Case 10-43400-dml11 Doc 455 Filed 07/28/10 Entered 07/28/10 16:31:40 Desc

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Jeffrey R. Fine
Texas State Bar No. 07008410
James H. Billingsley
Texas State Bar No. 00787084
Daniel I. Morenoff
Texas State Bar No. 24032760
K&L GATES LLP
1717 Main Street, Suite 2800
Dallas, Texas 75201
(214) 939-5500
Telecopy: (214) 939-5849

COUNSEL FOR THE OFFICIAL UNSECURED CREDITORS’ COMMITTEE

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION

IN RE: § Chapter 11
§
TEXAS RANGERS BASEBALL PARTNERS, § Case No. 10-43400-dml11
§
Debtor. §

LIMITED OBJECTION OF THE OFFICIAL UNSECURED CREDITORS’

COMMITTEE TO THE SECOND AMENDED PREPACKAGED PLAN OF
REORGANIZATION OF TEXAS RANGERS BASEBALL PARTNERS UNDER
CHAPTER 11 OF THE BANKRUPTCY CODE

The Official Unsecured Creditors’ Committee in the above-captioned case (the

“Committee”), by and through its counsel, submits this limited objection (the “Limited

Objection”) to the Second Amended Prepackaged Plan of Reorganization of Texas Rangers

Baseball Partners Under Chapter 11 of the Bankruptcy Code [Docket No. 276] (the “Plan”).

I. BACKGROUND

1. On May 24, 2010 (the “Petition Date”), Texas Rangers Baseball Partners (the

“Debtor”) filed a voluntary petition under Chapter 11 of the Bankruptcy Code. The Debtor

continues to operate its business and manage its properties as a debtor-in-possession.

2. The Debtor owns and operates the Texas Rangers Major League Baseball Club, a

professional baseball team based in Arlington, Texas.

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3. On the Petition Date, the Debtor filed the Disclosure Statement along with a

Prepackaged Plan of Reorganization of Texas Rangers Baseball Partners under Chapter 11 of the

Bankruptcy Code [Docket No. 31]. The Plan has been amended from time to time thereafter.1

4. According to the Disclosure Statement, (a) the Debtor is a Texas general

partnership; (b) the Debtor’s general partner is Rangers Equity Holdings GP, LLC, (c) the

Debtor’s only limited partner is Rangers Equity Holdings, L.P., and (d) Rangers Equity

Holdings, L.P. is the only member of Rangers Equity Holdings GP, LLC.2 The Disclosure

Statement further indicates that Rangers Equity Holdings, L.P. is entirely but indirectly owned

by Hicks Sports Group LLC (“HSG”), which is indirectly controlled by Thomas O. Hicks.

Accordingly, the Debtor’s management and equity owners are owned and controlled by the same

person.

5. On June 3, 2010 (the “Appointment Date”), in accordance with Bankruptcy Code

§1102(a)(1), the United States Trustee appointed the members of the Committee and filed a

notice of this appointment with the Court [Docket No. 128]. Thereafter, undersigned counsel

was approved as counsel for the Committee.

6. According to the Disclosure Statement, HSG owes approximately $525 million to

a collection of lenders (the “HSG Lenders”), secured by liens in substantially all of HSG’s

assets. According to the Disclosure Statement, the Debtor guarantied $75 million of HSG’s

indebtedness and pledged substantially all of its assets to secure the guaranty.

7. The Plan provides for the sale of substantially all of the assets of the Debtor to

Rangers Baseball Express LLC, an entity controlled by Chuck Greenberg and Nolan Ryan (the

1
The Committee reserves the right to review and raise objections to any further amendments to the Plan.
2
Rangers Equity Holdings LP and Rangers Equity Holdings GP, LLC are collectively referred to as the “Equity
Owners.”

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“Proposed Purchaser”). Attached to the Disclosure Statement as Exhibit C is the proposed Asset

Purchase Agreement (the “APA”), executed by the Proposed Purchaser.

8. According to the Debtor, the APA and the Plan provides that all allowed creditor

claims will receive payment in full plus interest. The Debtor further asserts that most claims will

be assumed by the Proposed Purchaser and those claims not assumed by the Proposed Purchaser

will be paid in full from the proceeds of the sale to the Proposed Purchaser.

