
I’ve carefully articulated several thoughts in both threads to try to learn more and help other people learn. Then I have you and swamp donkey dropping deuces on my posts.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 4:54 PM CST up reply actions
Well good for you big guy
Want a cookie?
You throw out a baseless claim that Hicks never cared about the Rangers and expect it to just fly because you said so? Go fuck yourself
Bryan Smith (12:17:17 PM PT): Justin Smoak and Josh Hamilton. The AL West might just have found their Bash Brothers, v. 2.0.
you have a business degree
and the cruz of your analysis is “He never cared about the Rangers. He was holding them long enough to raise money for Liverpool. He didn’t have a long-term interested in being the Marlins because he’ll make 10x more elsewhere.”? Geez.
Go Rice Owls!
Yep. I'm pretty sure cahill agrees with me.
And that’ll do for now.
I’ve seen Trip in this thread also — I would expect both of them to express refutations to anything I’ve posted if it is off base or illogical.
Stop focusing on me. Focus on the arguments.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 5:02 PM CST up reply actions
Okay.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 9:21 PM CST up reply actions
Is their another large investment by HSG that we are missing?
Outside of the Stars center stuff in Frisco, what other large scale development projects is HCG involved in in the last few years? Are they doing anyhing around the AAC or the ballpark?
There is a huge amount of cash being used for something.
JD’s like, "you want some fucking pitching? Here’s all the pitching you can stand. Now choke on it, bitches!"- RCCook
Texas Stars
He owns the Stars new AHL affiliate in Austin and I believe he owns the Cedar Park development they’re housed in.
This is how Tom Hicks works
Buy a company, load it up with debt, use the proceeds to buy more companies.
He doesn’t actually bring any management value or improvements to the companies, just more debt.
If you look across the radio landscape, you see a lot of companies struggling to stay alive because of all the debt they are saddled with.
"I don't condone steroids or any other type of growth hormones or anything else, but I could care less, and, for the most part, I don't think the fans give a (bleep). The people that care about it are the people that probably don't like baseball," - Jim Leyland
But really
that is what business/investment/government is in the current financial system.
Without any financial know-how, this is how I see the financial world today. You buy something you strictly can’t afford. A house, a company, a stimulus package, whatever. You borrow lots of money to make the purchase. The hope, in each of those cases, is that one of two things happens. 1) the underlying value of your investment takes off: the housing market booms, the company turns a great profit, the stimulus package works causing the economy to rebound and tax revenues to jolt back up. Or 2) the value of the debt decreases due to inflation or boost of rates, where owing money at a cheap interest rate is actually like an asset (since the underlying investment hasn’t changed).
Of course, if you have deflation and dropping interest rates, a recessing economy, and dropping asset prices, these bets are bad. And then the relative weight of the debt begins to take a toll, you can’t sell because you’re underwater, you can’t roll over your loans, since your assets are worth less. So you try to tie off those assets and stop throwing good money after bad. That’s business.
So Hicks’ gamble failed. He did what Tom Hicks does, and since he’s not a moron, he isolates his investments from himself. Unfortunately, the basket with the Rangers was one of the failed baskets. And so we, as fans, got screwed. Let’s not forget though, that if the basket with the Rangers had taken off, if HSG’s leveraging paid off, the Rangers would be in incredibly good financial shape relative to other teams in baseball who play it safe. I could argue that the Rangers face a structural disadvantage with their market, fanbase, etc; maybe taking that type of risk was smart. Of course, it sucks when your double down loses.
Go Rice Owls!
by JBImaknee on Dec 1, 2009 12:31 PM CST up reply actions 1 recs
I think it's a terrible approach with a sport's franchise
where the measure of success is rarely determined by your bottom line. I seriously doubt that the owners get together to brag about making more than another team. I would imagine they get to brag about winning. I would think that applies to a lot of aspects of the entertainment industry, where being the best isn’t determined by income.
i just believe that the purpose of a professional sports team should be winning, not a profit.
that may be a little naive or wishful, but whatever
very naive
As big a fan as Mark Cuban is he is a businessman first. He may have bought the team originally as a fan and wanted nothing more than for them to win. But I guarantee you now its about business. Granted he doesn’t mind spending money to win but thats because winning sells seats and gets you the playoffs which increases revenue and your bottom line. I can almost guarantee you if the Mavs weren’t a perennial 50+ win team he would take the 2-3 year hit in the win column to rid his checkbook of big contracts, go young and cheap, and try and build another decade long dynasty
Bryan Smith (12:17:17 PM PT): Justin Smoak and Josh Hamilton. The AL West might just have found their Bash Brothers, v. 2.0.
