Tom Hicks – welcome to the 2010 World Series
Saturday night can’t help but be a bittersweet moment for former Texas Rangers owner Tom Hicks. The Rangers with their backs to the wall down two games to none in the World Series against the San Francisco Giants will be hosting their first ever World Series, a team owned by Hicks between June 1998 and earlier this year when Chuck Greenberg and Nolan Ryan rescued the franchise from the financial turmoil Hicks’ ownership of the team had evolved into. In a similar state are the Premier League’s Liverpool franchise and the National Hockey League’s Dallas Stars, all professional sports teams owned by Tom Hicks, each either having collapsed or on the verge of collapse as a result of Hicks alleged management issues in the last few years. Still, Saturday evening Hicks will be little more than a paying spectator when the Rangers meet the San Francisco Giants in game three of the World Series in Arlington.
"I'm excited about this," Hicks told ESPN. "I do take some personal pride in it. I figured out there were no shortcuts. We started this plan five years ago and JD has been able to really turn things around. The Mark Teixeira deal was the key and it went from there."
Hicks had hoped he'd still be the owner of the team when the plan finally came together.
"I'm happy, but it's bittersweet. There's no denying that," Hicks said in the ESPN report. "I tried the last few years to pay of HSG's debt, but the only way to do it was to sell the teams. I never thought it would turn into the fight in court, but I wonder what might have happened had we not done what we did in June."
Hicks bought the Rangers from former United States President George W. Bush and Edward W. Rose on June 16, 1998. Hicks was in his 13th season as owner and chairman of the board of the Texas Rangers and served as the team's representative on Major League Baseball's Board of Governors. During his ownership, the club had captured two American League West Division titles, winning a franchise record 95 games in 1999. At one time he was also on the board of directors of Major League Baseball Advanced Media, the internet-based subsidiary of Major League Baseball.
Hicks is founder, chairman and chief executive officer of Hicks Holdings LLC, a Dallas-based family office that owns and manages the Thomas and Cinda Hicks family's sports, real estate and corporate assets and investments. Hicks Holdings' sports ownership assets at one time included Major League Baseball's Texas Rangers Baseball Club, the Dallas Stars Hockey Club of the National Hockey League, a 50% interest in the American Airlines Center, and a 50% interest in Liverpool Football Club, an English Premiership League team known as "Britain's Most Successful Football Club."
Purchasing the Stars in February 1996, Hicks was the team's chairman of the board and the club's representative on the NHL Board of Governors. He also served on the NHL Executive Committee and the NHL Audit and Finance Committee. The Stars won the 1999 Stanley Cup and were Stanley Cup finalists in 2000. The team won the NHL's Presidents' Trophy for the best regular season record in both 1997-98 and 1998-99, and has captured seven division titles under Hicks' ownership.
In addition, Hicks Holdings is a partner with Hillwood Development Company in the Victory Park project in downtown Dallas, and co-developer of Glorypark, a 75-acre urban town center adjacent to Rangers Ballpark in Arlington, neighbouring the new Dallas Cowboys Stadium. Hicks Holdings is also developing Champions Park, a 40 acre office/retail development in Frisco, Texas, adjacent to the Dr Pepper Ballpark and Dr Pepper StarCenter, and is a venture partner in four hotel/residential projects currently under development, including the "W" Hotel and Residences at Hollywood and Vine in Los Angeles. Through Hicks Trans American Partners, Hicks Holdings also selectively makes corporate and real estate investments in South America.
Hicks and George Gillett (the former owner of the NHL’s Montreal Canadiens) were forced to sell their interests in the Liverpool football club two weeks ago, ironically to John Henry and the Boston Red Sox ownership group. Hicks is doing whatever he has to, to sell the Dallas Stars. The days of Tom Hicks owning professional sports teams have come to a shameful end for a man who at one time had to be considered one of the most powerful owners in sports.
The end arrived for Tom Hicks and his sport properties, called “Hicks Sports Group,” at the start of the 2009 baseball season (April 9, 2009) when as FINalternatives and many other media reported (SportsBusinessNews.com has featured the saga since it began) Hicks defaulted on more than $550 million in outstanding loans (debt) Hicks Sports Group was carrying at the time.
