There’s an interesting tale to a civil lawsuit filed recently in a Tarrant County District Court. Not because of the dollar figures or the cause of action – one business is claiming that another business owes it $60,000 for services rendered. Slightly more curious are the players involved: the Texas Rangers baseball club and a company called Highland Capital Lending of Dallas.
The Rangers are suing Highland over missed payments for a two-year lease on a stadium suite Highland signed up for last year. The Rangers claim the lending company agreed to pay about $80,000 but has ponied up only about $20,000 so far.
What’s really funny is that Rangers owner Tom Hicks is the same guy who recently defaulted on a $525 million loan with his lenders last month by holding back a $10 million quarterly interest payment. The Wall Street Journal reported that Hicks Sports Group (HSG), which owns the Rangers and the Dallas Stars hockey team, couldn’t cover both the debt service and the two teams’ operating expenses. The paper also reported Hicks’ insistence that he won’t make up the difference out of his own pocket, which angered the debt-holders.
He basically blamed the lenders for his default. “I am working to negotiate something that will make economic sense going forward for me, HSG, and its lenders,” he said in a statement. “The current situation simply does not make economic sense.” (Maybe the suite deal didn’t make economic sense for Highland Capital either. Perhaps they could negotiate the same kind of deal Hicks is asking for.)
For the past 10 years, Hicks has not been the kind of owner (like Mark Cuban, for instance) who is content to see his teams operate at a loss if it means they come out as winners. In fact, he plays it just the opposite: He doesn’t much care if his teams lose, as long as they make money for him. And he’s used the sports team capital to make some high-debt bets. Connect the dots on those debts now, and they show that the Hicks sports empire may be on the verge of crumbling.
When Hicks bought the Liverpool FC soccer team two years ago, he financed his portion of the deal with about $400 million in debt. That debt has to be paid off in full or refinanced in July. Hicks and his partner also promised the rabid Liverpool fans a $400 million new stadium and said that there would be a “spade in the ground within 60 days.” He now says he has no definite date for starting construction.
A British parliamentary committee, in response, has accused Hicks of “financial doping” and “ludicrous levels of borrowing” that threaten the near-legendary team’s existence.
Over on these shores, things aren’t too rosy either. Hicks had promised the city of Arlington a $1.2 billion mixed-use real estate development called Glorypark around the Rangers ballpark nearly 10 years ago. He pulled the plug on it last year and, as with the Liverpool stadium, has no definite plans to resume. Dallas architects who designed parking garages for Glorypark say Hicks still owes them nearly $350,000 in fees.
Hicks sold the Mesquite Championship Rodeo last month in what looks like a move to get some cash in his pocket. He’s also announced that he wants to sell minority interests in the Stars and the Rangers in hopes of raising $250 million.
But who would want to invest now in teams owned by a group facing massive debt? I’d think any potential investors would rather wait and see how the default process plays out. Hicks might be forced to sell his entire interest in both North Texas teams, and buyers could snap up ownership shares at a much lower price.
Hicks once told me that his sports teams were completely separate from his other business interests. But his business interests have always revolved around huge amounts of borrowed money, and the current credit crunch is punishing people who do business that way. The sports teams represent a big chunk of the debt pile that’s threatening to topple over on him.
No one can say at this point whether Hicks will have to sell his teams. Many observers think he can refinance those big loans and move on. But these little financial blips, like not paying an architecture firm what he owes them, suggest that Hicks might be closer to financial meltdown than had been suspected.
Suing Highland for that whopping $60,000 is another bad sign for Tom. It suggests too many comparisons with Hicks’ own demands for leniency from those to whom he owes so much more. The outcome could affect a couple of counties’ worth of taxpayers, whose dollars have built the places Hicks’ teams call home, and all of us North Texas baseball and hockey fans, from the cheap seats to comfy suites. Not to mention those poor saps in Liverpool.
