By Ben Klayman - Analysis
CHICAGO (Reuters) - The long-awaited sale of the Chicago Cubs baseball team could be thrown open to new prospective buyers, after its parent company, The Tribune Co, filed for bankruptcy protection on Monday.
While more bidders could play a role in the process, how quickly the sale moves will be influenced by the bankruptcy court judge, available financing and whether new buyers do emerge, bankruptcy law experts said.
“Bankruptcy processes require auctions. Auctions tend to generate competitive biddings and make the process play out in a much more public, visible way,” said Gary Holtzer, an attorney at Weil Gotshal & Manges, a top U.S. bankruptcy firm in New York.
“It can throw it open to anyone,” he continued.
New bidders or other litigation can often delay the sale process in bankruptcy court, Holtzer said. But at the same time, he said, buying an asset under the auspices of a bankruptcy court makes it more attractive to bidders because under the bankruptcy code assets are sold “free and clear” of any claims, potentially speeding up the process.
Tribune filed for Chapter 11 bankruptcy protection on Monday, hurt by a heavy debt load and the weak publishing sector, but the Cubs and their home park of Wrigley Field were not part of the filing.
But analysts said Tribune, the parent of the Cubs, will need the court’s approval to sell any assets.
“The company and the judge will have a great deal of discretion on this and I believe that any creditor or party of interest in the filing can raise objections to the sale,” said Tim Turek, managing director with BBK Ltd, a business advisory firm in Southfield, Michigan, that specializes in corporate restructuring. “Whether that happens or not is another story.”
Tribune, which owns the Chicago Tribune and Los Angeles Times newspapers, put the Cubs on the block in April 2007 when Tribune announced it would be bought for $8.2 billion by a group led by real estate magnate Sam Zell. It is selling the team to cut debt it took on as a result of the leveraged buyout. [ID:nN08475094]
Tribune officials could not be reached to comment, but in a press release about the bankruptcy filing said efforts to sell the Cubs and related assets would continue.
Cubs Chairman Crane Kenney on Friday told the Tribune newspaper the team expects a sale by spring training next year, which starts in February.
Sources previously told Reuters at least three bidders had submitted second-round offers for the Cubs and related assets. Before the financial markets melted down, analysts had predicted bidding would top $1 billion.
However, some bidders, including Internet billionaire Mark Cuban, who sources said did not submit a bid in the latest round, said the weak economy would likely hurt their bids.
Turek, who lives in Chicago and named his son Clark Addison Turek after two famous streets outside Wrigley Field, agreed.
“The combination of a bankruptcy filing and the credit markets are likely to lead to a reduced value for the Cubs,” he said. “If they thought they were going to get $1 billion three months ago, it’s likely substantially less than that now.”
Some reports had Zell retaining a stake in the Cubs of as much as 50 percent to smooth a sale; something Kenney on Friday denied. He added the franchise’s value remains strong.
A source familiar with the sales process said Kenney’s spring timetable is possible, with a winner identified by year end and the deal closing in the first quarter.
“What Major League Baseball wants is for the team to trade quickly,” said the source, who asked not to be identified discussing an ongoing process.
Bankruptcy court experts said new bidders could emerge, or old ones could re-emerge, as the judge pushes Tribune to get the most money it can for any assets on the block.
However, another source suggested Kenney’s time frame would be tough given the tight credit market, and said baseball still controls who buys the club.
“Teams are bought ‘subject to baseball rules’ -- period,” said the source, who asked not to be identified discussing the ongoing sales progress. “I think it will be business as usual and the team will be sold in the ordinary course.”
At least two baseball teams have been bought out of bankruptcy in the past.
In August 1993, a group led by attorney Peter Angelos purchased the Baltimore Orioles, while baseball’s current commissioner, Bud Selig, led a group that in April 1970 bought the Seattle Pilots, moved the team to Milwaukee and renamed it the Brewers.
Among those currently bidding for the Cubs are groups led by Tom Ricketts, chief executive of Chicago investment bank Incapital LLC and the son of the founder of TD Ameritrade Holding Corp; Marc Utay, a managing partner with New York-based private equity firm Clarion Capital Partners LLC; and Chicago real estate executive Hersh Klaff.
Additional reporting by Emily Chasan in New York; editing by Patrick Fitzgibbons