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Cubs May File Bankruptcy to Expedite Sale

When the Tribune Company filed for bankruptcy protection, the Chicago Cubs, one of its subsidiaries was deliberately left out of the filing to facilitate its sale and not unduly complicate the Chapter 11 process. Now, The Chicago Cubs are exploring the possibility of becoming the first Major League Baseball club in 39 years to seek bankruptcy protection in order to expedite the sale of the club to the Ricketss family for $900 million.

A bankruptcy filing now would allow the purchase of the club to be free from any liabilities of the Tribune Company. While the Cubs believe that the stay in bankruptcy court would be brief - just long enough to conduct a sale and confirm the Chapter 11 reorganization plan which would be presented at the outset in a "pre-packaged" filing - the best laid plans of debtors are sometimes waylaid in bankruptcy proceedings.

The bankruptcy judge is likely to want to conduct a public auction of the club. Although unlikely, it would then still be possible that another bidder could emerge offering a higher price than the Ricketts family. If accepted by the judge, the new high bidder would then have to obtain approval from Major League Baseball to become an owner.

A further delay could be possible if the creditors of the Tribune Company object to the reorganization plan offered by the Cubs. They will be entitled to most of the proceeds of any sale and their consent will be needed for the approval of any reorganization plan. For an example of how badly the bankruptcy process can upset a sale of a franchise, one need only look to the Phoenix Coyotes and the pitched battles taking place between Gary Bettman and Jim Balsillie, a process which has only just begun.

In any event, this is a bankruptcy filing that is intended to be a short process in the same manner as the GM filing. If it all goes according to plan, the Cubs could be in and out with a new owner, clean of all liabilities in about the same time it took GM. The filing would also provide interested
bystanders (like the readers of this blog) with a rare look into the finances a Major League club, and a wildly successful at that.

Full post as published by Sports Biz on July 13, 2009 (boomark / email).