Mavs have taken a loss the last 5 years
JD’s like, "you want some fucking pitching? Here’s all the pitching you can stand. Now choke on it, bitches!"- RCCook
Right
But its easier to take a loss if you are winning. And baseball and basketball are terrible comparisons, my apologies, because of the fact that in baseball one singular player can’t singlehandedly take you to the playoffs. In basketball if you have that one guy just to get to the playoffs doesn’t take much else (in some cases…hello Eastern conference last few years) whereas in baseball even if you have a Zach Greinke you still have to have so much more.
If the Mavs started going 41-41 with their payroll and age of their roster I have no doubt that Cuban would blow the team up in a heartbeat, take the couple years of losses, and build with young cheap players again. Running a sports franchise at a loss financially is only fathomable if the product on the field/court/etc is good enough to make it worth it
Bryan Smith (12:17:17 PM PT): Justin Smoak and Josh Hamilton. The AL West might just have found their Bash Brothers, v. 2.0.
Hicks. Soccer vs. MLB
In England there are huge penalties for going into receivership (bankruptcy) for a team. Not just financial penalties but actually deducting points in the standings from a team that goes upside down.
If those penalties are steep enough, even a big club like Liverpool might get relegated to a lower league where the TV money goes from $100mil per season to like $8mil. All this is to say that I agree with Adam, Hicks is likely pushing his debt to MLB where the penalties for his problems are less and there is zero chance his share of the TV money will ever go away.
Hicks and Gilette are so unpopular with some Liverpool fans (kind of the loud, jackass Philly fans of the UK) that the fan groups did NOT want a Scottish bank to refinance Hicks so that he would be forced to sell their beloved Liverpool. That didn’t happen and the Scottish bank reworked the loans to keep H&G in charge. So Rangers fans are not the only pissed off ones.
Careful now
As I’m not only a Liverpool fan, but also a Cowboys fan, I take exception at being compared to Philly fans…
But yeah, we (both in the US & in the UK) are pretty pissed at Hicks & Gillett- there’s a grassroots organization in Liverpool, the Spirit of Shankly, that’s carried out several protests at matches, and met with representatives of Hicks & Gillett on several occasions to voice their concerns. Nothing’s really come of their efforts thus far, but they’re at least making it perfectly clear to Hicks & Gillett that they’re not wanted…
"Just remember what ol' Jack Burton does when the earth quakes, and the poison arrows fall from the sky, and the pillars of Heaven shake. Yeah, Jack Burton just looks that big ol' storm right square in the eye and he says, "Give me your best shot, pal. I can take it."
Self-fulfilling prophecy
Sure Hicks got screwed by the market, but he also screwed himself. By bitching and moaning about how he had to reduce salary, he devalued the franchise by turning off the fan base. the DFW area is one of the top 10 markets in the country and can easily afford the Rangers. in fact, there’s no reason that the Rangers couldn’t be doing exceptionally well, with the right marketting. instead I listen to the Fan, where its all Cowboys all the time. The last time they mentioned the Rangers was to ask people if they really cared if the Rangers moved out of town or not. about 50% didn’t, and half of the ones who did care, WANTED them to move away. That’s bad marketing. That’s something the front office needs to address. They need to make themselves availble for regular interviews, generate some media buzz, fuel some free agent speculation, have some charity events, so SOMETHING!
The best research to date on the Rangers financial situation.
Adam,
You cut through all the hype. It appears that Hicks has NOT reduced debt but has increased it. It also appears that all that he has done since owning (controlling maybe a better word) the Rangers has been to make interest payments (and he stopped doing that this past spring).
Your brother, Ben, may need to step up and explain what happens when someone gets a MARGIN CALL. Put up more cash or the stock will be sold at MARKET VALUE.
How does Selig, Hicks, and MLB expect the Rangers to sell for above value? If the team had a value of $405 million in March 2009, is it possible to be worth more today?
What about the additional interest, late payments, penalty, and etc. on being in default on the loan.
Being highly leveraged in something that is increasing in value “can” help ROI. The down side is a “MARGIN CALL” on something that is decreasing in value can wipe out ALL equity.
Nice research on your part, Adam. It is appreciated.
T
any discussion of extending the deal with fox and the impact this will have on getting a new owner?
haven’t been following too closely – too depressing, but this seems like a really huge issue/potential disaster
defeatist pussy lives here
In Arlington, HSG is involved in the development of over 100 acres, as an exciting mixed-use development focused on restaurants and entertainment, planned between the Rangers Ballpark in Arlington and the new Dallas Cowboys Stadium.
This was the planned Glory Park. Hicks invested a shit ton of money in this project, but something happened and he flaked out. He pissed off the developer and the project was never completed. This happened sometime during the 2007 season. I had a friend who worked for the developer, but she couldn’t tell me much due to a possible law suit against HSG. It was actually going to be a pretty cool area.
by Anonymous New Guy on Dec 1, 2009 12:44 PM CST reply actions
Bob Sturm just now:
“You gotta check out LoneStarBall.com…”
On this topic.
