A major Republican fundraiser who purchased the Texas Rangers from a group affiliated with President George W. Bush has defaulted on three loans valued at more than half a billion dollars. The Hicks Sports Group, owned by Tom Hicks, confirmed it has defaulted on loans totaling $525 million.
Hicks had secured the loans via the HSG's 95% ownership stake in the Rangers and Dallas Stars of the National Hockey League.The company confirmed that the debt is partially secured by HSG’s ownership interests in Dallas but not by Hicks’ 50% stake in the English soccer team Liverpool Football Club, according to the website FINalternatives.
According to Bloomberg data, the loans were arranged by JPMorgan Chase and Barclays, with maturities next year and in 2011. They include a $350 million term loan with an interest rate of 2.5 percentage point over the London interbank offered rate, $100 million second-lien loan with a rate of 5.5 points over Libor, and a $75 million revolving credit facility with a rate of 2 points over Libor.
Hicks, the single-largest lender to his own sports group, did acknowledge that he is seeking buyers for a minority stake in both of the affected teams.
HSG emphasized that the default would have “absolutely no impact on operations of either team or the fan experience at its venues.”
The UK based Guardian reported that HSG had recently missed payments on all three loans which are held by a total of 40 banks:
"There is no possibility of banks owning the teams," Hicks wrote in an email to the Fort Worth Star-Telegram. "I am working closely with both leagues to find quality partners that share my long-term vision of building these two great franchises. I will continue to fund the teams' operations. I am the largest creditor to HSG and need 51% of the banks to agree with my plan."
Hicks's investment in Liverpool is held through a separate entity, Kop Investment LLC, which is the parent of the UK-based Kop Holdings, Liverpool's sole shareholder. However there is likely to be an impact on Hicks's interests at Anfield since he is also engaged in an odyssey to attract investors to the club. So far Hicks's attempts to woo backing from the Middle East has faltered; the news is therefore particularly untimely.
It will also have the damaging effect of shaking the confidence of Kop Holdings' two lenders, Royal Bank of Scotland, around 70% owned by the UK government, and the US finance house Wachovia. The club's £350.5m loan is not only secured against its own assets but also through letters of credit and personal guarantees from Hicks and Gillett, amounting to £185m.
Hicks has been an active supporter of George W. Bush since the 1994 election. Hicks, who had previously given $17,000 to Bush's opponent Ann Richards, received a plum appointment from the newly elected Bush, who received nearly $150,000 from Hicks for the 1994 and 1998 gubernatorial elections.
In return for the gratitude, Bush approved legislation to form UTIMCO in 1995. Hicks had used a full-court press strategy, spending between $50,000 to $110,0001 in lobbying and using with the powerful lobbying team Vinson and Elkins, who represents several Texas business interests, to achieve this dream.
Conveniently for both men, Bush appointed Hicks as the first chair to UTIMCO, which began the tradition of tit-for-tat management and good-ol' boy favoritism that has defined the relationship between UTIMCO and Texas politics since. In 1998, Hicks would make Bush a multi-millionaire by purchasing the Texas Rangers. In addition, Hicks' company, Hicks, Muse, Tate, & Furst, Inc., is now Bush's number 4 career patron. The company is still donating to the GOP; Rick Perry has received $283,481 from Hicks Muse, with another $176,500 coming from Charles Tate [Hicks, Muse, Tate, & Furst, Inc.]. Hicks's brother Steven has also thrown in $138,516.
For several years, UTIMCO acted in secrecy under the protection of the Texas Attorney General, which facilitated the process of questionable investments in return for political favors. UTIMCO invested some $525 million in assets run by Hicks associates and other major GOP donors. After the Houston Chronicle exposed such insider dealings in a 1999 article, Tom Hicks resigned from the board.
Investments made by UTIMCO under the watch of Tom Hicks include the following, as reported by the Multinational Monitor, Texas for Public Justice, and Bushwatch.net:
°The Carlyle Group: the Group's partners include Bush Sr. and ex-Secretary of State James Baker III.
