MLB's Response to Weil

8/8/2019 MLB's Response to Weil

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Doc#: US1:6636761v5

Sander L. Esserman Brad S. KarpState Bar No. 06671500 Stephen J. ShimshakPeter DApice Jordan E. YarettState Bar No. 05377783 Susanna M. BuergelCliff I. Taylor PAUL, WEISS, RIFKIND,

State Bar No. 24042007 WHARTON & GARRISON LLPSTUTZMAN, BROMBERG, 1285 Avenue of the AmericasESSERMAN & PLIFKA New York, New York 10019-6064A Professional Corporation Telephone: (212) 373-30002323 Bryan Street, Suite 2200 Facsimile: (212) 757-3990Dallas, Texas 75201-2689Telephone: (214) 969-4900Facsimile: (214) 969-4999

Attorneys for the Office of the Commissioner of Baseball

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

-----------------------------------------------------------In re:

TEXAS RANGERS BASEBALL PARTNERS

Debtor.

-----------------------------------------------------------

x:::::

:x

Chapter 11

Case No. 10-43400 (DML)

LIMITED RESPONSE OF THE OFFICE OF

THE COMMISSIONER OF BASEBALL TO THE

FIRST AND FINAL APPLICATION FOR ALLOWANCE

OF ATTORNEYS FEES AND REIMBURSEMENT OF

OUT-OF-POCKET EXPENSES FOR WEIL, GOTSHAL & MANGES LLP

The Office of the Commissioner of Baseball (MLB) hereby submits its Limited

Response (the Response) to the First and Final Application for Allowance of Attorneys Fees

and Reimbursement of Out-of-Pocket Expenses for Weil Gotshal & Manges LLP [Dkt. No. 652]

(respectively, the Application and Weil) and shows this Court as follows:


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I.

PRELIMINARY STATEMENT

1. Weil deserves its fair share of the credit for the successful sale of theTexas Rangers Major League Baseball club (the Texas Rangers or the Club) and the

confirmation of the Chapter 11 plan for Texas Rangers Baseball Partners (TRBP). Thus, MLB

does not object to the payment of Weils fees and expenses. MLBs issues with the Application

lie elsewhere. In seeking compensation, Weil tries to bolster the Application with a revisionist

account of TRBPs prepetition relationship with MLB. In an apparent attempt to answer

unnamed critics, Weil faults MLB for forcing TRBP to resort to a strategy of filing of a

prepackaged plan of reorganization that provided for an immediate private sale to Baseball

Express without an auction process. (Weil Application at p. 8, 17). Accordingly, MLB files

this Response not to object to the compensation sought by Weil, but to correct the record so that

the self-serving spin that Weil has sought to put on the history of this matter is not mistaken for

an accurate accounting of events.

II.RESPONSE

2. In paragraphs 17 through 23 of the Application, Weil makes unnecessarilynegative assertions about MLB unsupported by the record and inconsistent with positions that

Weils own client has taken in this case. Weil contends that [i]t is uncontroverted that MLB, to

a large extent, controlled the Debtor prepetition, disingenuously attempting to create the

impression that MLB not only ran the Club, but also made all decisions relating to its sale.

(See Weil Application at p. 8, 18).

3. The facts are otherwise. While TRBPs attorneys offered to turn over thekeys to the franchise to MLB in the spring of 2009 because TRBP purportedly did not have


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enough cash to make payroll, MLB declined that offer. Instead, as Weil knows and repeatedly

represented to this Court and to TRBPs constituents, Tom Hicks remained in control of the

Club, Tom Hicks and his advisors (including Weil) ran the sale process and, even though Weil

tries to claim otherwise, Tom Hicks selected Rangers Baseball Express LLC (RBE) as the

winning bidder on December 15, 2009. The extent of MLBs involvement with the Texas

Rangers (beyond carrying out its ordinary course responsibilities as the governing body of the 30

Major League Baseball clubs) concerned monitoring the operations of the Club, arranging for

Baseball Finance LLC (Baseball Finance) to lend money to the Club, and assuring that the sale

came to a timely conclusion, consistent with the specific contractual rights granted to MLB by

TRBP in the prepetition agreements that Weil negotiated.

