The Ryan Express Keeps the Rangers Rolling at Auction

There is much more to professional baseball, along with every other pro sport, than just the action taking place on the field. While it is the accomplishments and exploits between the foul lines that fans want to see, it is the out of site front office operations that are actually driving the billion dollar industry of baseball. An organization’s success is now determined as much by its balance sheets as it is by its box scores, and the recent happenings of the Texas Rangers provide a perfect example of when on and off-field performance can become mutually exclusive.

The cleat and cap-wearing members of the Rangers organization have enjoyed extraordinary success in 2010. Manager Ron Washington’s squad currently holds an eight game lead in the American League West, the second largest divisional lead in the majors, and avoiding a complete collapse down the stretch the team is poised to win their division for the first time since 1999. Their potent offense, led by Triple Crown contender Josh Hamilton and the resurgent Vladimir Guerrero, has the third highest combined batting average (.274) in the bigs, the sixth most combined homeruns (112), and the fourth highest runs scored per game (4.97).

The Rangers pitching staff, solid to begin the year, has become increasingly dominant throughout the course of the season; first with emerging star Tommy Hunter’s 9-1 record since his June 5th call-up and following with the trade deadline acquisition of vagabonding lefty ace Cliff Lee, who to this point has the highest single-season strikeout to walk ratio in MLB history (126K/9BB). Texas has been playing great team baseball all season and is confident in their chances to finally win their first playoff series for the franchise and the Arlington faithful, both of whom have been waiting for almost four decades.

However, despite the dynamic chemistry concocted in the clubhouse for the 2010 campaign, the Rangers’ front office could not be more disjointed. Problems began brewing in March of 2009, when then-owner Tom Hicks and his Hicks Sports Group (HSG) defaulted on $525 million in bank loans for failure to make interest payments. At that point, (HSG) began exploring options to sell a minority stake of up to 49% of the team, and in January a preliminary deal had been worked out under the approval of Major League Baseball to sell the franchise to a group of investors led by Pittsburgh sports lawyer Chuck Greenberg and Texas native, Nolan Ryan. However, as with most business dealings involving the exchange of hundreds of millions of dollars worth of various leveraged debt, things would not end so simply.

When bank loans to Hicks Sports Group fell into default, the majority of the distressed debt was acquired by New York-based hedge fund Monarch Alternative Credit. Their goal in this deal was simply to make as much money as possibly, regardless of the desires of MLB or the wellbeing of the game of baseball. Accordingly, Monarch did not feel they would receive adequate compensation from the original deal between HSG and Greenberg/Ryan so therefore did not approve this transfer of debt that they in fact owned.

At this point, Houston shipping magnate Jim Crane was also attempting to purchase the team, reportedly for more than Greenberg/Ryan and much to the disliking of Major League Baseball and Commissioner Bud Selig. These combined forces effectively left the Rangers organization in a total cluster-fuck for the majority of the previous offseason and they had difficulty making player transactions not knowing the state of the franchise or who would actually end up owning the team the upcoming season. The following spring MLB stepped in to expedite the sale process and on May 24, 2010, HSG filed for Chapter 11 bankruptcy protection and the team was placed up for auction. Part of the reason for this decision was to circumvent the otherwise necessary approval of Monarch Alternative Credit.

Fast forward to August 4, 2010: the auction is finally set to begin between the Greenberg/Ryan group, who had MLB and most of the Rangers fans’ support, and a group led by Jim Crane and Dallas Mavericks owner Mark Cuban, who had the support of Monarch Alternative, if for no other reason than to raise the final purchase price. This too was wrought with road bumps, as Greenberg/Ryan accused the Crane/Cuban group of obtaining an unfair advantage in finding out Greenberg/Ryan’s bid early and threatened to appeal the decision if they did not win. MLB also threatened Crane/Cuban with claims that if they won the process of transferring ownership would be a tedious, nearly year-long process. Undeterred by this proposition, bidding began and Crane/Cuban received a short-term “floating” loan from Monarch Alternative Credit to help their efforts. This raised the bidding considerably, but the Greenberg/Ryan group still eventually won the auction with a total bid of $590 million, $385 million of that available immediately in cash.

Later this week MLB owners are scheduled to meet and are expected to unanimously approve the sale, officially handing over the Rangers ownership to the Greenberg/Ryan group. Hicks was originally going to maintain a 1% stake and Chairman Emeritus title, but that was nixed when his sale of an adjacent 154 acre parcel of land was dropped from the deal so he will now have no official ties to the organization. But was it a good deal?

According to the latest Forbes valuation report, the Rangers were valued at $451 million, meaning the Greenberg/Ryan group paid approximately 31% over the Forbes value. From a strictly monetary standpoint, Greenberg, Ryan and the rest of the investment group got ripped off and the creditors of Monarch Alternative made off like bandits. This was exactly what the lenders intended to do by offering cash to Crane/Cuban to up their offer and in the auction process they gained approximately $100 million. In this sense, the Rangers auction was definitely a good deal for Monarch Alternative Credit, who handles bankruptcy hearings such as this regularly and used this expertise to maximize their investment of Hicks’ outstanding debt.

But baseball is about far more than just the money, and even though they may have overpaid this was still a big win for the Greenberg/Ryan group as well as Major League Baseball as a whole. Greenberg/Ryan already has all the necessary financing in place, is backed by a group of local investors, and Nolan Ryan has been the Rangers president since February of 2008. MLB and its owners win big with this purchase by avoiding the possibility of Mark Cuban turning the Rangers into another Yankees or Red Sox-type organization by throwing around heaps of money and in turn driving up the payrolls of other mid-market teams looking to compete with them.

Both Chuck Greenberg and Nolan Ryan have been very successful in owning and operating multiple minor league baseball franchises and understand the business behind running a successful baseball team both on and off the field. This brings us back to what we all really care about: the game itself. With all the courtroom drama finally behind them, the new owners can now fully dedicate their time to making the Rangers a winning organization. Greenberg has already announced plans to improve the fan experience at Rangers home games but readily admits that winning is the best way to draw bigger crowds. Now with the assurance that ownership will fulfill their end of contractual obligations, the players can focus on doing the same. The Rangers are having their best season in over a decade on the field and with new ownership in place the front office should finally be getting on the same page. And that’s something that anyone wearing an Elvis Andrus jersey or an Armani suit can cheer for.