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League Impact on the Sports Team Bankruptcy Process

By Thomas J. Salerno and Jordan A. Kroop
September 28, 2010

There's no playbook when it comes to professional sports teams facing bankruptcy, given that only six of them have sought bankruptcy protection since the Bankruptcy Code was enacted in 1978. For those keeping score, however, it's clear the professional sports leagues ' Major League Baseball (MLB), the National Football League (NFL), the National Basketball Association (NBA) and the National Hockey League (NHL) ' have played an unusual role in bankruptcy proceedings.

The recent bankruptcies of three teams ' the NHL's Phoenix Coyotes and MLB's Chicago Cubs and Texas Rangers ' provide valuable perspective on the leagues' roles. This perspective is important, because while team bankruptcies have been relatively rare, the ongoing global economic turmoil hasn't passed by team owners, who are often highly leveraged in numerous investments. In difficult economic times, then, it should not surprise anyone to see more owners resorting to bankruptcy courts in an effort to maximize the value of their teams in light of either a league's insistence on limiting the universe of potential buyers (as happened in both the Coyotes and Rangers cases) or intransigent lenders trying to hold up sales (as happened in the Rangers case).

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