4. The prepetition financial difficulties confronting Hicks Sports Group LLC(HSG) and TRBP and their affiliates are now well-known. In 2005, entities controlled by Tom

Hicks, including HSG, began to experience serious liquidity problems. In 2006, seeking to

address a mounting cash shortfall, HSG refinanced certain loans and, in the process, entered into

a $540 million credit facility with the Lender Group.1

TRBP guaranteed $75 million of that debt.

Despite this refinancing, HSGs financial condition had eroded so severely by the spring of 2009

that HSG was left without sufficient funds to meet its debt obligations.

5. On March 31, 2009, HSG failed to make a scheduled interest paymentunder the Credit Agreements. In April 2009, the Lender Group accelerated the entire amounts

1 Lender Group refers to the consortium of lenders to which HSG and certain affiliates were obligated underthe First Lien Credit Agreement and the Second Lien Credit Agreement (collectively, the Credit Agreements),

as those terms are defined in the Debtors June 17, 2010 Amended Disclosure Statement Relating to the

Amended Prepackaged Plan of Reorganization for Texas Rangers Baseball Partners Under Chapter 11 of the

Bankruptcy Code (the Disclosure Statement) [Dkt. No. 226].


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owed under their respective Credit Agreements. (Disclosure Statement at p. 7). While Tom

Hicks and HSG found sufficient funds to make TRBP payroll in April and May, TRBP continued

to operate with a negative cash flow. In late June 2009 and with Tom Hicks unwilling to

contribute any additional funds to HSG, TRBP again faced the prospect of missing payroll. No

funding source, other than Baseball Finance, would assist it. (See T. Hicks Deposition, July 27,

2010, at 131:23132:1 and 133:1-4).

6. To meet payroll, HSG and TRBP asked MLB to provide TRBP withfinancial support. On June 29, 2009, MLB entered into the Voluntary Support Agreement (the

VSA) with, among others, Tom Hicks, HSG, and TRBP. Under the VSA, MLB agreed to

arrange for Baseball Finance to provide TRBP with a $15,000,000 revolving loan facility. To

ensure the repayment of the loans and, more importantly, that the Club would return to financial

stability, Tom Hicks, HSG, and TRBP agreed to bring to a conclusion the sale process that Tom

Hicks and HSG had been running since 2008. (M. Sosland, Transcript, May 25, 2010 Hearing,

18:3-19:6). Notably, the VSA provided that [Tom Hicks]shall have the ultimate authority to

determine whether to accept an offer to purchase the [Texas Rangers] subject to the requirement

that Tom Hicks consummate a sale if a bona fide offer was made to purchase the Texas

Rangers and such offer was at or above an agreed-upon price. (VSA at p. 11). Accordingly,

Tom Hicks, HSG, and Weil were free to run the sale process as they saw fit, including the

opportunity to explore alternative transactions that would put the Club back on firm financial

footing without a sale, which is exactly what they did. (Disclosure Statement at p. 8). Weil

negotiated the terms of the VSA on behalf of Tom Hicks, HSG, and TRBP. (See T. Hicks

Deposition, July 27, 2010, at 129:11-22).


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7. As of early November 2009, Tom Hicks and HSG had not made any finaldecision as to how to stabilize the Club. While they had asked for the three finalists in the sales

process to submit final bids, Tom Hicks and HSG had no obligation to accept any of the bids. In

fact, on several occasions Tom Hicks appeared to use the bidding process merely as an avenue to

solicit members of the various bidding groups to provide funding to him so that he might retain

control of the Club. At the same time, TRBP faced an additional cash flow shortage. That

shortage prompted HSG and TRBP to request that MLB increase its support by an additional

$10 million, from $15 million to $25 million. (Disclosure Statement at p. 8). MLB agreed to

increase its support, and on November 25, 2009, the parties entered into the Amended and

Restated Voluntary Support Agreement (the Amended VSA). However, MLBs increased

commitment depended on the agreement of Tom Hicks and HSG to come up with a definitive

solution to the Clubs financial difficulties. MLB worried that because the Lender Group had no

power to take any action against HSG and TRBP until the summer of 2010, Tom Hicks and HSG

would continue to avoid committing to any course of action in the increasingly remote hope that

some workable solution would eventually emerge from somewhere to allow Tom Hicks to retain

control of the Club.

