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Club Officials Go Silent Over Chatter Major League Baseball Has Loaned Texas Rangers Money

Posted on July 2nd, 2009 12:47am by Evan Grant
Filed under Baseball, Breaking News, Dallas Sports Business, Texas Rangers, Tom Hicks

UPDATED, 9:10 a.m. CDT to indicate it is Hicks Sports Group, not Tom Hicks personally, that is struggling with debt issues.

ARLINGTON – Amid increased internet chatter Wednesday that Tom Hicks’ sports group – Hicks Sports Group – financial woes are deepening and that the club has borrowed money from MLB’s rainy-day fund, team officials took a strange approach.

They went silent.

The chatter arose Wednesday after a local blog reported hearing on a national radio broadcast the team had borrowed $15 million from MLB to make its most recent payroll obligations and to fund ongoing operations. Asked about the reports, Hicks referred questions to team spokesman John Blake, who said the team would have no comment on the financial situation. Club president Nolan Ryan declined to comment after the Rangers’ 9-7 win over Los Angeles, which pulled them within a half game of the Angels in the AL West.

Club sources, however, said the team has paid its employees for the most recent pay period and that Hicks remains in control of the organization. According to a source familiar with the situation, the Rangers are continuing normal operating procedures and have financial resources to sign both draft picks and international free agents. The source, however, did not mention the possibility of increasing payroll at the trading deadline.

According to a source, a scenario has been in place for several weeks that would have allowed the Rangers to borrow from the MLB fund. It would not mean MLB would take control of the club, but under those circumstances, it’s likely MLB would have much more say on spending matters. The Rangers top two draft picks, LHP Matt Purke and RHP Tanner Scheppers, are both demanding bonuses well in excess of the current MLB-recommended “slotting” system.

Since late March, when Hicks announced a willingness to sell a minority stake in the club, the problems have widened. Hicks went into default over an interest-only payment on a $525 million loan to his U.S. based sports operations. Earlier this season, he acknowledged a willingness to sell a controlling interest in the team and has talked to potential investors such as Ryan, Houston-based Don Sanders and car dealer David McDavid. In June, the Rangers laid off a little less than 10 percent of their front office staff in an attempt to further trim costs.

Last week, GM Jon Daniels said he had not explicitly been told the club would be unable to add payroll at the deadline, but the Rangers were proceeding as if taking on extra financial commitments was not a viable option. The Rangers did not get involved in trade talks for versatile former Ranger Mark DeRosa, who Cleveland traded to St. Louis last week. DeRosa was still owed about $3 million in salary at the time of the trade.

27 Comments to “Club Officials Go Silent Over Chatter Major League Baseball Has Loaned Texas Rangers Money”

Dan @ July 2nd, 2009 at 1:19 am

CJ tweeted a couple of weeks ago about going to his bank to deposit his paycheck. Lots of folks started questioning what was up back then. I assume players usually get stuff direct-deposited undre normal circumstances.
Little O @ July 2nd, 2009 at 1:28 am

Oddly enough $15 million is also Hicks water bill last year
B. Money @ July 2nd, 2009 at 2:04 am

The Hicks era can’t end soon enough.
Old Tom @ July 2nd, 2009 at 3:13 am

Evan, thanks for very informative post well past your bedtime.
90DaysOfHicksDefault @ July 2nd, 2009 at 3:14 am

hicks thought another tax cut was coming so he wasn’t worried…..uh oh……..
90DaysOfHicksDefault @ July 2nd, 2009 at 3:15 am

despite the initial pain this is going to get better when the Bass brothers take over……
marc @ July 2nd, 2009 at 4:43 am

He used ten million gallons of water on his estate. How many babies in africa could you a wash? let alone the mosquitos?

He owns a 40+ million home and he is in finacial problems. Gimme a break.

Hicks bankrupted Dr Pepper. Clyde from the Clint Eastwoods movies could’nt done worse.

It is time for Hicks to sell. I like his son tommy but it is time to sell.

the market might not be right now but in fans interst it is time to move on.

go invest in some overseas cereal hicks. Stop meddeling with the Rangers and Stars.
Jon @ July 2nd, 2009 at 8:33 am

I find it curious that the Texas Rangers can not make payroll without a loan.

Attendance is about where it has always been and payroll is fairly low compared to other MLB organizations.

My guess is that Hicks has somehow saddled the Rangers with an onerous debt burden that is sucking up cash flow. Basically I suspect that he has looted the organization by taking cash and leaving the Texas Rangers holding the debt for his most recent acquisiton on the othe side of the pond.