"...like some Russian priest fresh off a bottle of potato vodka and a box of cigars." -t ball
BAD Radio
extoling the greatness of LSB this afternoon.
Why the hell is it Adam that has to uncover this rock? Where is Evan Grant or does he not want to jeopardize his gig on the Ranger post-game show on Fox next year?
"Dying ain't hard. It's living that's hard."
"Ranger players, especially veterans, weren’t surprised that Daniels couldn’t find a deal"
"Business as usual." - Tom Hicks on the Ranger off-season 11/19/09
Its sad
that we are exposed to your crap on a semi-daily basis… It cant be good for our health…
TCU AD/PR Student: I Need A Job
by PM Productions on Dec 1, 2009 1:39 PM CST up reply actions
Actually
writers have been on the Tom Hicks is completely in debt story since the mid 90s.
"I don't condone steroids or any other type of growth hormones or anything else, but I could care less, and, for the most part, I don't think the fans give a (bleep). The people that care about it are the people that probably don't like baseball," - Jim Leyland
Great journalism, Adam
Utilize the political process… Hicks will never be allowed by the MLB to keep any ownership in this team
This post makes me want to go stand at the corner of Ballpark and Randol Mill with a bullhorn and sandwich board
by oc on Dec 1, 2009 3:32 PM CST up reply actions
You could probably just go straight to arson.
I’m sure there would be debt to build a new stadium the next day.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 3:36 PM CST up reply actions
OT: Yes I know there's a fanpost up about it...
But head over to fangraphs.com and put in your projections for the Rangers next year…or anyone else you really want to for that matter. I’m really curious to see what the Ranger mood is on certain players now that we’ve had enough time to cool down some. I think the thing I was most surprised by was Nelson Cruz’s K% last year and throughout his career, 25.5% and 26% respectively. For some perspective, HanK BlalocK was 23.4% last year and 21.4% for his career. Although, Hamilton, Murphy, Andruw Jones, and Salty all had higher K% than Hank, too.
Also, Ian Kinsler led the team last year (min 50 PA) with a K% of 13.6%.
If Brad Pitt is playing Beane who do you want playing you?
JD: Eddie Guardado.
2007
That would be the year that Hicks’ “contributions” to the Sergio Kindle and Damion James Endowment Fund would surface.
Liverpool isn’t the only entity that he is leveraging the Rangers on. ;)
It is a great thing to know the season for speech and the season for silence.
--Seneca
The Texas Stars impact
Apparently Tom Hicks paid 12 million for the Cedar Park Construction.
He was awarded an AHL franchise to play in the rink BEFORE he actually paid for a franchise or relocated it. http://thethirdintermission.blogspot.com/2009/04/uh-about-that-austin-ahl-franchise.html
From Mike Heika: The deal is pretty unique and it shows how much the league wants this team involved. Texas is being granted a special exemption that it is a member of the league without an official affiliate and that it will purchase the first affiliate that is available for a move.
I’m heading out so I can’t look more into it, but he had to pay more money somewhere. Does anyone know if he leased an AHL team, or if he had to pay the franchise fees?
And people thought you had lost your touch with the Rubio post
This story belongs in the LSB Almanac
by oc on Dec 1, 2009 3:42 PM CST reply actions 3 recs
I think it's the defaulting part that I don't understand.
He used the Rangers as collatoral, but what was he using to make the debt payments? Is it simply that fewer people are going to games (Rangers, Liverpool, otherwise) and the attendant entertainment dollars that are spent that has messed up his cashflow to the point that he can’t make payments?
Seems like it could’ve been a pretty good financial situation overall had this all worked out.
Pro baseball has always been a dream, so this is pretty freakin’ cool out here. -- Tim Steggall, undrafted Rangers minor leaguer.
It's simple really
Ranger fans don’t drink enough Dr Pepper
by Anonymous New Guy on Dec 1, 2009 3:56 PM CST up reply actions 2 recs
Surprised nobody rec'd this
I failed my LSB ethics test.
"It's kind of a new stat that's in vogue" - Joe Buck on OPS
It's a never-ending circle.
What we could guess is that he probably wasn’t using his money to make even the interest payments.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 3:57 PM CST up reply actions
That's what I thought, but I wonder what other investments he was using for that.
Pro baseball has always been a dream, so this is pretty freakin’ cool out here. -- Tim Steggall, undrafted Rangers minor leaguer.
He was using that "operating income" that Adam posted yesterday to make the interest payments
So in the end he wasn’t really making any money.