9. On July 13, 2010, the Debtor filed its Second Motion Pursuant to Sections 105(a)

and 363 of the Bankruptcy Code for (i) Approval of Procedures for the Sale of the Texas

Rangers Baseball Partners’ Assets to Rangers Baseball Express LLC or Other Successful Bidder,

(ii) Authorization to Use the Asset Purchase Agreement as a Stalking Horse Agreement with

Rangers Baseball Express LLC in Connection Therewith, (iii) Approval of the Payment of

Break-up Fee and (iv) the Setting of Related Auction and Hearing Dates [Docket No. 352] (the

“Sale Motion”). The Court approved certain Bidding Procedures in connection with the Sale

Motion (the “Bidding Procedures”) by entry of an Order Adopting Bidding Procedures [Docket

No. 363].

10. The Bidding Procedures provide for other Qualified Bidders to present a marked-

up APA which may have substantially different terms than the Proposed Purchaser’s APA. If

there are other Qualified Bidders, then an Auction will be conducted on August 4, 2010. The

deadline for submitting bids is 8:00 p.m. on August 3, 2010, which is after the deadline for filing

objections to confirmation of the Plan. There are very short time deadlines regarding the

Bidding Procedures and the confirmation of the Plan. Anticipating that there could be significant

developments in a very compressed time frame, the Committee generally reserves all rights and

objections concerning the Plan process.

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II. LIMITED OBJECTION AND RESERVATION OF RIGHTS

11. Out of an abundance of caution, the Committee files this Limited Objection due to

potential uncertainties in the Plan, the APA and the version of the APA to be submitted by other

Qualified Bidders. The Committee reserves the right (a) to amend, supplement, or otherwise

modify this Limited Objection; and (b) to raise such other and further objections to any proposed

modified Plan or APA.

12. The Prepackaged Plan and the APA contemplate the successful bidder assuming

most of the Debtor’s unsecured obligations,3 and the purchaser, “thereafter in due course shall

perform, pay and discharge, all Liabilities of Seller…”4 The assumed Liabilities of

approximately $204 million include player contracts, deferred compensation agreements,

obligations owed to the MLB, trade claims and other assumed contract and related long-term

unsecured obligations of the Debtor. By contrast, the bulk of the cash portion of the purchase

price will be paid out at closing to the HSG Lenders, in respect of the Seller’s guarantee of the

Senior Indebtedness, or as payment to the Class 12 Equity Holders.5

Adequate Assurance of Future Performance

13. Under Section 363, the Debtor, to assume and assign a contract must, among

other things, provide adequate assurance of future performance. The Major League Baseball

Player’s Association requires that professional baseball clubs such as the Texas Rangers

maintain a fund to secure deferred compensation obligations. On information and belief, no

monies are currently being held in escrow by the Debtor for this purpose. Furthermore, upon

3
Not all unsecured claims will be assumed by the successful purchaser. An unknown amount of unsecured claims
may be left behind in the estate.
4
APA, ¶2.3.
5
APA, ¶3.2.

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information and belief, neither the Plan nor the APA, contain provisions requiring the Purchaser

to maintain such an escrow fund. Further, the two other elements of adequate assurance of future

performance have also not been demonstrated: (1) in general, the financial ability to satisfy

obligations in the future, and (2) a commitment to pay when due, versus “in due course” as

provided in the APA. Since the prevailing bidder will not be known until August 4th or

thereafter, the Committee, on behalf of those creditors whose obligations are being assumed, has

not received adequate assurance of future performance from the Debtor or such bidder(s).6

No Claw Back

14. The Equity Owners are the subject of separate Chapter 11 cases and a Chief

Restructuring Officer, William K. Snyder (the “CRO”), has been appointed for the Equity

Owners.

15. Although the Court has denied the CRO’s request for an expedited hearing on

their Motion Pursuant to 11 U.S.C. § 363(b) of the Bankruptcy Code for Authority to File Motion

for Substantive Consolidation on or before August 4, 2010, in due time, the Rangers Equity

Owners may ask the Court to consider the substantive consolidation motion.7

16. Although it is clear that the Court will not hear the substantive consolidation

motion at this time, there are issues raised by the substantive consolidation motion that may

affect the current sales process. As currently presented to the Court, the Proposed Purchaser’s

6
The Committee also reserves all feasibility objections until it is known what claims will be assumed or left behind
by a purchaser and what provisions will be made for payment of claims.
7
The CRO has asserted “that substantively consolidating the Debtor’s and the Rangers Equity Owners’ estates will
result in a significant benefit to the Rangers Equity Owners’ estates and their creditors, as the significant
number of fraudulent midnight transfers that occurred on the eve of bankruptcy at the Debtor level will be
preserved for prosecution for the benefit of the creditors at the Rangers Equity Owners’ estates level, which
would otherwise evaporate if the Court confirms the current plan of reorganization proposed by the Debtor.”