8. Accordingly, MLB would only increase its commitment to TRBPacommitment effectively funded out of the pockets of the other 29 clubs that together with the

Texas Rangers make up Major League Baseballif Tom Hicks, HSG, and TRBP agreed to

specific milestones in the sale process. MLB insisted on these milestones so that it could assure

the other Clubs and the Lender Group that an end was in sight. Tom Hicks, HSG, and TRBP

agreed that, in consultation with the Commissioner and MLB, they would select a winning

final bid for the Texas Rangers baseball club no later than December 15, 2009. (Amended VSA


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at p. 14). They also agreed to enter into a definitive purchase agreement with respect to the sale

of the Club by no later than January 15, 2010. (Disclosure Statement at p. 8). In requiring the

assent of Tom Hicks, HSG, and TRBP to these milestones and in holding Tom Hicks, HSG, and

TRBP to them, MLB was doing what it thought best at the time to ensure an orderly and efficient

sale process in a tenuous economy, to protect the viability of the Club, and to preserve the

integrity of the game of baseball.

9. MLB did not dictate the decision to sell the Texas Rangers; economicreality did. HSG overextended itself and it needed to find a solution to the problem that it had

created. As Martin A. Sosland of Weil told this Court at a May 25, 2010 hearing:

And so beginning in 2008, HSG, the holding company, inconjunction with the team and the other entities that are subs of

HSG, began looking and exploring for how they could infuse morecapital into the company. They looked at a variety of methods ofdoing so, from selling a minority stake to some sort of capital raiseto sale options, and ultimately concluded, Your Honor, that therewas no viable option for the baseball club but to sell it.

(Transcript, May 25, 2010 Hearing, 17:19-18:2) (emphasis added). TRBPs Disclosure

Statement drafted by Weil reinforces the view that [u]ltimately, HSG and TRBP concluded that

the sale of the Texas Rangers franchise was the only viable course of action. (Disclosure

Statement at p. 8). Thus, the record clearly shows that, regardless of the role that MLB played,

HSG and TRBP each came to its own independent conclusion that only a sale of the Texas

Rangers could alleviate the financial stress created by, among other things, HSGs inability to

service or repay its debt.

10. The VSA and Amended VSA also provided for the appointment of a leadmonitor whose main function was to monitor the Clubs business operations. This operational


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support, as the Debtors Disclosure Statement (again, drafted by Weil) makes clear, was

provided at the request of HSG and TRBP . . .. (Disclosure Statement at p. 8). In addition to

providing the operational support requested, the lead monitor was also tasked with making sure

that all monies borrowed from MLB were being used in compliance with the terms of the VSA

(and, later, the Amended VSA).

11. The monitors role was welcome, and hardly an intrusion. Kellie Fischer,TRBPs CFO, testified that John McHale, the lead monitor appointed by MLB, was someone

with whom it was not burdensome for her to work, and who provided a lot of business counsel,

which was necessary in order to help keep the team on the field. (See K. Fischer Deposition,

July 29, 2010 at 213:25215:9). The monitoring provided by John McHale was not the assertion

of MLB control over the Rangers; rather, the monitoring was aimed at making sure that the Club

operated in a financially prudent manner at a time when it had limited financial resources.

12. On December 15, 2009, Tom Hicks, HSG, and TRBP selected RBE as thewinning bidder for the purchase of the Texas Rangers. That selection followed an open,

thorough and vigorous bidding process that started in June 2009, during which numerous groups

of interested bidders performed due diligence on the Club. In November 2009, the three finalists

chosen by Tom Hicks (in consultation with his chosen financial advisors) submitted bids.