Bryan Smith (12:17:17 PM PT): Justin Smoak and Josh Hamilton. The AL West might just have found their Bash Brothers, v. 2.0.
How do you know that bigsteve?
Or did you just pull it out of your ass?
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 4:53 PM CST up reply actions
Because its what most businesses do in that case
Just like a person with CC debt who only makes a little amount of money. They can only pay the interest on their CC and the principal doesn’t go down.
Bryan Smith (12:17:17 PM PT): Justin Smoak and Josh Hamilton. The AL West might just have found their Bash Brothers, v. 2.0.
I'll leave you to your wisdom.
Good lord you are retarded.
"Nothing we do here has a point" - Czar Morris
by inactive lsb user on Dec 1, 2009 5:00 PM CST up reply actions 1 recs
He's a lot more on the money than not
Lfc is profitable as an entity, rangers are in the same way a profitable entity but both are overleveraged and have an inability to pay of debts that are exceding their annual profits. That’s all on hicks, and hicks budget, especially in relation to footy where bankruptcy will turn the Yankees into the Mudville hens in a week. His situation is no different than average homeowners who overextended their credit cards while at the same time buying a new house they could barely cover. It’s no different I just hate him more for it.
I can't help it. I’m an asshole.
-brettgardner on Jul 7, 2009 10:55 PM EDT
by Jayslick on Dec 1, 2009 7:18 PM CST via mobile up reply actions
The real question is....
is jayslick impressed?
"He will not coddle them. Nolan Ryan doesn’t coddle." - Jeff Passan
by Dirk Diggler on Dec 1, 2009 4:01 PM CST reply actions 1 recs
Absolutely
I swear, ever since I gave ajm hell for link and summarize blogging, the site hasn’t been as much of that. Well done. You’ve been doing some really nice pieces. Pieces that others are linking back to you. That was my whole point.
The article is well done and pushes Liverpool questions from a Texas Rangers perspective. Frankly that hasn’t been done a bunch of. There’s like 5 people on earth who are sadistic rangers fans who are also bigtime scousers who understand the workings of the fa in England, the bargaing agreement in MLB, all the innerworkings in betwixt. Adam may not be scouse, but there hasn’t been Suchan in depth perspective written to date done as well, and the level of writing has drastically improved on lsb ever since I gave ya shit.
Kudos AJM, u dun good m’boy.
I can't help it. I’m an asshole.
-brettgardner on Jul 7, 2009 10:55 PM EDT
by Jayslick on Dec 1, 2009 7:07 PM CST via mobile up reply actions
You know
a site like this is going to have some ebb and flow in the type of posts Adam puts up. It’s unrealistic to expect the same kind of post every day. He didn’t decide to step up after you scolded him.
G G G E-flat_______ F F F D__________....
Not saying he did
Just saying the in depth stuff and deep thought out stuff is awesome. This is the stuff that I goto blogs to check out and ajm has made the blog a better place to stop by and read up on his thoughts. Its appreaciated, and noticed.
YNWA
I can't help it. I’m an asshole.
-brettgardner on Jul 7, 2009 10:55 PM EDT
by Jayslick on Dec 1, 2009 8:54 PM CST via mobile up reply actions
it's because he was so upset with your criticisms
i think he was having trouble sleeping, lost his appetite, started hitting the bottle
but then he decided to take your words as motivation instead of criticism and, by golly, he accomplished his objective of putting together a good blog piece and making you happy.
go away, jackass
Hey Ump,
Blow me.
Ps: u really wanna be the delayed response that doesn’t aknowledge the 1st retort?
Well done.
Cunt.
Ps: if u have problems with terminolgy surf a English footy blog, tellm you are a yank, askm what a wind up merchant is. They’ll let u know.
I can't help it. I’m an asshole.
-brettgardner on Jul 7, 2009 10:55 PM EDT
by Jayslick on Dec 1, 2009 9:29 PM CST via mobile up reply actions 2 recs
Do they regularly use
“cunt” on the English footy blogs?
Welcome to 7th grade, Slick.
by robert_d_wilfong on Dec 2, 2009 12:37 AM CST up reply actions
Yes there are lots of cunts on English footy blogs
So it’s of good use.
Seriously though, a guy tries to commend the owner of the published post and little minions beyond his control swarm in to try to bastardize the message. You guys could turn mother Theresa into josey wales in six weeks on this blog. You all deserve josey, he is of your own making. if he was ever to disappear another josey would pop right up after a period of grooming n perfecting by the pack of morons trying to work their way up the lsb org. Depth chart.
I can't help it. I’m an asshole.
-brettgardner on Jul 7, 2009 10:55 PM EDT
by Jayslick on Dec 2, 2009 10:55 AM CST via mobile up reply actions
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