The Texas Rangers filed for Chapter 11 bankruptcy protection this morning. It sounds like a big deal, and in some ways it is, but it didn’t come out of nowhere. Commissioner Bud Selig claims that the filing “assures an orderly process to expeditiously transfer Rangers ownership to the Greenberg-Ryan group,” referring to Pittsburgh attorney Chuck Greenberg and Hall of Famer Nolan Ryan.
The thing with Chapter 11 is that while secured creditors — those with collateral to back their loans — usually get paid back, it’s unsecured creditors who face the risk of nonpayment. The Rangers owe Alex Rodriguez $24.9 million in deferred payments from the 10-year, $252 million contract he signed in the winter of 2000. Might A-Rod not realize the full amount of his deferred payment amount?
At Hardball Talk, Craig Calcaterra raises the issue. It’s a little journey, and I suggest starting with the 1:15 p.m. part at the bottom and work up. Craig notes that the Rangers can’t pay A-Rod the full amount without also paying their full debt to all unsecured creditors:
Since the Rangers filed for bankruptcy it means they don’t have enough money to pay all of their unsecureds at a 100% rate. That means that A-Rod should not get all the money he thought he’d get and all of the ugly union/team dynamics set forth below come into play.
A later update notes that, no, A-Rod probably won’t get stiffed on the $25 mil. He might see a delay in the process, but because this Chapter 11 filing acts as a precursor to a sale, not to help it restructure its debt. The Greenberg-Ryan group, then, will be responsible for the remainder of A-Rod’s deferred payments, as well as deferred payments to a number of current and former Rangers.
The important point here: bankruptcy law is boring and esoteric. Another point: I doubt anyone will cry for A-Rod if he did get stiffed, even if it amounted to more than 10 percent of the contract he signed.