Wall Street Journal Looks at Tom Hicks’ Finances

This isn’t really news. Tom Hicks first spoke to our own Evan Grant about why he was defaulting on some of his loans. But seeing it all laid out in the WSJ (sub only) just makes Hicks’ position look terribly uncomfortable. He missed a $10 million interest payment on March 31. Now he’s working with dozens of investors and financial institutions to change the terms of $525 million in debt. If he can’t work things out, it’s possible that he’ll lose control of the Rangers and Stars. But the sports business doesn’t have his undivided attention, as he’s still trying to close a $3.2 billion deal to acquire a majority stake in plastic-container company Graham Packaging Holdings from the Blackstone Group. Oh, and don’t forget the money he borrowed to buy Liverpool. Hicks has a $400 million loan from the Royal Bank of Scotland that’s due in July.

Certainly Hicks has made some sports decisions that haven’t worked out (I’m looking at you, A-Rod). But even Hicks’ biggest detractors must see that having a bunch of banks in control of the teams would not be a positive development.

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13 comments on “Wall Street Journal Looks at Tom Hicks’ Finances

  1. Well, that’s really not The Whole Story.

    It is understandable that Hicks is funding the expenses associated with the operation of the Stars and Rangers, as his failure to do so would not only make the teams insolvent but would also cause the Hicks Sports Group to immediately begin foreclosure proceedings. But by publicly casting this situation at HSG as a negotiating tactic within the context of a business dispute, there seems more than a bit of disingenuousness goin’ on.

    Typically when requesting cooperation and forebearnace from lenders in regard to existing debt covenants and provisions, one DOES NOT non-consensually withhold interest payments. The only time that I have personally seen such type of debt service withholding as part of debt restructurings has been when bankruptcy protection was a true possibility.

    Moreover: the fact that Hicks is trying to push through a sale of a minority equity interest in both the Stars and the Rangers in the current depressed economic environment speaks amply to the direness of the current situation. The aggregate Credit Crisis discount that Hicks may reap on the sale of such minority interests could amount to well into the hundreds of millions of dollars relative to earlier or later timeframes of lessened market distress.

    A more likely reason that Hicks has withheld interest payments to the HSG lenders is to conserve cash in light of the June 2009 maturity of the $400 million that Royal Bank of Scotland had fronted to Hicks and George Gillett to facilitate their acquisition of the Liverpool soccer club. RBS itself is in doomed straits: and it seems unlikely that any other lender would step into the breach that will be left when RBS tries to exit the loan this summer. (Hicks and Gillett could possibly attempt an extension of the RBS loan, coupled with a partial principal paydown: but with Hicks using cash rfom his personal coffers that otherwse would have served to pay interest to his HSG lenders.)

    Finally, recent filings by Hicks Acquisition Group make it clear that Tom is not much working to close Graham Packaging deal. http://www.sec.gov/Archives/edgar/data/1402175/000095013409001308/d66019e8vk.htm

    In any case: it’s all ugly out there, Gang.

  2. So, if all this doesn’t work out, will George and Laura just move into the Hicks compound?

  3. If his best prospect for gaining liquidity is Ray Washburne, then his goose is cooked. Evidently Mr. Washburne was his guest at The Masters. Cue to Peggy Lee: “Is That All There Is?”

  4. “even Hicks’ biggest detractors must see that having a bunch of banks in control of the teams would not be a positive development”

    Yeah, right…..another case of “too big to fail”? Cry me a river!

  5. It seems like Unfair Park has been doing a much better job of posting local news first. Too much Twitter, which I’m not following.

  6. Hicks just needs to sell the teams to someone who can afford them. I am not going to waste any time crying for Hicks simply because his appetite is far bigger than his bank account.

    Even the banks foreclose, they won’t own the teams for long — they will want to flip them as quickly as possible to get the loans off their books, even if it does mean taking a hit on the existing loans. But I bet that the combined value of the two clubs would be pretty close to, if not in excess of, the $525m.

  7. Now at CNBC

    http://www.cnbc.com/id/30211713

    19 minutes ago
    Is Tom Hicks On The Ropes?
    Posted By:Darren Rovell

    You probably saw the news last week. Texas Rangers and Dallas Stars owner Tom Hicks, who also owns part of the Liverpool soccer club, defaulted on a $10 million payment connected to $525 million in loans.

    It’s not the end of Hicks’ ownership reign, but it’s not a good sign, despite what Hicks would have you believe.

    When the news broke, Hicks, who famously agreed to give Alex Rodriguez a 10-year, $252 million contract despite the fact that there weren’t teams within a sniff of that deal, played it off. He actually said that he defaulted intentionally.

    While there are no immediate penalties for defaulting on a loan like this, it’s not like it hurts his personal credit rating, insiders I spoke to have said that they’ve never heard of a person doing this on purpose.

    The next step in the process is for Hicks and those lending the money to sit down and negotiate a new payment schedule and perhaps a new number that needs to be owed.

    The catch is that the ability of the lenders to be flexible has little to do with Hicks’ business and more to do with the still frozen credit markets.

    So what happens if things can’t be worked out?

    Well, the Wall Street Journal notes today that the lenders have agreed not to take control of the Dallas Stars for at least six months, abiding with the National Hockey League provisions that protect a team from immediately going into foreclosure.

    So the immediate solution for Hicks is to sell pieces of his teams to raise enough cash to remain the owner or eventually just hand them over to the banks. But, trust me, the banks don’t want the teams. They want the money.

    Hicks’ greatest problem might be his inability to accept reality. In mentioning that he’s ready to sell parts of his teams, he has mentioned selling a 49 percent stake, so that he can raise money while still maintaining his majority ownership position.

    Not only has the value of his teams probably dropped at least 25 percent because of the marketplace, but the person who is buying has to have more cash than ever before. And someone who doesn’t have a sports team who is going to buy now is going to want majority ownership, if not immediately upon purchase, within a couple years.

    The other way it could shake down is if either of the leagues decide to buy the teams for a reasonable price, hoping that they could flip it around when the economy clears up a bit. This actually last worked when Major League Baseball flipped the Montreal Expos and turned them into the Washington Nationals. But in order for the league to buy a team, they have to make sure that contraction is off the table.

  8. Read this in the WSJ this morning as well and my two cents is that someone needs to pinch Tom Hicks and remind him that such tactics (and yes, they clearly are tactics) went out the window last year in the global economic meltdown.

    Employing such tactics with RBS, which is now majority-owned by the British public, will go over with an even bigger thud. Brits may be uber-passioinate about their football but they are not uber-passionate about a bank they now own being overly-passionate and generous toward a carpet-bagging American businessman who bought one of their prized footie teams.

  9. I for one will be happy to see him out of the sports game, if for no other reason than to less of his brood trolling around town spouting about being VP of this and that. maybe an honest godfearing job would help them out.

  10. Karma? Bathing in the tears of Unicorns finally catches up with Mr. Hicks? I’d go to a Rangers game just to support a new owner, any new owner.