We all remember what it was like the week after the Super Bowl. When we once again knew we would have live, professional football. We hoped it would be as great as our expectations, but we weren’t sure.
A level of nervousness for everyone involved. From XFL executives all the way down to the fans at home. And then, Kickoff.
What we ended up with was 5 weeks of amazing football. A new, updated style of the game we’ve made into this country’s biggest spectator sport. New rules, faster play, officiating we could trust, and never-before-seen access to players and coaches on the sidelines during the game.
Then the virus came and wiped out the sports world as we knew it. It may never be the same after this. Leagues of all kinds stopped. Some were paused. Some were gone forever.
The XFL at first stalled. But about a month later, all of a sudden filed for bankruptcy.
This is a timeline, of sorts, of everything that happened between April 13th, and now, as it is represented through the court case. All of this is based upon publicly accessible court documents. And although they are legally binding, both sides reserve their rights.
Contracts may seem “ironclad”, but nothing in the court system is really that absolute. A special distinction, because although we talk about leases and contracts being assumed and assigned, this is still very fluid. Either side can change their mind at any time.
The sale, however, is final.
Monday, April 13th:
Paperwork is submitted to a Delaware court, stating that Alpha Entertainment, LLC, the parent company of the XFL owned by Vince McMahon, has filed for Chapter 11 bankruptcy. Among that paperwork are motions to end every contract and/or lease involved with the league. This process also creates the two sides: the Debtor, and the Unsecured Creditors. A list of those creditors is created. It’s 103 pages long.
Every executive, coach, player, vendor, media and security staff, venue, and practice facility the league employed and used was-in legal speak-rejected. There are a few reasons why this is done in Chapter 11. Most immediately is to minimize the debts, and maximize assets. The other is to work out a new deal. Limit the cure cost, and have something for the new owners.
This is also when Oliver Luck’s contract was ended. Sparking the legal action he took against Vince McMahon, claiming he was fired without cause. That a clause in his contract states he is owed his entire salary unless he is fired for a specific reason. That’s an entirely different case, though.
The first motion for the sale is entered. This is important because it sets all the rules. How and when the bidding will start, what a qualifying bid is, how it’s determined, auction date, and objection date.
Also among the document is how the assets will be determined. How the Debtor (Alpha/XFL/Vince McMahon) will decide the leases and contracts it will assume and assign, which ones will be rejected, and how the interested parties may get involved.
Assumption and assignment of unexpired leases and designated contracts, is a process in which people, and real property with a lease or contract get added to the asset list. It starts with a negotiation, then a proposed motion, and finally it will be added to what is known as the cure sheet.
A cure sheet is a list of contracts and/or leases of Creditors that have agreed to continue to do business. This doesn’t take them off the Unsecured Creditors list, nor does it affect their standing in the case. Just means that a settlement for money-owed has been made, and adds them to the asset list.
Remember, Chapter 11 is restructuring, not a fire sale. The AAF went into chapter 7 almost immediately. They knew they were done. The XFL wanted to restructure the debt and continue. Vince just didn’t want it any longer.
The next big move was for both sides to be represented by both lawyers and financial firms. The Creditors also created the Official Committee of Unsecured Creditors. A group was chosen by those who were owed money, to work directly with their firms, for the good of the group.
It’s important to note, that while creditors are owed money, bankruptcy by the Debtor never guarantees they will ever see any of it. In this case, the big deals, and the facts that we will go over, pertain to those who will, or have been negotiated with.
Statements of no objections to the player’s and coach’s contacts were entered. An extension was ordered, based upon the number of people and real property on the list of Creditors. ESPN announced its appearance in the case. As did the University of Houston.
Now, even though this is when things started heating up, there were actions we didn’t notice that were important at the time. Like ESPN showing up, and the University of Houston. These were big deals because both would later file objections to the case. We’ll get to that.
It is at this point we found out that Jeffrey Pollack, President of the XFL, had started reaching out to the venues, or stadiums. We learned that Houston and St. Louis were indeed interested in continuing.
This was also the first big objection by the Creditor’s Committee. They claimed that McMahon was attempting to slide the scale in his favor, limiting the time the estate had to find a buyer, and making it easier for him to buy back the league.
A member of the Committee was quoted as saying:
“McMahon’s intentions are laid to bare when considering his decision to shutter the league and then advance debt to the company, rather than infuse equity, in the face of the many public statements and reports that McMahon was prepared to invest several hundred million dollars in the league and absorb significant losses over a several year period in order to ensure the ultimate success of the enterprise,” the objection reads. “Instead, seizing an opportunity to shed significant liabilities and at the expense of the many creditors and vendors that detrimentally relied on McMahon’s comments and commitment to backstop the league as it matured into a profitable enterprise, McMahon is the principal architect of a loan-to-own strategy that that would benefit him at the expense of unsecured creditors.”Member of the Committee of Unsecured Creditor’s statement against McMahon.
The Creditors also objected to a proposal that they pay the $3.5 million to season-ticket holders. This payment was agreed upon earlier, but it was to be paid by McMahon/Alpha. Not the Creditors. Through a loan that was offered from Vince to whoever purchased the league.
We learned the sale date had been extended by 30 days, to the first week of August.
