In 2002, MLB and the MLBPA were negotiating a new collective bargaining agreement. Rangers owner Tom Hicks spoke to assembled media about “cost-containment.” Media members were assembled, on his lavish yacht in San Diego. Tom Hicks is not a man for penetrating thought, and it is that cavalier orientation that has seen his sports empire dissolve into a billion-dollar mess, spread across two continents.
Hicks’ plan has been clear. (1) buy a sports franchise with other peoples’ money (2) invest other peoples’ money to aggrandize it (3) sell the franchise for way more money than its worth, turning a huge profit. Hicks accomplished step one with the Dallas Stars, the Texas Rangers and Liverpool. He amassed incredible debt in step two and in step three has failed miserably. He has been the anti-Midas.
Let’s start on this side of the Atlantic. Hicks bought the Dallas Stars in 1995 and the Texas Rangers in 1998. His original company “Southwest Sports” defaulted on $135 million in loans in 2003 due to “steeper than expected financial losses” from the two teams. They “expected” Alex Rodriguez’ signing to be an unqualified success. Hicks tried to offload the Stars and his 50 percent stake in American Airlines arena before the default for $250 million (original investment $84 million). No takers. With the team up for sale again, he reportedly wanted $350 million.
Hicks’ subsequent management of the Stars inspired this censure from Forbes in 2007.
It is a good thing Dallas Stars owner Tom Hicks is a billionaire. Otherwise, he might not survive the mess he has made of the Dallas franchise. The team, which owns 50% of American Airlines Center, is saddled with $200 million in debt (the team’s holding company, Southwest Sports, defaulted on $135 million of debt four years ago), a high payroll, and an under-performing team that can’t make it past the first round of the playoffs. The natives have clearly gotten restless, illustrated by sagging ticket sales and waning interest in the Dallas market for the Stars. In the face of this Hicks has actually increased the team’s marketing staff to boost ticket sales. What he really needs is a better product.
His Hicks Sports Group defaulted again on interest payments in 2009, this time with $525 million in debt. The Texas Rangers declared bankruptcy in May. Shocking details emerged about the Rangers’ finances. MLB lent them $25 million to meet their payroll. They failed to pay $39.55 million to the players’ “deferred compensation fund,” in violation of the CBA. Texas owes millions to individual players, including $24.9 million to Alex Rodriguez alone. Chaw enthusiast Mickey Tettleton is owed $1.4 million. Texas even stiffed New Era more than $100,000 because they did not pay for the team’s hats.
MLB lent the Rangers another $40 million to meet expenses while the team goes to an open auction. It’s tomorrow, if you’re interested. Courts rejected Hicks’ initial plan, to sell the club to Chuck Greenberg and Nolan Ryan, which was paired with a separate transaction that would earn Hicks a sweetheart $70 million deal for land around the ballpark. MLB denied Hicks his right for reservations about the sale process. He remains owner “in name only.”
Hicks shafted Dallas fans, but the disaster he masterminded with fellow owner George Gillett at Liverpool is even worse. The nefarious duo bought the club for $348 million in 2007, promising to build the new stadium to vault the club into the modern era. By “bought” I mean they took out loans and transferred virtually all of the debt to the club itself. The club now has total debts of $752 million (Liverpool’s estimated value is $557 million). Kop Holdings, another Hicks created company, is liable for $558 million of the debt. The club is paying $63.8 million per year in interest.
On the field, Liverpool have plummeted. The new stadium has yet to materialize. Liverpool missed the Champions League knockout stage last season and failed to qualify by finishing in the top four of the Premier League, losing tens of millions in revenue. Liverpool were a perennial top-four finisher and Champions League contender when Hicks and Gillett took over. They finished only four points away from the Premier League title in 2009. They can’t reinvest in the team without selling other players. They are in danger of becoming a perennial mid-table club or worse.
Hicks has rejected repeated offers for Liverpool that would see him leave making a substantial profit. He audaciously set the club’s selling price at around $1.3 billion in April, based on the potential value of the stadium that does not exist. The two owners were holding out for a $955 million offer. Now, they probably will get nothing.
Prospective buyers are bypassing Hicks and Gillett. Potential Chinese investors called Liverpool’s shares “worthless.” They are negotiating with the Royal Bank of Scotland, who hold $382 million of the debt and are controlling the club, to buy the debt. If the bank agrees, they can takeover the team without consulting the two Americans. Profiting from Liverpool’s sale was Hicks’ plan to offset the hundreds of millions he is set to lose on the two American teams. Oops.
Lesser men would be humbled by such unconscionable failure, but not Tom Hicks. He’s going “back on offense.” Look out, Texas financiers.
blog comments powered by Disqus