Considerable back and forth between the competing bidders and the sellers ensued. HSG and

TRBP, aided by Weil and their financial advisers, made a careful and deliberate decision in favor

of RBE after the submission of enhanced bids at the request of HSG and TRBP.


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13. Tom Hicks, HSG, and TRBP, not MLB, selected RBE as the winningbidder at the conclusion of the prepetition auction. Again, the Disclosure Statement prepared by

Weil recites that:

HSG and TRBP and their financial advisors negotiated with all

three bidders and were successful at getting two of the bidders tosubstantially enhance their original offers. HSG and TRBPselected Rangers Baseball Express LLC (the Purchaser) . . . asthe most viable bidder for the sale of the Texas Rangers franchise.

(Disclosure Statement at p. 8) (emphasis added). TRBPs Disclosure Statement further recites

that [O]n December 15, 2009, when TRBP and HSG selected the Purchaseras the winning

bidder, they believed that the Purchasers offer was the best offer and in the best interests of both

TRBP and HSG and indirectly their creditors. (Disclosure Statement p. 9) (emphasis added).

14. Despite the completion of the auction and the selection of RBE, HSG andTRBP did not enter into a definitive purchase agreement with RBE by the agreed upon date of

January 15, 2010. To bring the sale process to an end, MLB asserted its right under the

Amended VSA to become actively involved. Far from dictating the outcome of the sale

process, however, as Weil contends, MLBs intervention sought only to have the parties

consummate the very transaction that HSG and TRBP had decided to pursue with the bidder,

RBE, that they had chosen as the winner. Thus, on January 16, 2010, the day after the deadline

for executing a definitive sale agreement under the Amended VSA, MLB wrote to TRBP, urging

it to conclude its negotiations with RBE and to execute and deliver an asset purchase agreement.2

2 On January 16, 2010, Robert A. DuPuy, President and Chief Operating Officer of MLB, sent Tom Hicks a letter

stating that the Hicks parties were required to enter into a Definitive Purchase Agreement (which agreement

would have been subject to MLB approval) no later than [January 15, 2010]. Mr. DuPuy went on to state that

MLB will permit and strongly urges you . . . to continue negotiating through Monday, January 18 towards the


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15. On January 23, 2010, HSG and TRBP entered into a definitive purchaseagreement (the APA) with RBE. The parties to the APA agreed to close no later than April 1,

2010 (subject to a thirty-day extension under certain circumstances), but a new problem

emerged: the Lender Group with liens on TRBPs assets declined to consent to the sale and to

release their liens. MLB urged the Lender Group to consent to the sale to RBE. Despite MLBs

efforts over several months, in conjunction with those of HSG and TRBP, the Lender Group did

not grant the requested consent. At that point, HSG and TRBP concluded, in consultation with

MLB and RBE, that a chapter 11 filing by TRBP was the only viable option to complete the sale

process that had been going on for over a year.

16. MLB did nothing to stand in TRBPs way in filing the prepackagedchapter 11 plan that TRBP and Weil had conceived. Weils assertion now that TRBP struggled

to convince MLB to allow TRBP to file its chapter 11 petition contradicts TRBPs multiple

public representations that TRBP decided to file its chapter 11 case in consultation with MLB to

break the impasse with the Lender Group. The parties believed that the chapter 11 filing offered

the most direct and efficient manner to consummate the sale of the Texas Rangers to RBE, the

winning bidder. A press release drafted and released by Kekst, a public relations firm hired by

Weil, on TRBPs website (www.trbpinfo.com) confirms this version of how and why the

decision to file for chapter 11 was made:

As you may know, Texas Rangers Baseball Partners have taken an

important step to facilitate the completion of the previouslyannounced sale of the Texas Rangers Baseball Club to RangersBaseball Express, the local investor group led by team presidentNolan Ryan and Chuck Greenberg. With the support of Major

goal of executing a Definitive Purchase Agreement with RBE, which is exactly what TRBP and HSG chose to

do with Weil leading the effort.


