Bankruptcy is as American as baseball, so it’s not surprise that the Cubs are bankrupt. The current owners are the Tribune Company which also owns the Chicago Tribune and Los Angeles Times. It would seem the Tribune Company has a knack for owning businesses of the early 20th century. Tribune Company went into bankruptcy itself last year.
It should be clear that I do not like baseball, and this is not the first professional team to go bankrupt. Here’s a list of professional sports bankruptcies, it’s prevalent in hockey. The point of my post is to talk about the bankruptcy process using the Cubs as an example.
This bankruptcy is entirely expected. Like GM or Chrysler, you could call it a prepackaged bankruptcy. Companies file for bankruptcy protection which on the most fundamental level says “I don’t have the money to pay my debts so protect me from my creditors United States government”. The Cubs are filing for Chapter 11 which is reorganization. Imagine hitting the restart button on your computer because it froze, you lost some work but live to type another day. Other types of bankruptcy are chapters 7 and 13, and more.
The Tribune Company is putting the Cubs in bankruptcy which protects them from the more than $10 billion they owe to various companies including JP Morgan and Major League Baseball. In bankruptcy your creditors do get some of their money back, but not everything. They’ll have to fight over $740 million.
The bankruptcy is designed for Tribune Company to sell the Cubs to a wealthy family responsible for TD Ameritrade. The Tribune Company will get a bit a cash, and 5% ownership in the team.
Now I’m no bankruptcy attorney, but the series of bankruptcies lately is setting a sad precedent for bondholders. In a corporate bankruptcy the people owed money to get first dibs on the dying company. If you are an owner, you get last dibs. The creditors to the Cubs should get ownership of the team from the Tribune (not via sale) and be able to sell it to the TD Ameritrade family, the Ricketts. But like GM, the creditors got screwed. Lenders don’t fear lending because in a bankruptcy they at least get ownership of the assets or company. Bankruptcy courts seem to be ignoring this lately. But I digress.
The Cubs’ bankruptcy sort of symbolizes everything wrong with the team. They have the longest drought without a championship of any team in any professional league. In fact, their drought predates the inception of the NFL, NBA, and NHL. 1908 was their last title. Perhaps with new ownership they’ll be leaner, meaner, and profitable. Now if we could just do something about how boring the sport is…
 By The Weakonomist |
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Said,
It’s easy to go bankrupt when you pay players ridiculous sums of money and then have 80 or more home games that nobody can afford to go to. Hell, most of the games are on weekday afternoons so people with jobs that can afford to buy a ticket aren’t able to go anyway.
Baseball as a whole is a relic from a different era. While it is steeped in tradition and people are obviously afraid of change the sport needs to adapt a bit so it works in the 21st century.
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