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APRIL 14, 2009 Creditors Find Hicks Sports Group in Default Article By MATTHEW FUTTERMAN
Creditors to Texas financier Tom Hicks's Hicks Sports Group have declared the company in default, a measure that could eventually dislodge the Texas Rangers baseball club and Dallas Stars hockey franchise from his control.The default notice is the strongest sign yet of the economic perils awaiting the country's professional sports leagues, where owners have spent lavishly on player salaries. Many owners' personal fortunes are also on the wane, creating uncomfortable standoffs between the owners and lenders.
In Mr. Hicks's case, a group of 40 financial institutions and other investors hold $525 million in debt. Galatioto Sports Partners, a New York sports-financing group, holds the largest position, having lent nearly $100 million to Hicks Sports Group.
Mr. Hicks missed a $10 million quarterly interest payment on March 31, triggering the default notice. The teams are unable to fund both their operating expenses and debt service, and Mr. Hicks has declined to continue making up the difference out of his own pocket, according to a person familiar with the matter.
Associated Press
Tom Hicks, right, pictured with Dallas Cowboys owner Jerry Jones last April, missed a $10 million quarterly interest payment March 31.
That has angered some of the lenders -- a collection of large banks and smaller investment funds -- for whom the default notice begins a process that could put the banks in control of the teams. That won't happen for at least 180 days, however, as lenders have agreed to National Hockey League provisions that prevent immediate foreclosure. Major League Baseball's rules for such situations are more fluid, though if Hicks Sports Group can't satisfy lenders, the lenders can eventually force an MLB-sanctioned sale of the Rangers.
Mr. Hicks can fix the situation, and remain in control of the teams, by paying off his current debt or by reaching a new deal with his lenders, which he is trying to do.
A spokesman for NHL Commissioner Gary Bettman declined to comment. Bob DuPuy, chief operating officer of Major League Baseball, also declined to comment.
Relations between the Hicks Sports Group lenders and the NHL have grown increasingly testy of late, with the NHL threatening to do all it could to block a forced sale of the Stars, according to people involved in the matter.
In the meantime, Mr. Hicks is trying to fashion a deal of his own, by selling a minority stake in the Rangers and Stars. He said he plans to fund operational losses of the teams but wants the banks to cover interest payments.
"I'm confident that I'll be able to reach agreement with 51% of the lenders because I will be able to fund all the cash needs of the two teams during the period that I'm bringing in new partners, which will help us to drastically reduce if not eliminate HSG's debt," Mr. Hicks said in an interview. "These are great sports franchises and they're valuable assets and I want to make sure I have ample time to identify appropriate partners to invest at a fair value."
Mr. Hicks has been one of the most high-profile figures in professional sports, having purchased the Rangers in 1998 from a group of owners that included former President George W. Bush. Under Mr. Hicks's ownership, the Rangers signed shortstop Alex Rodriguez to a 10-year, $250 million contract. This year the Rangers' payroll is about $68 million, and is in the bottom third of MLB. The Stars, meanwhile, became the most successful of the NHL's franchises in the South, winning the Stanley Cup in 1999.
In 2004, Mr. Hicks stepped down as chairman of Hicks Muse Tate & Furst Inc., the private-equity firm that he co-founded.
Today Mr. Hicks operates Hicks Equity Partners, a private-equity arm of his investment firm. He is currently trying to close a $3.2 billion deal announced last June in which a Hicks investment vehicle would acquire a majority interest in plastic-container company Graham Packaging Holdings from the Blackstone Group.
Separately, Mr. Hicks has a $400 million loan from the Royal Bank of Scotland due in July, used to fund his purchase of the Liverpool soccer team in the English Premier League. Mr. Hicks splits ownership of the team with Colorado businessman George Gillet. To raise cash, Mr. Gillet is also moving ahead with a sale of his controlling stake in the NHL's Montreal Canadiens.
The trouble for Hicks Sports Group has been brewing for months, as the poor economy has dried up interest in sponsorships and ticket sales. Late last month, just days before the payment was due, Mr. Hicks informed the lenders he wouldn't make the payment. On April 6, the lenders found Hicks Sports Group in default.
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