°Maverick Capital Fund: Major project of the Wyly brothers.
°Bass Brothers Enterprises: The Bass family donated $210,000 to Bush's campaign through PAC's, with $273,000 from themselves, and they invested $25 million in Bush's Harken Oil venture.
°Kohlberg Kravis Roberts: This corporate buyout firm would soon join Hicks Muse in a $1.5 billion takeover of Regal Cinemas.
°Evercore Partners: Evercore and Hicks joined forces for a $900 million television buyout.
°American Security Partners: Landed a contract with UTIMCO months after selling several radio stations to Tom Hicks.
°Wand Partners and Inverness Management: Firms run by friends of Tom Hicks, such as former frat brother Bruce Schnitzer.
Hicks is also tied to the son of fellow Texan nut Ross Perot.
Together Hicks and Ross Perot, Jr. (chairman, CEO and director of Perot Systems Corp. and son of the former presidential candidate) created the most expensive hockey and basketball arena in U.S. history. The American Airlines Center cost $420 million; $125 million of that came from Dallas's taxpayers. This was soon after the Ballpark in Arlington was constructed and partially funded from tax-payer dollars. As an added incentive for constructing new arenas, franchise owners received $10 million bonuses. Hicks did see some money of this money from building the American Airlines Center for his Dallas Starts although he did not receive it from the newly constructed ballpark that houses his Texas Rangers (it was built before he made the purchase). Hicks also has interests in minor league baseball; he just built a new stadium in Frisco, and three entrepreneurs have filed a lawsuit against him for "freezing them" out of their interests in bringing a minor league team to Frisco.
Currently, Hicks and Perot, Jr. are working together in another business venture that coincides with this new arena. Hicks's company, Hicks, Muse, Tate, & Furst, Inc., and Perot's company, Hillwood Development Corporation, have joined forces to develop the land around the arena. In the private sector, Hicks frequently combines his corporate dealings with his personal relationships. As chairman of UTIMCO, Hicks continued this practice, leading to numerous conflicts of interest. For example, UTIMCO has $988,080 invested in Perot Systems Corporation as of March 2002 and $109,309 in Electronic Data Systems Corporation (which Perot Sr. founded) as of June 2003.
So Tom Hicks donated enormous sums of money to Bush and other Republicans such as Rudy Giuliani, all done in the hopes of influencing GOP lawmakers to deregulate financial institutions so that they might benefit Hicks and others in the billionaires club. Then after it all went to shit, the crocodile tears came out and a major donor to the party of personal responsibility tries to weasel out of loans that would have wiped out 99.9% of the rest of us but that he somehow deserves to renegotiate.
“Like so many other companies and institutions, HSG has been impacted by a global credit crisis which no one could have anticipated,” Tom Hicks said. “The company is not asking for additional money; it is only asking for full access to the interest reserve account and revolving credit line as well as some amendments in the debt covenants.”
Of course, Hicks played his best Officer Barbrady imitation by downplaying HSG's default on more than a half billion dollars
"This will be a nonevent to players, to the fans, our sponsors, our vendors, anybody," Hicks said. "All we want the banks to do is be reasonable."
Reading this story sickens me. It is one of the most glaring examples of a completely different set of rules for the Uber-wealthy than there is for ordinary folks.
I hope, but seriously doubt, Hicks will suffer any consequences for his financial brinksmanship. In a perfect world, both MLB and the NHL would step in and assume receivership of the teams because you know, defaulting on a loan tends to give the impression that the team is broke and players and employees just might not get paid. Unfortunately, doing the right thing would point a huge spotlight at the growing financial problems of not just Hicks but many wealthy team owners in a number of different sporting leagues. So far Hicks is the biggest and most notworthy given his ties to the Republican Party, but he may not be the last owner to default on a loan.