## Facts

- Texas Rangers Baseball Partners (TRBP) owned the Texas Rangers Major League Baseball club and was indirectly owned through upstream entities controlled by Hicks Sports Group, LLC.
- A bank syndicate led by JPMorgan Chase Bank, N.A. held first-lien secured debt, including a pledge of equity interests in the ownership chain and contractual consent/veto rights over a sale.
- Major League Baseball (MLB) extended a third-lien bridge loan to TRBP conditioned on the team being sold.
- TRBP negotiated an asset purchase agreement to sell substantially all assets, including the franchise, to Rangers Baseball Express, LLC, and sought a prompt closing to preserve franchise value and minimize operational disruption.
- TRBP filed a voluntary chapter 11 case with a prepackaged plan built around the Express sale and treated the first-lien lenders as “unimpaired” based on proposed payment in full.
- The lenders opposed the transaction and asserted their contractual right to withhold consent, seeking a different sale process they believed could yield a higher price.
- The lenders filed involuntary chapter 11 petitions against upstream ownership entities to gain leverage over the sale and case structure.
- Early in TRBP’s case, the court addressed threshold disputes concerning TRBP’s entity status and whether the plan could both override lender consent rights and still label the lenders “unimpaired.”

## Issues

1. Whether TRBP was a general partnership under its governing agreement and applicable state law.
2. Whether first-lien lenders are “impaired” under 11 U.S.C. § 1124 when a plan pays them in full but alters non-monetary contractual rights, including sale-consent/veto rights.
3. Whether and to what extent bankruptcy law permits modification or override of lenders’ contractual consent/veto rights in connection with a chapter 11 sale and plan.

## Decision

- The court held TRBP was a general partnership based on the plain terms of its “Second Amended and Restated General Partnership Agreement” and applicable law.
- The court held that a creditor can be impaired under § 1124 even if paid in full when the plan alters significant legal, equitable, or contractual rights, including contractual sale-consent/veto rights.
- The court concluded that treating the lenders as “unimpaired” while eliminating or materially modifying their consent rights was improper; to that extent, the lenders were impaired and entitled to vote.
- The court indicated that, although the lenders were impaired, their contractual veto rights were not absolute in bankruptcy and could be modified through a confirmable plan that satisfies Bankruptcy Code requirements and provides appropriate protections.

## Legal Principles

- Entity characterization in bankruptcy is determined by the debtor’s governing documents and applicable nonbankruptcy law; clear “general partnership” language in the operative agreement supports general partnership status.
- Impairment under 11 U.S.C. § 1124 is not limited to economic reduction; a claim is impaired if a plan alters the creditor’s legal, equitable, or contractual rights.
- A chapter 11 plan cannot deem a creditor “unimpaired” while stripping material contractual control rights such as sale-consent/veto rights; if those rights are altered, the class must be treated as impaired and afforded voting rights.
- Contractual consent/veto provisions negotiated prepetition may be limited in bankruptcy; they may be modified when necessary to implement a sale or reorganization, subject to compliance with confirmation standards and creditor protections required by the Code.

## Conclusion

The court treated TRBP as a general partnership and rejected a plan structure that proposed full payment to secured lenders while overriding their contractual sale-consent rights yet labeling them “unimpaired,” holding that alteration of such rights constitutes impairment and triggers voting and corresponding Bankruptcy Code protections.


In re Texas Rangers Baseball Partners, 434 B.R. 393 (Bankr. N.D. Tex. 2010)