The Texas Rangers were sold in an August bankruptcy auction to a syndicate headed by former baseball great Nolan Ryan and attorney Chuck Greenberg. The final purchase price was $608 million—nearly $100 million more than the original offer for the team—and is a great example of how lenders can use the bankruptcy process to maximize the value of an asset.
In bankruptcy, most sales of assets or businesses are held via public auction under the bankruptcy court's rules Auctions expose the assets to the market and encourage qualified bidders to put forth their "highest and best bids." The Rangers' auction is a good example of this—the difference between the approximately $500 million initial bid and the final $608 million purchase price is substantial. And when an auction results in a price increase, creditors' of course, benefit.
The Ryan-Greenberg group had been negotiating a Rangers purchase since 2009, but the lenders never agreed to the deal, taking the position that the Rangers had not been fully shopped and insisting on conducting a traditional bankruptcy auction. In the bankruptcy case, the Rangers originally sought to have the first Ryan-Greenberg transaction approved, but the objecting bank creditors continued to press for a bankruptcy auction and complained that the deal that the Rangers' management and ownership were pushing was tainted by conflicts of interest. MLB initially asserted that it would approve a sale only to the Ryan-Greenberg group, but ultimately it halted its objections to the auction process. The bankruptcy court eventually appointed an independent fiduciary, who determined that pursuing a traditional bankruptcy auction and re-opening the bidding process was in the best interests of creditors. This determination led to spirited bidding for the team by a group headed by Dallas Mavericks owner Mark Cuban. Though unsuccessful, Cuban's bid helped increase the overall purchase price. The additional $100 million that the bankruptcy estate received validates the wisdom of open auctions for distressed assets and illustrates the value of a bankruptcy auction to creditors in the professional sports team context.