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Dallas Business Journal:

A federal bankruptcy judge late yesterday declined to decide whether to allow the controversial sale of the MLB Rangers to proceed, a somewhat surprise move after a day in which he seemed to be siding with the team.

Judge Michael Lynn of the U.S. Bankruptcy Court for the Northern District of Texas ordered a vote of the creditors, who are contesting the sale, but said he would only decide later whether those votes would count.

During the hearing, Lynn told the attorney for the Rangers, Martin Sosland of Weil, Gotshal & Manges, that he was inclined to agree with him that the team was not required under the bankruptcy code to maximize value. He also seemed steadfast against appointing a trustee.

"I am disinclined to see trustees appointed in Chapter 11 cases, particularly this one," he said. But Lynn left open the possibility that the creditors' attorney, Andrew LeBlanc of Milbank Tweed, could change his mind.

But at the end of the day he made no decision.

The key issue from a bankruptcy perspective is the team's exposure to the creditors, because their $525M loan was to the team's parent, and in that agreement the lien against the team is $75M.

Lynn's opinion on maximizing value is critical, because creditors who are seeking to block the sale allege there was a higher offer for the team. But if the club is not required to choose the highest offer, then whether there was a higher offer becomes moot.

If Lynn sticks with his opinion, it could prove fatal to the creditors, said Bill Siegel, a bankruptcy attorney with Cowles & Thompson. However, he expressed surprise at the judge's inclination, because the rule of thumb in these cases is there is a fiduciary duty to maximize the value of the estate, he said. If the creditors lose, Siegel said, they would have to appeal immediately and request a stay on the sale. They would appeal to the nearby federal district court.

Bankruptcy Attorney Bill Siegel of Cowles &Thompson in the DBJ article

A group led by Chuck Greenberg and Nolan Ryan are seeking to buy the team, whose parent company defaulted on its debt in March 2009. That gave the creditors veto power over a sale. The Rangers filed for Chapter 11 bankruptcy on May 24.

For additional details, see Daniel Kaplan's report in Sports Business Daily, an affiliate of the Dallas Business Journal. 

http://www.bizjournals.com/dallas/stories/2010/06/14/daily23.html

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