Evan,

This is really a big story. I hope that you or Mike or someone can dig into it. It would be really informative to have someone leak the Texas Rangers financials.
Tom @ July 2nd, 2009 at 8:48 am

So here we sit, in the fifth-largest market, with a mostly young, talented team that’s a half-game out of first place, but with the financial resources of the Pirates.
Tom Hicks’ legacy is getting worse by the day. Can’t make payroll? Come on. Sell. Now.
He needs to turn this thing over to David McDavid, before it gets placed into a trust or is totally controlled by MLB.
If the latter happens, the payroll will drop to the bare minimum and no one will be happy.
John @ July 2nd, 2009 at 8:50 am

@ mar

1) clearly he shouldnt have a right to do what he damn well pleases on his own property, right? what do you want to happen? the gov’t to step in and say “no more for your mr. hicks”

2) you like tommy? dont ever go to a liverpool game and say that…

3) how is he meddeling with the rangers and stars? ya know, its not like he owns both teams or anything…
Tom @ July 2nd, 2009 at 8:57 am

I’m guessing/hoping Evan will be spending the off day doing some more digging on this. Didn’t see much in the daily papers about it, other than a shared story about the Hicks marketing group being closed.
Russ @ July 2nd, 2009 at 9:00 am

Jon, I think we need to pump the breaks in regards to Hicks “looting the organization by taking cash and leaving the Rangers to hold the bag”.
bhudson @ July 2nd, 2009 at 9:40 am

@Russ:

Actually, I think it’s somewhat appropriate. Hicks bought the Stars for 82 million, and the Rangers for around 250 million. And he has consistently leveraged every last ounce of appreciation.

He is effectively a homeowner who has their house reappraised regularly and takes out a home equity loan every chance he gets.

You can look at what little information is available and come to the conclusion that he has no equity stake in his teams. *He has looted his sports empire*. He took the money and bet it on real estate, which has stalled. He’s holding onto undeveloped/partially developed real estate assets (which are themselves partially leveraged) which are creating little to no cash flow. And therefore he can’t service his loans.

He’s not leaving the Rangers to hold the bag, though, true. But the team may suffer until a sale (this is the cruel curse of being a Rangers fan: every time there is a light at the end of the tunnel, the tunnel caves in). They’ll sell for market value, and if it’s not enough to cover his liabilities, Hicks will most certainly have to tote his own bag.
Matt in Austin @ July 2nd, 2009 at 10:42 am

I’d temper the enthusiasm about getting rid of Hicks. The past aside, this is one of the best organizations in MLB right now. Who knows what the “next guy” is gonna do. I’d rather stick with Hicks and know the plan is going to stay in place.
Ranger_Rick @ July 2nd, 2009 at 11:02 am

@Matt – better to sell and keep Ryan involved. He is why they didn’t trade off a bunch of prospects last year and why they won’t do it again this year. Hopefully when they do sell Ryan will be part of the new ownership and will have even better control. I think JD needs his guidance long term even though he has recently made some good, well timed trades he still needs experience and Ryan has that. Ryan is the best thing that has happened to this organization in a long time and I hope he stays for a very long time.
The Beer Guy @ July 2nd, 2009 at 11:03 am

I’m really concerned about this. Talk about really bad timing for Hicks to go insolvent…just when we’re in a pennant race at mid-season, this has a good chance of putting a serious damper on serious action in the trade market, AND in the off-season FA market.

However, it might also mean that he’s willing to come down a fair bit on the asking price for the Rangers, opening it up even more for a Nolan-led consortium.

Whatever the case, I want Hicks to go. I don’t think he’s been a tightwad owner as the usual criticism goes, but this rampant acquisition spree that he’s been on has really caused ALL his teams to have problems now. It would be nice to have an owner predominantly committed to the Rangers.
Fred @ July 2nd, 2009 at 11:22 am

@Beer Guy-
I, too, am very concerned–especially with 2 over slot top draft choices and the Latin players dangling.
Dallas Blog, Daily News, Dallas Politics, Opinion, and Commentary FrontBurner Blog D Magazine » Blog Archive » Hicks Sports Group Borrows $15 Million From MLB @ July 2nd, 2009 at 11:51 am

[...] Grant has the scoop on the Rangers’ off-the-field efforts to keep the ship sailing. FrontBurner® [...]
Rossometown @ July 2nd, 2009 at 11:57 am

Rick, I like what the express has done here, but JD started the plan and Nolan backed it when he got here, it wasn’t Nolan’s great plan. He started out with fan relations and what not and then after seeing what was going on did he start giving his opinions on baseball relations.
Did Rangers have to borrow money from MLB to make payroll? @ July 2nd, 2009 at 12:07 pm

