Are the Rangers going to stiff Alex Rodriguez?

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UPDATE: OK, some more research leads me to believe that the answer in the headline is “no” A-Rod is not going to get stiffed. At least probably not.

It’s possible and, in “prepacked” bankruptcies like this one, common, for the debtor (i.e. the Rangers) to  file for bankruptcy when it has the assets
to cover the liabilities but can’t pay the liabilities exactly as they come due
. This sort of Chapter 11 may allow the debtor to hold a sale — say, to someone like Chuck Greenberg! — to get fresh
cash and to restructure the timing of payments.

Upshot: A-Rod and all of the other creditors (which includes Mickey Tettleton of all people) are still quite likely to get their money, even if there is some sort of delay or disruption.

I think we all learned something today kids: bankruptcy is difficult to understand. And kind of boring, frankly. So unless a ballplayer shoots someone this afternoon, it’s going to be actual baseball content for the rest of the day.

2:09: I am obviously not a bankruptcy expert, but thankfully some of you are, and you have informed me that I got some stuff wrong below. Let me, to the best of my ability, fix it.

The notion that unsecureds don’t get paid is not accurate. They do get paid, and often, but it’s usually pennies on the dollar. Moreover, they are paid at the same rate, so if Alex Rodriguez gets, say, 50 cents on the dollar, all the unsecured creditors get 50 cents on the dollar.  It would not be kosher, then for A-Rod to get his $24.9 million and the others to get stiffed.

The practical implication of this is that yes, A-Rod is likely to get at least partially stiffed. Because if he gets all of his $24.9 million, all the creditors get all of their money and then, by definition, there is no point of a bankruptcy (i.e. a bankruptcy is defined by owing more money than you have). 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.

Another point of clarification: there can’t be a “side deal” between the Rangers and A-Rod, because that would violate bankruptcy laws which prohibit a debtor agreeing to make preferential payments to certain creditors before the filing. I didn’t intend that meaning when I said “side deal” — I really meant that there was some understanding on A-Rod’s part that he would be taken care of in the normal bankruptcy process — but that seems far less likely given the pro-rata thing outlined above, even if it were proper for the Rangers to make such an assurance, which I’m not sure is the case.

I’d ask that the bankruptcy experts among you continue to help me out with this stuff, but for now anyway, it seems like, yeah, A-Rod is gonna walk away with less money than he bargained for.  I can’t help but think that this will become something of a problem for baseball going forward.

1:15 P.M.: Pfun Pfact from the Rangers bankruptcy filing: the largest unsecured creditor is Alex Rodriguez, who is still owed
$24.9 million in deferred compensation from his big $250 million deal.

“Unsecured” means that Mr. Rodriguez does not have any collateral for the amount of money he is owed.  Unsecured creditors rarely if ever get any of the money they’re owed when the debtor goes into bankruptcy. Your mortgage company is secured (i.e. it has a lien on your house) which means that if you stiff them, they can take the house back to satisfy what you owe them.  Your credit card company, in contrast, is an unsecured creditor. If you stiff them they can try to collect from you and can ruin your credit rating, but they can’t take your stuff and, for the most part, once you file bankruptcy, its game over for them. Which is the biggest reason why credit card companies donate a lot of money to Congressmen in order to get them to make it harder for you and I to file bankruptcy.

But that’s a subject for another blog. Let’s you and I stick to Alex Rodriguez. Is A-Rod SOL?  Are the Rangers going to really just walk away from the money they owe him? The short answer: I don’t know.

The longer answer: man, I can’t see them just doing that. Lots of teams owe deferred compensation to players. Indeed, I think the Diamondbacks spent more time in the last decade working on deferred comp deals than they did playing baseball games.  If a team were to suddenly renege on a major deferred compensation deal you’d have to think that the union would scream and the other teams — who might like to convince some of their own high-priced players to take deferred compensation — would scream even louder.  If there’s a chance they’re going to get burnt, why would any player take such a deal again?

As is the case with the Tom Hicks creditors, I can’t help but think that there is a side deal to pay Mr. Rodriguez what he is owed, be it from the Rangers or some other source.* Otherwise, the team and the league will have just created a big labor headache that no one needs.

*How that is specifically being done — if indeed it is being done — is a pretty interesting question, because I think it’s unprecedented in baseball history.  The most recent parallel I can think of is Mario Lemieux, who was owed so much in deferred compensation that he just up and converted all that debt into an equity stake with the Penguins and now owns the team.  That can’t happen with A-Rod because baseball prohibits players from doing such a thing.  Seems like it would have to be a cash thing.

