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.

President Obama pardons Willie McCovey

SAN FRANCISCO, CA - APRIL 06:  San Francisco Giants legend Willie McCovey  waves to the crowd while seating between Jeff Kent (L) and Willie Mays during a ceremony honoring Buster Posey for winning the 2012 National League MVP before the Giants game against the St. Louis Cardinals at AT&T Park on April 6, 2013 in San Francisco, California.  (Photo by Ezra Shaw/Getty Images)
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The big presidential pardon news today concerns the commutation of Chelsea Manning’s sentence. We’ll leave that aside. For our purposes, know that someone in the world of baseball was pardoned: Willie McCovey.

Yes, Hall of Famer Willie McCovey, who in 1995 pleaded guilty to income tax fraud related to the non-reporting of income received from memorabilia and autograph shows. Duke Snider pleaded guilty alongside McCovey. They were given two years probation and fines of $5,000. Snider died in 2011. McCovey still works with the San Francisco Giants as a senior advisor and goodwill ambassador.

President Obama’s release of McCovey’s pardon was pretty succinct. But it’s enough to scrub the record of one of the greatest sluggers of all time.

 

Jake Diekman will miss at least half of the 2017 season

TORONTO, ON - OCTOBER 9: Jake Diekman #41 of the Texas Rangers works against the Toronto Blue Jays in the sixth inning during game three of the American League Division Series at Rogers Centre on October 9, 2016 in Toronto, Canada. (Photo by Tom Szczerbowski/Getty Images)
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Rangers reliever Jake Diekman will have surgery on January 25 to help alleviate ulcerative colitis, an inflammatory bowel disease. As a result, the lefty will miss at least half of the 2017 regular season, Jeff Wilson of the Fort Worth Star-Telegram reports. Diekman was diagnosed with the illness when he was 11 years old. He has brought awareness to the Crohn’s and Colitis Foundation of America with a “Gut It Out” campaign.

Diekman, who turns 30 years old on Saturday, finished the 2016 campaign with a 3.40 ERA and a 59/26 K/BB ratio in 53 innings. He came to the Rangers from the Phillies in the Cole Hamels trade on July 31, 2015.

The Rangers and Diekman avoided arbitration last Friday, agreeing to a $2.55 million salary for the 2017 season.