Ref and Max, I just want to say thank you for your input on the legal matters for us legal neophytes(for lack of a better word). Even though I tend to disagree with both of you about Crane, I really appreciate the insight into the legal aspects of the whole fiasco. Keep up the good work!
Question Lets say the judge let the Astros out of their media rights with csn H and try found a deal with someone else. That in and of itself doesn't fix their ownership interest in csn H? In other words, could they actually walk with their rights, sign with let's say fox again, and still be a part owner of csn H? If not, wouldn't a judge letting them out have to include a buyout of some kind?
The termination provisions of the partnership agreement deal with that aspect of it. Remember that the Astros were going to exercise their contractual right to walk. The Comcast Creditor filed the involuntary bankruptcy provision to invoke the automatic stay to prevent the Astros from exercising that right.
So they could go from a possible 500 million buy out to being happy just to walk away? These are the issues I just don't understand in this whole thing
I do not know what the contract says about their ownership interest in the event they terminate. There are many points on the continuum between $500M and zero.
They may have been fine with 500 million. CSNH is not profitable as currently configured. Astros media rights are most likely worth over 100 million dollars per year. 0 profits from CSNH and over 100 million dollars per year is better than CSNH losses and less than 100 million dollars from CSNH. If CSNH is terminated, Comcast losses money as a debt backstop. Comcast also loses as they most likely have to pay higher carriage fees to fox if fox acquires Astros media rights. Rockets prefer CSNH survive as it has good long term profitability for them as long as CSNH has Astros media fees. Three different parties as partners contingent on getting deals that meet all their needs. Astros needs not met.
The $500MM number seems kind of suspect since it's a huge profit over what Crane bought it for, despite only bad things having happened to it since. I'm wondering if the $500MM was the valuation of the whole thing, and the Astros' buyout would have been whatever percentage they owned (45% or something?). That said, a buyout would leave their media rights with CSN-H - at $80MM/yr or whatever it is. If they walk away, they get their rights back, and maybe they can get more than that elsewhere (they had, at one time, a higher offer on the table from FSH). So over 20 years, maybe they make up whatever the upfront payment is.
I think the number was higher because Comcast would eventually be able to cut low-ball deals with other providers without the Astros being part owners, and they'd be able to absorb short to medium term losses far better than the Astros could. In the long run, RSN's (with full distribution) are still profitable... and with Comcast being able to control almost all the ad revenue, while still holding the Astros as tenants by owning the media rights, they'd be ok. Plus, it may have been sweetened to help them avoid any litigation that Crane seems happy to throw at them for presenting fraudulent business deals. Comcast, the company itself, is a financial monster that could basically throw money to make their mistakes go away.
Article from this Tweet: http://www.houstonchronicle.com/spo...Houston-saga-5215912.php?t=92bbb712e68cb15e6e The Astros asked a federal judge Friday to overturn an order placing the parent company of Comcast SportsNet Houston under Chapter 11 bankruptcy protection and also asked the bankruptcy court to delay action in the case until the appeal is decided. Friday's actions by the Astros, while not unexpected, could result in further delays in the contentious CSN Houston case at a time the Rockets are in the midst of a second season without full carriage and the Astros are nearing a second season without access for fans across most of their five-state territory. But Astros general counsel Giles Kibbe said the Astros are better served if an order by Bankruptcy Judge Marvin Isgur placing the Astros-Rockets-Comcast partnership under Chapter 11 is overturned and if Isgur places the case on hold during the appeal. "The best carriage deal that Comcast presented to us would have resulted in $200 million in losses over the next 10 years," Kibbe said. "On Tuesday, Judge Isgur stated that Comcast presented the Astros with 'rotten business deals' and that we made sound business decisions in rejecting them. "Now we're facing an order that attempts to strip us of our contractual rights and pressure us into accepting value-destroying business deals that will make it extremely difficult for us to field championship-caliber teams throughout the next 20 years. We have no choice but to appeal." The Rockets and Comcast, who along with the Astros are partners in CSN Houston parent company Houston Regional Sports Network, had no comment on the Astros' notice of appeal. Isgur ruled Tuesday that CSN Houston should be placed under bankruptcy court protection while the partners attempt to reorganize and craft a business plan that will make the network profitable and allow carriage deals that will enable CSN Houston to be seen across the Houston area and, for Astros games, a five-state region. But during a Friday hearing, the Astros said they would appeal Isgur's order. The appeal was assigned to U.S. District Judge Lynn Hughes. Trio of issues for Astros In the meantime, Astros attorney Harry Perrin told Isgur it would be proper for him to delay efforts in his court to reorganize the CSN Houston partnership while the appeal is before Hughes. "We're dealing with sports clubs, and they're used to knowing what the rules are," Perrin said. "… I hate to unleash the Chapter 11 case and have it take on a life of its own before we have a chance for the appellate court to rule." Isgur set a hearing for Tuesday on the Astros' motion to stay bankruptcy action while the appeal is pending. At issue in the CSN Houston case is the Astros' contention that the network cannot be reorganized successfully because Comcast, which owns 22.5 percent, has been unable to arrange carriage deals with companies such as DirecTV, AT&T U-verse and Suddenlink that do not result in massive losses. The ballclub also contends bankruptcy is improper because it would allow the court or another party to