Did Alpha Entertainment, the Vince McMahon-backed company that has agreed to sell the XFL to a group headlined by former WWE star Dwayne “The Rock’’ Johnson, businessperson Dany Garcia and RedBird Capital CEO Gerry Cardinale for $15 million, maximize the sale price?
This is a critical question for Alpha’s creditors, who hope to recoup as much money owed to them as possible. As detailed on Sportico, unsecured creditors assert that Alpha failed to adequately protect their interests under requirements imposed by bankruptcy law. They believe that Alpha didn’t receive enough value in exchange for the league’s various assets and thus they will be underpaid.
Attorneys for these unsecured creditors hope to persuade U.S. Bankruptcy Judge Laurie Selber Silverstein of these concerns in a sale hearing scheduled for tomorrow in Wilmington, Del. The hearing could delay the sale or require that it be reworked.
Alpha appears confident the facts are on its side. On Thursday, Alpha president and COO Jeffrey Pollack and Houlihan Lokey managing director Jay Weinberger (whom Alpha retained for the sale) submitted sworn declarations to the court. Both declarations enthusiastically support the sale and detail the ways in which Alpha believes the process maximized value.
The two declarations stress that there was plenty of time for bids. Judge Silverstein approved the bidding process on May 28 and bidding was open until July 31.
Weinberger’s declaration also reveals data points that detail efforts made to attract bids and that show how a process which began with over 246 potential bidders finished with only one qualified bid:
♦ Houlihan Lokey—the investment banking and financial advisory firm hired by Alpha—contacted over 246 potential bidders. These potential bidders “represented both financial and strategic buyers/investors.” Houlihan aimed to “cast a wide net.”
♦ Alpha signed confidentiality agreements with 35 parties. These parties, in turn, were granted access to a detailed confidential information memorandum as well as a “virtual data room” on the XFL’s financials.
♦ Four interested parties submitted “initial indications of interest”, which are non-binding expressions of a desire to submit a bid.
♦ Only two bids were submitted by the July 31 deadline.
♦ One of those two bids was determined to be “unqualified” in that it failed to meet minimal level requirements. According to Weinberger, discussions were then held with this bidder, who is unnamed in court documents. This bidder elected not to proceed and thus did not submit a revised bid.
♦ That left one remaining bid—the one by Johnson, Garcia and Cardinale. It was deemed qualified based on bidding requirements.
Weinberger insists that, in his view, “the bidding procedures allowed [Alpha] to run a fair, open, and competitive postpetition bidding and auction process.” He cautions that the process should be reviewed “under the circumstances of this chapter 11 case”—a reminder that a bankrupted spring football league might not attract a great deal of interest, particularly during an infectious disease pandemic that has partly shut down sports.
Weinberger also details that Johnson, Garcia and Cardinale’s group is investing what will amount to more than $15 million: in addition to paying $15 million for the acquired assets, the buyers will “assume various and specified liabilities” and “pay cure amounts of up to $9.2 million for contracts designated to be assumed and assigned.”
Pollack, for his part, strikes a similar tone in his declaration. He “believes the terms of the [agreement] provide a greater recovery for [Alpha’s] estate than would be provided by any other available alternative.” He also highlights that the sale should be viewed in the context of a bankruptcy.