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League Baseball, on May 24, 2010, we chose to implement the salethrough a voluntary, prepackaged, court-supervised process

under Chapter 11 of the U.S. Bankruptcy Code. We think this sale

is in the best interests of the Rangers franchise and fans. We

intend to use this legal process to complete the sale, which

requires the approval of the Bankruptcy Court, and smoothlytransition to new ownership. We expect this will occur by mid-

summer when we plan to exit from Chapter 11.

(www.trbpinfo.com) (emphasis added).

17. In addition, Weil intimates that MLB would only move forward if TRBPand Weil followed a plan put together by MLB. This intimation is inconsistent with the facts.

Weil floated the plan. RBE and TRBP negotiated the plan. The only role that MLB played

involved ensuring that the documents comprising the filing accurately reflected how the parties

had agreed to move forward and that nothing in the plan violated any MLB rules or regulations.

18. Finally, a word on MLBs postpetition financing. Weils portrayal ofMLB as iron-fisted and overbearing in the negotiation of the terms of the postpetition financing

for TRBP also deviates sharply from the facts. MLB initially proposed fair terms based on the

strong and flexible working relationship that had sustained the Club financially and operationally

for nearly a year. Some of the members of the Lender Group offered to improve those initial

terms in some respects at the continued hearing on first day matters on May 26, 2010. MLB

willingly matched those terms to make sure that it would continue to remain available as TRBPs

preferred lender, thus avoiding further conflict between the management of TRBP and the

Lender Group.


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CONCLUSION

19. For whatever reason, Weil has decided to rewrite history. Weils versionends up disserving TRBP, its principals, and, ultimately, Weil itself; the reputation that each

enjoys for tenacity and independence in the face of adversity alone should belie the fiction of

MLB domination and control. An accurate account of events does the rest. While MLB does

not object to Weils being paid for its hard work in this case, that work should stand on its own

merits, undiminished by Weils gratuitous attack on MLB.

WHEREFORE, MLB respectfully requests that this Court (i) make no findings

of fact respecting MLBs prepetition or postpetition relationship with TRBP as part of allowing

Weils compensation for fees and expenses, and (ii) grant MLB such other and further relief as

this Court deems just and proper.

Respectfully submitted this 15th day of November, 2010.

By: /s/ Sander L. EssermanSander L. EssermanPeter C. DApiceCliff I. TaylorSTUTZMAN, BROMBERG, ESSERMAN &

PLIFKA, A Professional Corporation

2323 Bryan Street, Suite 2200Dallas, TX 75201-2689Telephone: (214) 969-4900Fax: (214) 969-4999

-and-


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Brad S. KarpStephen J. ShimshakJordan E. YarettSusanna M. BuergelPAUL, WEISS, RIFKIND,

WHARTON & GARRISON LLP1285 Avenue of the AmericasNew York, New York 10019-6064Telephone: (212) 373-3000Facsimile: (212) 757-3990

ATTORNEYS FOR THE OFFICE OF THE

COMMISSIONER OF BASEBALL

CERTIFICATE OF SERVICE

I, Cliff I. Taylor, certify that on November 15, 2010, a copy of this LIMITEDRESPONSE OF THE OFFICE OF THE COMMISSIONER OF BASEBALL TO THE FIRSTAND FINAL APPLICATION FOR ALLOWANCE OF ATTORNEYS FEES ANDREIMBURSEMENT OF OUT-OF-POCKET EXPENSES FOR WEIL, GOTSHAL &MANGES LLP was served on the Master Service List dated October 26, 2010, by ECFnotification to the email addresses listed or on November 15, 2010, by first class United Statesmail.

/s/ Cliff I. Taylor

Cliff I. Taylor

MLB's Response to Weil

Documents

Transcript of MLB's Response to Weil