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APA contemplates the purchaser assuming most, but not all, unsecured claims of the Debtor.8

The CRO’s substantive consolidation motion does not make it clear whether those general

unsecured claims assumed by the purchaser will be subject to the substantive consolidation

motion, potential claw back or any other claims of the consolidated entities. For example, if the

successful purchaser assumes general unsecured obligations of the TRBP Debtor, and if the

substantive consolidation motion is subsequently granted, will the newly consolidated entities

then seek to assert actions to recover the value of the claims assumed by the purchaser or

otherwise attack or challenge those claims? The CRO’s substantive consolidation motion is

silent on this issue. Asserting claims to disgorge or claw back creditor recoveries would

certainly be contrary to the stated Plan goal of 100% recovery for creditors and would threaten

the unimpaired status of Class 7 and 8 creditors.

17. Therefore, the Committee requests that language be added to the Plan, and to any

Plan confirmation order, to insure that all unsecured claims, whether or not assumed by a

Purchaser, be free of any claw back claim or any other right of recovery. The Committee is

seeking clarification that when the successful purchaser assumes a creditor claim there will be no

future action to claw back, disallow, recover from or otherwise challenge some or all of that

claimant’s recovery.

Adequacy of Reserves

18. Under the Plan, TRBP will retain the Plan Disbursement Agent function. Claims

that are not assumed by the Purchaser will be left behind to be resolved through an allowance

process, and thereafter, upon allowance, to be paid by the Plan Disbursement Agent. Under Plan

8
Although there may be some changes made to the form APA, the Committee assumes that any competitive bidder
will adopt the same mechanism, as in the Proposed Purchaser’s APA, of assuming general unsecured
obligations of the TRBP Debtor as part of its APA.

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section 6.2(d), the Disbursement Agent will keep behind “appropriate reserves” and otherwise

disburse the remaining sale proceeds to the Equity Owners. The Plan does not define

“appropriate” as used in this context, and the Disclosure Statement does not provide any

information about the amount to be reserved to pay them. Since it is unknown what claims will

be left behind, it is unclear who will determine what is an “appropriate reserve.” For example, if

disputed claims are not assumed by the Purchaser, will TRBP conclude that an appropriate

reserve for those claims is zero, since TRBP has valued disputed claims at zero on its schedules?

The Committee requests that there be a more exact or formal process for determining an

appropriate reserve to pay any claims that are not assumed by the Purchaser.

Section 13.14 of the Plan

19. Section 13.14 of the Plan calls for the dissolution of the Committee on the

Effective Date, and then provides that after the Effective Date, the post Effective Date Debtor

shall no longer be responsible for paying any fees of the Committee professionals. The

Committee requests that this provision be clarified to make clear that the professionals for the

Committee will be paid after the Effective Date for work performed through the Effective Date

(subject to all other fee guidelines and orders of the Court).

III. CONCLUSION

WHEREFORE, PREMISES CONSIDERED, the Committee respectfully requests that

the Plan be modified to resolve the concerns of the Committee as set forth above.

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DATED: July 28, 2010

Respectfully submitted,

K&L GATES LLP

By: /s/ Jeffrey R. Fine _

Jeffrey R. Fine
Texas State Bar No. 07008410
jeff.fine@klgates.com
James H. Billingsley
Texas State Bar No. 00787084
james.billingsley@klgates.com
Daniel I. Morenoff
Texas State Bar No. 24032760
dan.morenoff@klgates.com

1717 Main Street, Suite 2800

Dallas, Texas 75201
Telephone: 214-939-5500
Facsimile: 214-939-5849

COUNSEL FOR THE OFFICIAL

UNSECURED CREDITORS’ COMMITTEE

CERTIFICATE OF SERVICE

I certify that, on July 28, 2010, the foregoing was served in compliance with the
requirements of the Scheduling Order.

_/s/ Jeffrey R. Fine____________

Jeffrey R. Fine