The Chicago Cubs dramatically jack up ticket prices

Wrigley Field
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The Cubs won the World Series. Now Cubs fans are going to pay through the nose for the privilege of going to games at Wrigley Field: The club has raised season ticket prices for 2017, on average, 19.5%. The rate increases range from 6% for upper deck seats to 31% for infield club seats.

As a result of the increase, the Chicago Tribune reports, a single infield box seat on the dugout for 81 games will cost $29,089.76, or $359 per game. The cheapest season ticket, for upper-deck outfield seats, is $2,139.20, or $26 per game. Those figures include tax, so it’s practically a bargain.

The Cubs cite “unprecedented demand” for tickets as the reason for the increase. That’s likely true. Cubs tickets are expensive even when they aren’t playing well due to the draw that is Wrigley Field. Indeed, for years, when the product on the field suffered, there was a sense that people would go to the ballpark just for the fun of it in ways that fans rarely if ever do for other teams. The Cubs attendance increased dramatically in 2016 and tickets often experienced an equally dramatic increase on the secondary ticket market. The Cubs would be wise to try to capture as much of that profit as they can rather than see it go to others.

Still, that’s gonna smart for people who can’t afford season tickets and who just want to go to a one-off game with the kids and exacerbates the longstanding trend of baseball tickets becoming luxury items for the well-off.

Minor League Baseball established a political action committee to fight paying players more

DURHAM, NC - JULY 28:  The Chicago White Sox play the Most Valuable Prospects during the championship game of the 2011 Breakthrough Series at the Durham Bulls Athletic Park on July 28, 2011 in Durham, North Carolina.  Most Valuable Prospects won 17-2 over the Chicago White Sox. (Photo by Sara D. Davis/Getty Images)
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Josh Norris of Baseball America reports that Minor League Baseball has established a political action committee to continue fighting against a lawsuit brought by a group of former minor league players seeking increased wages and back pay.

You may recall that, earlier this year, two members of Congress — Republican Brett Guthrie of Kentucky and Democrat Cheri Bustos of Illinois — introduced H.R. 5580 in the House of Representatives. Also known as the “Save America’s Pastime Act,” H.R. 5580 sought to change language in Section 13 of the Fair Labor Standards Act of 1938. In doing so, minor leaguers wouldn’t have been covered under a law that protects workers who are paid hourly. Minor League Baseball publicly endorsed the bill. Bustos withdrew her support after receiving widespread criticism.

The whole thing started when Sergio Miranda filed a lawsuit in 2014, accusing Major League Baseball teams of colluding to eliminate competition. The lawsuit challenged the reserve clause, which binds minor leaguers into contracts with their teams for seven years. That suit was dismissed in September 2015. However, another lawsuit was filed in October last year — known as Senne vs. the Office of the Commissioner of Baseball — alleging that minor leaguers were victims of violations of state and federal minimum wage laws. Senne et. al. suffered a setback this summer when U.S. Magistrate Judge Joseph Spero of the U.S. District Court in San Francisco dismissed class certification. That essentially meant that the players could not file a class-action lawsuit. As a result, the players’ legal team led by Garrett Broshuis amended their case to only include players who play in one league for an entire season. As Norris notes, that means that the included players’ experiences are uniform enough for inclusion in a class-action lawsuit.

So that’s why Minor League Baseball established a political action committee (PAC). A PAC, for the unfamiliar, is an organization created with the intent of raising money to defeat a particular candidate, legislation, or ballot initiative. In other words, they’re getting serious and want Capitol Hill’s help.

Minor League Baseball president Stan Brand said, “Because of procedurally what has happened in the Congress and the difficulties in getting legislation, we’ve got to adjust to that. We were lucky. We had the ability because of the depth of the relationships and involvement in the communities to not have to worry about that. And now we do, I think. The PAC . . . gives us another tool to re-enforce who we are and why we’re important.”

Norris mentions in his column that Phillies minor league outfielder Dylan Cozens received the Joe Baumann Award for leading the minors with 40 home runs. That came with an $8,000 prize. Cozens said that the prize was more than he made all season. The minor league regular season spanned from April 7 to September 5, about six months. Athletes aren’t paid in the other six months which includes offseason training and spring training. They are also not paid for participating in instructional leagues and the Arizona Fall League. Minor leaguers lack union representation, which is why their fight for fair pay has been such an uphill battle.