Creditors Object To XFL Sale
Following today’s announcement on the sale of the XFL, creditors for the league have submitted an objection with the United States Bankruptcy Court For The District Of Delaware.
Earlier today, paperwork was filed by Vince McMahon’s Alpha Entertainment advising the court that one qualified bid for the league and its assets was given by Alpha Acquico, LLC.
The joint venue between The Garcia Companies and Redbird Capital Partners Management LLC. The Garcia Companies is headed by Dwayne ‘The Rock” Johnson and his ex-wife and business partner Dany Garcia. Court documents reveal a purchase price of $15,000,000.
The qualified bid from Alpha Acquico can be seen below.
Creditors outlined their case in a 14-page document submitted Monday.
While the Committee has been and remains supportive of a competitive sale process run by the Debtor that attracted a qualifying bid from the Proposed Buyer, the Debtor’s role as a fiduciary to the estate and its constituents does not end with securing that offer. Rather, the Debtor has an ongoing obligation to negotiate terms with the Proposed Buyer that are most favorable to the estate and do not unduly prejudice its creditors. The proposed APA, however, does not reflect such terms and seeks to strip the estate of valuable assets for no consideration. As such, the Committee has significant concerns that the Sale contemplated with the Proposed Buyer does not satisfy the sound business purpose test, and is not in the best interests of the Debtor’s estate.
The primary objective of selling assets in a bankruptcy proceeding is to maximize an estate’s value and recoveries for the debtor’s constituents. The Committee, however, cannot reasonably determine whether that objective has been achieved in connection with the Sale to the Proposed Buyer given the Debtor’s failure to value significant assets that are now being included in the Sale, but were not contemplated as part of the assets to be purchased in the form asset purchase agreement prepared by the Debtor. More specifically, the APA that the Debtor now seeks to have the Court approve contemplates the sale of, among other assets, all claims and causes of action of the Debtor against any person (the “Causes of Action”), including all claims against statutory insiders (the “Insider Claims”) and chapter 5 causes of action (“Avoidance Actions”). Moreover, because the Purchased Claims were expressly excluded from the Purchased Assets in the form asset purchase agreement prepared by the Debtor, parties in interest had no reasonable expectation from the Sale Motion or Bidding Procedures Order that a sale of the Debtor’s assets would include a sale of all Causes of Actions, Avoidance Actions and Insider Claims, among others.
The full list of Alpha Entertainment creditors can be viewed below.
While creditors do not object to the sale to Alpha Acquico specifically, they believe the valuation of the assets need to be investigated to ensure they are paid back debt that is owed by Alpha Entertainment.
Accordingly, while the Committee generally supports a sale to the Buyer—on terms modified to account for the value associated with the Purchased Claims or to remove the Purchased Claims from the Purchased Assets and that addresses its other comments to the APA—the terms of the transaction as currently proposed are objectionable, as they are not in the best interests of the estate, would surrender critical sources of recovery for unsecured creditors and are generally inconsistent with market standards.
The bid deadline for the XFL was set for July 30, 2020. Creditors state they were made aware of Alpha Acquico’s intentions to bid on the evening of that day, and were made aware of the canceled auction the morning of August 3.
On July 30, 2020, just before the Bid Deadline, Alpha Acquico, LLC (“Proposed Buyer”), submitted its bid along with an Asset Purchase Agreement (the “APA”) reflecting a $15 million purchase price and a definition of Purchased Assets that includes Purchased Claims, which includes, among other claims, all Causes of Action of the Debtor. While the Debtor has generally consulted with the Committee throughout the sale process, the Committee only first become aware of the Proposed Buyer’s intent to acquire the Purchased Claims on the evening of July 30, 2020
With a base purchase price of $15 million, if the value of the Purchased Claims, purchase price adjustments and Debtor payment obligations exceed $15 million, then the Debtor will in effect be getting no value for the sale of its assets. Despite the Committee’s requests, neither the Debtor nor the Proposed Buyer has quantified the Purchased Claims, adjustments and obligations, creating uncertainty as to whether the Sale is in the best interest of the Debtor’s estate and its creditors.
You can view the full document below
The court has a hearing scheduled for Friday, August 7 at 10 a.m ET