Hicks Sports Group at the time the group defaulted on their sports related loans, as had been noted in this report owned baseball’s Texas Rangers and hockey’s Dallas Stars, failed to make its interest payment on $525 million in syndicated bank loans on Monday. The Liverpool Football team collapsed as well, as a direct result of the debt load Gillett and Hicks had carried since they had purchased the franchise.
Hicks made his billions on leveraged buyouts, founding private equity firm Hicks Muse Tate & Furst, now HM Capital, in 1989. He retired from the firm in 2006.
According to sources, who has seen original documents relating to the loans, Hicks defaulted on a $350 million bank term loan, $100 million second-lien loan and a $75 million revolving credit facility.
Days before the banks announced that Hicks had defaulted on the loans, Hicks had hired Merrill Lynch to explore the sale of a minority stake—of up to 49%—in the Rangers. That, of course, failed and Hicks was forced to sell his entire interest in the Rangers.
The Hicks default was and for the most part still is regarded as the most dramatic manifestation of the economic crisis on the sports world.
Hicks’ sale of the Rangers was anything but a smooth process. On January 23, 2010 it was announced Hicks had agreed to sell the Rangers to a group led by Chuck Greenberg and Nolan Ryan. Hicks would have been a minority share holder in the new ownership group.
Prior to bids being placed by potential buyers, Hicks told the media the Rangers were operating under normal business with no interference from MLB. Regarding the Rangers' inability to sign 2009 first round pick Matt Purke, Hicks told MLB.com at the time, "We were disappointed that the family insisted on $6 million. The Texas Rangers were not willing to do that. It had nothing to do with MLB restrictions. There is a clear misimpression we didn't sign Matt Purke because MLB wouldn't let us. That's not true. We didn't because of Tom Hicks, Nolan Ryan and Jon Daniels. We were not willing to go to $6 million."
After his group had completed the purchase agreement, Nolan Ryan told the media the Rangers were not able to offer the 1st round pick the 6 million dollar signing bonus both parties had agreed to verbally after the draft because MLB, who were strictly overseeing the Rangers budget by this time, wouldn't approve the amount needed to sign Purke.
After the announcement of the pending sale by Hicks Sports Group, several additional hurdles occurred which had to be remedied before the sale of the team could be finalized. Several of the lenders, who were owed over $500 million, vocally objected to the deal accusing Hicks of rejecting a higher offer by Jim Crane and stated they would not sign off on the deal. Hicks was sued by 3 different parties over the land adjacent to the stadium that was sold in a separate transaction as a part of the purchase by Greenberg and Ryan.
On May 24 Hicks and HSG filed for Chapter 11 bankruptcy protection/separation of the Texas Rangers from HSG and asked the courts to approve of the sale of the Rangers to the group headed by Chuck Greenberg and Nolan Ryan. The move was made to expedite the sale and resolve the sale prior to the MLB trade deadline and draft signing deadline
As the stalemate between HSG and its creditors continued, on May 24, 2010 the Texas Rangers filed for Chapter 11 Bankruptcy. As of that date, the Rangers and HSG had an estimated debt of $575 million. Much of the unsecured debt was owed in back salary. Officially, New York Yankees third baseman Alex Rodriguez topped the list of unsecured creditors with an estimated $24.9 million owed by the Rangers. Additionally, the Rangers also owed Baltimore Orioles pitcher Kevin Millwood $12.9 million, and current Rangers third baseman Michael Young $3.9 million. At a press conference, the Greenberg-Ryan group proposed to buy the team for $575 million. The sale would repay all the team’s creditors, including players owed back salary.
After several attempts to resolve the deal fell through, the bankruptcy court ordered a public auction to be held on August 4. The Greenberg/Ryan bid would be the opening bid, and other offers (subject to MLB approval) would have to be submitted by the prior day in order to be considered. At the auction, only one other MLB-approved group submitted an offer – Radical Baseball LLC, a group formed by Houston businessman Jim Crane (who was previously unsuccessful in buying the Houston Astros) and Dallas Mavericks owner Mark Cuban (who was previously unsuccessful in buying the Chicago Cubs). The auction lasted until the early morning of August 5, with the winning bid submitted by Greenberg/Ryan. The bankruptcy court approved the bid later that morning and the bankruptcy case closed. The sale to Greenberg/Ryan was approved by all 30 MLB owners at the owners meeting in Minneapolis on Thursday August 12.