[...] of Rangerfans, who went home after hearing the segment and blogged about what was said. From there, Evan Grant of D Magazine and Maury of Brown from The Biz of Baseball sprang into action and reported a flurry of no [...]
Hicks in hock @ July 2nd, 2009 at 12:50 pm

[...] The Rangers’ financial woes continue: Amid increased internet chatter Wednesday that Tom Hicks’ sports group – Hicks Sports Group – financial woes are deepening and that the club has borrowed money from MLB’s rainy-day fund, team officials took a strange approach. [...]
franco @ July 2nd, 2009 at 2:34 pm

Jon, you wrote
“Basically I suspect that he has looted the organization by taking cash and leaving the Texas Rangers holding the debt for his most recent acquisiton on the othe side of the pond.”

You may wanna go look up what Hicks has done w/ Liverpool since he took over because he’s basically ladled the club with so much debt that really all the club has going for it is it’s name. Failure to qualify for the European Champions league would be a disaster for them and for Hicks.

Hicks should not be running a sports franchise anywhere.
A nonymous @ July 2nd, 2009 at 4:32 pm

I know for a fact that things have been odd for awhile. Speaking to the previous comment regarding CJ having to deposit his check, HSG randomly switched banks after a long relationship with Chase, and still distribute paper checks to everyone. There is still no direct deposit, and people were told to expect that for forseeable future.
Jon @ July 2nd, 2009 at 8:47 pm

My point is this.

There is no way that this team with this payroll with this attendance should have to borrow to make payroll.

I am a long-time CFO. I have a feel for this stuff.

So if it isn’t operations what does that leave?

Knowing Hicks the only answer is debt.

I have no detailed knowledge of what is leveraged against what, but that has to be the root of the problem.

I love the way the rich dude is “prettying up” the rangers by firing a bunch of people in order to make the cash flow look better to some prayed for buyer. Like they aren’t going to look at longitudinal data.

I just hope that Nolan gets them.

Soon.
Hicks comeuppance @ July 3rd, 2009 at 7:47 am

Hicks has saddled all the 3 franchises with a ton of debt. They are all up for sale but each one is for sale at much more than market value – he cannot sell for any less because it does not cover the debt. In other words, he’s between a rock and a hard place. His leveraged kingdom is crumbling while he has his personal assets ring fenced and untouchable.
HubZ @ July 15th, 2009 at 9:32 am

HICKS~ yes, it’s called being “incorporated”… it protects his personal assets, duh! His budgets for his sports teams are hurting with cash flow. In other words, he needs to fill seats. His business approach seems steady(USA), but his rapport with fans are out of touch. He has a way of stepping on his own tongue in press. He seems to shy from, “Build it, they will come” mentality. The opposite seems more in reality. Not fan friendly, Mr. Hicks. Rangers need a B-12 shot and visionary leadership… untie the ropes that bind. Daniels and Ryan can only do so much, with a cracker jack payroll. Now go water your lawn TH & dream of a “Croquet League” in your own backyard. Can you imagine a $20mm grounds keeper being the catalyst? Oh my, now what to charge best friends at your $45mm homes gate? Don’t forget the Patio Furniture “Best Sale” at CHAIR KING in Plano… see Ron.
bigoil @ November 29th, 2009 at 5:14 pm

ATTENTION ALL RANGERS FANS!!!

Your white knight has arrived, ExxonMobil Oil Company of Irving Texas, to buy out Tom Hicks and take control of the Texas Rangers Baseball Club with a $**700,000,000** purchase.

Nolan Ryan would join the Board of Directors of ExxonMobil, would receive 5% ownership of the Rangers, and, most importantly, would be the ‘Control’ owner of the Texas Rangers Baseball Club.

ExxonMobil would hold 95% ownership and act as a silent partner and investment banker for the Rangers.

Bud Selig would bless this transaction by awarding the rights to host the 2012 MLB All-Star Game to the Texas Rangers.

And they lived happily ever after…Except for one thing.

This deal WILL NOT HAPPEN if you sit on your hands and remain silent.

All YOU have to do to make this dream a reality is to phone, fax, write, e-mail, and demonstrate [in front of ExxonMobil corporate HQ in Irving Texas if need be] to ExxonMobil and tell them to underwrite this deal.

WE NEED TO HEAR YOU NOW RANGERS FANS!!!!

MAKE YOUR VOICES HEARD..CONTACT EXXONMOBIL TODAY!!!