McMahon responded to the Committee’s objections. This was part of that statement:
“Filled to the brim with inflammatory rhetoric and unsubstantiated accusations that the Debtor rigged the Bidding Procedures in favor of Vince McMahon, the Committee’s Objection is irresponsible and value-destructive. Indeed, in response to the needlessly vitriolic personal attacks in the Committee’s Objection, McMahon has chosen to bid the Debtor good luck and simply walk away from any potential bid for the Debtor’s assets.”
The statement, as aggravated as he was, effectively convinced the court that the extension of the sale and bidding process until August 3rd was substantial enough, and McMahon withdrew the proposal for the Creditors to pay the $3.5 million.
By the end of the month, things were back on track. Regular motions and procedures were filed and followed. Nothing substantial had been released yet.
THE PRE-SALE PERIOD
We finally get to see what was being sold. Alpha filed its assets and liabilities list. It’s a 618-page report on everything the league owed and owned. Everything the potential buyer was getting. Equipment, intellectual property, real property, assumed and assigned leases, and contracts. Every dime they owed, and who they owed it to.
St. Louis would be the biggest debt, when it came to league business. But would not be on this list, as the lease was previously rejected. This is why the actions are important to note. Had they assumed and assigned the lease, it would have made the assets list.
An advertisement ran in the New York Times, which was meant to be the official announcement to those outside of the football world that the XFL was going to be sold at auction on August 3rd.
That same day, the initial cure notice/sheet was released. On it, were names, and leases or contracts with which Alpha expected the potential buyer to continue doing business with after the sale. Or contracts that would be beneficial, or add value to the estate.
The order to reject certain unexpired contracts and leases was given. Except for this time, there were some properties missing from the list. Why were the other leases missing?
On April 13th Alpha filed to reject ALL leases to venues and practice facilities. When the order was granted in June, only DC, St. Louis, New York, and Seattle remained. which meant the leases to LA, Dallas, Houston, and Tampa were at the very least being negotiated. More was to be revealed.
ESPN filed a limited objection to the assumption and assignment of its contract. Stating that the deal was with McMahon. In that, a pay agreement from Alpha to ESPN was made. Which made it two separate entities (broadcasting rights and pay agreement), but one contract legally. They could not be separated, but the pay agreement could not be listed as an asset.
They also wanted it known that while they were objecting to the assigning of their contract, they were willing to work with the new owners, depending on who that may be.
We learned that Fox had stepped in, wanting to reserve their right to refuse to work with the new owners, but they were willing to do so, depending on who they were.
These two actions were huge for the league. They showed that the broadcasting partners were still interested. This was sure to attract high-level buyers. While no list was ever made available of those who were interested, speculation that it was going to be an entertainment group like Disney spread like wildfire.
That was also the first day that vetted, interested buyers could begin bidding. The rules were laid out in a previous court order that a Stalking Horse Bid, which is the bid that begins the process, could be set beginning 7/23/20. If there was only the single bid, that would be the winning bidder.
If there were three or more bids there would be an auction. Two bids and the original bidder could choose whether to put up what would constitute the third bid inducing an auction, or step away.
Just days before the bidding period would be over. A list of contracts and leases to be assumed and assigned was ordered by the court. This list would have the Dallas, LA, and Houston venues on it. While Tampa’s Raymond James Stadium lease was on the cure sheet, it had not yet been assumed and assigned.
I cannot state enough how big this is. While it is still possible to not play in those cities, having active leases in the stadiums is a major deal.
Another major objection. This time, from the University of Houston. While an agreement was made, and a cure amount was filed, UH felt they were shorted over $100,000. This would end up being resolved.
This was also the last day that bids could be submitted. A big day, as we would find out later only one qualified bid was placed.
The next filing was the announcement of the cancellation of the auction since there was only one qualified bid. Obviously today we know that was done by Alpha Acquico, Dany Garcia, Dwayne Johnson, and Gerry Cardinale of RedBird Capital.
The Committee filed an objection to the sale. Arguing that Alpha added assets, claims, and actions on the last day of bidding. Not allowing other potential buyers the opportunity to bid based on accurate data. They weren’t against the sale or the buyer, just how it happened. Easy fix.
The winning bid was for $15 million. On top of the bid, the group also owes $8.5 million in cure costs to the Unsecured Creditors. Making the final tally $23.5 million.
The hearing to resolve this matter, the wording of the final sale, and the assets included were changed to fit the recommendations of the Committee, and the court approved the sale to Alpha Acquico.
The XFL would officially change hands. Huge for the league. Initial thoughts were about when we would begin play, and while hints were made, the group has been relatively quiet.
Ten days later another filing for assumption and assignment of an unexpired lease or contract was submitted. On the list of real property, was the lease for Raymond James Stadium. Many heard rumors that the Vipers could leave the Bay area for Orlando. While this doesn’t solidify their place in Tampa, it makes a move much less likely. You don’t assume a lease, if you don’t plan on using it.
This is where we stand, the league has new owners. Things are moving slowly right now, but they are moving. More documents have been filed with the court about leases and contracts, but aren’t highly relevant.
With the NFL setting its rosters over this weekend, we should see more action in the coming weeks. Players will be placed on practice squads, and others will be free agents. From those FAs, we’ll be able to tell who is available to play in the XFL.
Because we will have another season. That we know, and we don’t need a court document to see that.
For the Love of Football.
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