The (surprising?) answer: Maybe. According to several sources with close ties to the process, the Chicago Cubs are considering filing bankruptcy, the Associated Press reports.
This, to the casual observer, will seem like a strange move. The Cubs have been one of the top draws in the National League and baseball at large for years. Since their brush with history in 2003, when they lost the National League Championship Series in seven games to the Florida Marlins, Wrigley Field has been packed with paying customers, attracting well over three million fans per season. All those tickets, combined with a pricey roster, don’t suggest a team with a financial crisis on its hands.
In fact, the Cubs’ possible bankruptcy underscores the usefulness of the process as a financial tool. According to Dave Carpenter of the Associated Press, the Cubs may use Illinois and/or federal bankruptcy laws to solve a problem—a split from their current owner, the Tribune Company, that has now dragged on for over two years.
When real estate mogul Sam Zell purchased the Tribune Company in 2007, he had big dreams for the media conglomerate, which includes the Chicago Tribune newspaper. He pointedly did not have dreams of a National League pennant, and the Cubs went up for sale.
The drama of the process has sucked in everyone, from Chicago natives Bill Murray, John Cusack and Jim Belushi to ex-Governor Rod Blagojevich. Along the way, the Tribune Company has offered the team’s general manager a four-year extension, meaning the new owners will be on the hook for Jim Hendry’s salary whether they like him or not, and declared Chapter 11 bankruptcy themselves. Zell told employees that the economic downturn was to blame, and said that even he had been surprised by the credit crunch.
That same credit crunch has made life difficult for Tom Ricketts and family, who own the investment company TD Ameritrade. Long considered the frontrunners to buy the Cubs from the Tribune, the Ricketts family has struggled to obtain credit, with one rumor suggesting that they appealed to Bill Murray’s sentimental side, trying to line up celebrity part-owners and their hefty portfolios.
The sale was greatly complicated by the parent company’s bankruptcy filing, and now the Cubs themselves are mulling over a little financial housekeeping of their own.
“They’re not looking for protection from creditors who are banging on the door,” says Paul Rubin, a corporate bankruptcy attorney in New York. “They’re looking to cleanse the entity so the buyer is protected on the back end.”
In fact, filing for bankruptcy now that a sale appears close will benefit the Cubs, because it will clear many of the roadblocks thrown up by the Tribune’s own situation.
It is unclear why the Cubs have not announced a deal with the Ricketts family, or with another dark-horse group led by private equity investor Mark Utay. The final package will include the team, their ballpark (more important than the team in the eyes of some) and a 25 percent share in Comcast SportsNet, which broadcasts many of the team’s games.
Bud Selig, the Commissioner of Major League Baseball, acknowledges that he’s been “talking to people” about the idea, but has no new information to share.
“The Tribune Co. is handling it and it’s in their hands until they come to us, and they have not come to us,” he said. “It’s a situation that they’re handling right now, and until baseball’s involved there’s nothing more for me to say.”
Unfortunately for Cubs fans, any bankruptcy filing would be a Chapter 11 reorganization, not a Chapter 7 liquidation. That means outfielders Alfonso Soriano, Kosuke Fukudome, and Milton Bradley and their staggering $250 million salaries aren’t going anywhere any time soon.
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