When the sale was completed and approved by Major League Baseball none of the official releases referred to Hicks – he was largely part of the team’s forgotten past. Is that the price Hicks paid for driving the Rangers into bankruptcy? The Rangers had to borrow more than $40 million to meet payroll (as a direct result of Hicks’ ownership issues) and had to first deal with MLB in regard to the team's need for some payroll flexibility to acquire players needed for a playoff run. (General manager Jon Daniel’s decision to acquire Cliff Lee on July 9 from Seattle is one example of a trade that had to be first approved by MLB).
"I tell you what, in some ways it's been kinda fun," Daniels told The Dallas Observer of dealing with the financial constraints attached to the bankruptcy. "It's been challenging. It forces you to think about things a little differently."
"Tom's taken a pretty significant public hit, and I understand some of it, but, in my opinion, he's been a very good owner," Daniels says.
A spokesperson for the Hicks Sports Group tired to explain what went wrong in a report published by The Dallas Observer.
HSG in 2006 aimed to land a better interest rate and terms for the debt related to the purchase and "enhancement" of both the Rangers and Stars and their assets, along with generating new capital to support operations.
The refinancing and teams' modest payrolls still weren't enough to enable HSG to pay the interest on the notes, so Hicks sunk more than $300 million of his own money (as opposed to the more than $100 million figure cited in court documents) into HSG, which the spokesperson says he "does not expect to be repaid."
"After loaning the teams and HSG millions to make interest payments and meet operating shortfalls, Mr. Hicks finally said he could not do that anymore," the spokesperson says of why he made the decision to default on the loans on March 31, 2009.
Hicks spun the failure to pay as a calculated tactic to negotiate with the 40 lenders and said in a statement that HSG had been "impacted" by the global credit crisis. He also began seeking investors to buy up to 49 percent of each team so he could retain majority ownership.
"The whole thing from the beginning has been nothing but negotiations," says Rustin Polk, a Dallas bankruptcy lawyer not involved in the case but who has followed along closely because he's a baseball fan. "By playing hardball, he gets a better deal for himself."
Still one has to wonder how Tom Hicks, who lost untold hundreds of millions of dollars (a reported $85 million in the last three years alone) feels as he watches his Rangers in the World Series – essentially coming up a year short on the dream of every sports owner, being a part of a championship run.
“Tom ran into the perfect storm for a leveraged sports asset: The economy falling apart, fans go away and corporate sponsors go away,” said Mike Cramer in a New York Times report, who invested in some of Hicks’s nonsports deals before becoming the president of the Southwest Sports Group, the holding company for the Rangers and the Stars. “All of a sudden, if you’re running a small deficit with a team that is performing O.K., now you’re running a larger deficit, and it’s harder to pay the bills.”
The Dallas Stars won two Stanley Cups while Hicks owned the NHL franchise. For better or for worse he did sign Alex Rodriguez and bring him to Dallas, a calculated risk at the time that failed.
“The mistake I made with the Rangers was I tried to catch up with the Yankees,” Hicks said. “I had to invest $50 million, because we lost more than that and finished in last place. You can’t change quickly, because you’re locked into contracts.”
“I can’t do anything about having too much debt like thousands of other companies in this financial crisis,” he said. “I’ve transitioned.”
“There were several people interested, but he was a big figure in Dallas, and he made it obvious that he was going to be an aggressive bidder,” said Craig Stapleton, who was part of the ownership group with George W. Bush that sold the team to Hicks for $250 million, which at the time was the second-most ever paid for a professional baseball team. “No one questioned his financial ability.”
If the Rangers win the World Series should Tom Hicks receive a World Series ring (yes the Rangers could come back and win the World Series)? Would he? Absolutely, he paid a price. Hicks was in San Francisco for games one and two and will certainly be at Rangers Ballpark in Arlington this weekend. At the heart of the matter is that Tom Hicks is a true entrepreneur. He may have failed but at least he tried. He had the courage and the conviction, it just didn’t work out as well as Hicks might have hoped it would.
For SportsBusinessNews.com this is Howard Bloom. Sources cited and used in this Insider Report: ESPN, The New York Times, Wikipedia and FINalternatives