How the Rangers bankruptcy situation might affect A-Rod

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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.

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  • http://www.puristbleedspinstripes.com Rebecca-Optimist Prime (Optimovelist Primus)

    I wish I was owed $25 million…

    • Templeton “Brendog” Peck

      i wish i was owed 2 million

  • http://www.soxandpinstripes.net JGS

    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.

    I think Craig brings up this point, but the Union most certainly will raise a stink about it

  • chriskeo

    I think this says something about the Rangers ownership (pre-sale), Alex hasn’t played a game for the Rangers since 2003, yet they still owe him about $25 million.

    • http://www.soxandpinstripes.net JGS
    • http://twitter.com/JamalG Jamal G.

      I think there is a player the Mets will be making payments to for the better part of the next two decades.

    • Ed

      In other news, around this time in 2001, 10 players on the DBacks agreed to defer more money from their salaries. The end result was about 60% of their combined contracts was deferred for 10 years.

      So the Diamondbacks are still paying substantially for that 2001 World Series win. link

  • MJG

    My understanding is that when A-Rod opted out of his contract a few years ago, it got the Rangers off the hook for the portion of his contract that they agreed to pay when he was traded to the Yankees. That was one of the reasons the Yankees originally said they would not renogtiate with him if he opted out. Are these deferred payments different from those payments? I would think any deferred obligation would have transferred to the Yankees with his contract when he was traded. If so, the Rangers do not owe him any more money.

    • A.D.

      So after 1 year in the deal A-Rod agreed to defer some of the contract to 2011-2020 or something like that, at the time to help the Rangers with payroll to sign players to surround A-Rod. Then during the trade the Rangers agreed to pick up a certain portion of the remaining contract, of which part was left on the table once A-Rod opted out.

      However the deferred money that was accumulated during his time with the Rangers is still owed to him.

    • steve s

      I remember this being the case as well. Joe P, can you check to see if the article you referred to is in error?

      • http://www.riveraveblues.com Joseph Pawlikowski

        Ed has it below. It is not in error.

    • Ed

      Deferred money is considered part of a player’s salary for a specific period of the contract.

      Example: A player signs a 5 year contract for $10m/season with $2m/per deferred.

      After 2 years, the player will have earned $20m, but only received $16m. If he is traded at this point, the new team will be responsible for the remaining $30m – $6m of which will be deferred. As the $4m in deferred money was already earned, the original team will still be responsible for paying it.

      These deferred payments are for the years A-Rod played in Texas. The money you’re thinking of was to cover the years played for the Yankees.

  • WIlliam

    A-rod needs to step it up so the Yankees can have a full AS infield. Come on. Then give him his 25 mil.

    Kidding…sorta

    • Tom Zig

      Funny thing is, A-rod is doing better than Tex and Jeter.

  • Reggie C.

    Is there any way a major creditor like Arod can throw a wrench in the sale of theteam by not signing off on the bankruptcy petition? Could Arod in conjunction with other creditors outright reject the sale & push for liquidation?

    250 million=power.

  • ADam

    I’m sure somewhere, some columnist/announcer/pundit will find some blame of the Yankees for this…

  • Frank

    As someone who just went through bankruptcy with a corporation, all contracts are determined to be “go forward”, meaning you must pay 100%, or else they are rejected, and the vendor/person gets cents on the dollar based on the court rulings. However, I would imagine that the player contracts are insured through the MLBPA or MLB as a whole in the event a team owner/franchise goes bankrupt.

  • NSY

    A-Rod is such a jerk. It would mean nothing to him to give me just 1 million of his money, but he won’t.

    • Alex S

      Don’t be so self-righthteous. Would you give $1 million of your money?

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