My breakdown of the numbers

Just so there's everything on one place - here's what I think went down MBA casestudy recap style.



Original Situation at Bankruptcy date:


Unsecured Creditors owed $200 million (including A-Rod- if he was unsecured, but may have been secured, hot dog vendors, airplane charter, anyone who did not have their debt secured by something). I could be wrong about total amount of unsecured creditors at bankruptcy.

Secured Creditors owed $535 million (including bond holders, first and second lien holders, banks, etc )

Total debt owed of $735 million


First thing the bankruptcy judge declared- total amount all unsecured creditors would be paid is $75 million of the $200 million owed. That is what a bankruptcy judge is paid to do and that is all there is for them, no recourse.


Original Greenberg-Ryan offer


$505 million ($305million in cash and $200m of assumed debt) to be paid as follows:

$75 million to unsecured creditors (just as judge had decreed)

$230m cash and $200m assumption of creditor debt for total $430 million to secured creditors (of the $535m owed)


In addition Greenberg and Ryan had a side deal to pay Tom Hicks for his office building and parking lots $70 million cash

So actually Greenberg – Ryan had raised $375 million of cash and $200 million of debt- a total $575 m in financing secured if you include the cash they raised to pay Hicks.


THEN the secured creditors said, hell no, we want to be fully paid and will put this thing into bankruptcy because we only get $430m of the $535m we are owed. Tom should not have been in line to be paid at all - that is not right. We want that $70million also, which would put us at $505m of $535m owed.  The judge agreed to hold an auction, with the new rule being that the $70 million to Tom Hicks was off the table. So, without doing anything new in financing, Greenberg-Ryan could immediately go to $375m cash plus $200 million in assumed liabilities for a total package of $575m.


Mark Cuban could also see that and understood the following would be the theoretical maximum offer to buy the team:

$75 million to unsecured creditors

$535 million to completely pay off secured creditors

$610 million total package


So, really, for all the bluster and theatrics (and desire to keep as much cash in the ballclub for operating cash, player procurement, etc) both sides knew that there was a lid of $610 million consideration on this deal. The only question was what blend of cash plus assumed liabilities for go-forward balance sheet.  To pay more than that was actually stupid because any money over $610m would just flow to unsecured creditors which is like pissing it in the wind. Neither side, and no one with a brain in their head would pay over $610m, which is why it was the max.


Winning bid:

$385 million cash

$208 million debt

$593 million consideration (though it sure sounded to me like there was another $12 million in escrow that hadn’t been earmarked for anything which raised the real value to $605m consideration - $5m under theoretical max that could be paid. This also was probably the root of all the arguments about whose deal had more cash, real cash, ready cash, etc. etc)


Of the $385m that will flow into the new Rangers bank account, cash will flow out as follows:


$75m to unsecured creditors

$310m to unsecured creditors- leaving $208m liability to the secured creditors,


So, this offer paid the secured lenders $518m of their $535m claim- a substantial improvement over the original $430 million). All of this “found money” in the bankruptcy hearing really just came from Tom Hicks pocket. But realistically, Tom STILL owns those assets and sooner or later he will have to be dealt with since he owns the parking lots and the office building and could play hardball with parking fees, etc, to get their attention.  Tom Hicks and other owners of the Rangers, get completely shut out. The equity goes to zero.


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