have jurisdiction over the Astros' media rights agreement through Major League Baseball. Even a reorganized CSN Houston partnership emerging from bankruptcy, the Astros say, lacks authority to bind the Astros to the network. Astros attorneys also argue the Astros' primary duty is to the ballclub, not the CSN Houston partnership, and that the Astros should not be required by the court to cast a vote on a CSN Houston matter that could benefit the network but harm the Astros, who own 46 percent of the network. Carriage poses problem Negotiators for the NBC Sports Group have been unable to arrange carriage deals for CSN Houston in part because of the five-state footprint in which Astros games can be seen, compared to the smaller 75-mile radius around Houston where it can show Rockets games. Interest in Astros games outside the team's traditional South Texas strongholds has dwindled in the wake of three straight 100-loss seasons. Attorney Randy Williams with the Houston office of the law firm Thompson & Knight said the decision to issue a stay hinges in large part on whether Isgur believes there is a strong likelihood his decision placing the network into bankruptcy will be overturned. "The standard is 'Do you think you got it wrong?' and what generally happens is that the bankruptcy judge is not going to grant a stay," he said. Williams also said the Astros raise potentially valid points by saying they believe the CSN Houston partnership was designed in a way that gives them veto rights. "They can argue that we bargained to be the biggest guys in the room, and what is there about bankruptcy law that allows you to change that?" he said. He also said the Astros raise interesting points in arguing they alone should control their media rights, even though they granted a license for those rights to CSN Houston. "Everyone knows the local teams get their local rights by agreement with the league. How can you override what the team wants to do with its rights when you knew that entering the deal?" he said. "They argue that they are the biggest part of this and you have to defer to us. People don't like that, but why were they given effective veto power, and can bankruptcy law override that?" Appeal could take year Appeals in bankruptcy cases can take six months to a year, although Williams said all parties can work for an accelerated schedule. If the stay is not granted, reorganization efforts under Chapter 11 can proceed while Isgur's order is being appealed.
<blockquote class="twitter-tweet" lang="en"><p>ICYMI, CSN Houston bankruptcy case has been appealed to U.S. District Judge Lynn Hughes.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/432915264737247232">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>While case on appeal, Astros want Bankruptcy Judge Marvin Isgur to delay action on Chapter 11 proceedings. Hearing on that set for 2:30 Tue.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/432915726140059648">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>Isgur just ordered Astros by 5 p.m. today to cite no more than three previous cases supporting their position on the stay request.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/432916117770612736">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>Cases, he says, must support Astros' claim they do not have to act in best interest of the bankrupt network of which they are part owners.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/432916445945548800">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>Isgur: "The principal issue is whether the directors of the Debtor’s general partner owe duties to act in the best interests of the Estate."</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/432917031310999552">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>
What a cluster...but I'm guessing this question has been well addressed in case law. This certainly isn't the first time that a partnership dispute has found its way into a bankruptcy court.
<blockquote class="twitter-tweet" lang="en"><p>No surprise, but the Rockets are opposed to the Astros' request for a stay in the CSN Houston bankruptcy case while it is on appeal.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433017658884104193">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>From the Rockets' court filing on the matter: "The Rockets cannot wait an extended period of time for the network to be restructured ...</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433017828635987968">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>"... and the indirect harms of which the Astros complain are inconsequential when compared to significant burdens ...</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433017960462942208">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>"... being imposed on the Rockets by any further delays." Rockets this year, like Astros last year, have not gotten their CSNH rights fees.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433018188138156032">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>Judge Isgur is starting to get testy w/Astros. He just wrote that their submission on stay precedents does not comply with his order.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433021874511945730">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>"The Astros must immediately comply," he writes.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433022051339612160">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>
I wonder if a team will ever relocate simply due to a TV deal. Not saying it would or even could happen with the Astros... but seeing as how "new TV deals" are becoming analogous to what "new stadiums" were 15 years ago (and are potentially far more profitable to the teams than simply a new stadium), I could see that situation playing out at some point for some team in some city. Lets hope this battle doesn't escalate to something beyond unsalvageable...
<blockquote class="twitter-tweet" lang="en"><p><a href="https://twitter.com/BizballMaury">@BizballMaury</a> Not to my knowledge, Maury. Comcast proposed another cash call/loan infusion pre-bankruptcy, but Astros vetoed it.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433020018918313986">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p><a href="https://twitter.com/brettmo13">@brettmo13</a> <a href="https://twitter.com/dfbarron">@dfbarron</a> <a href="https://twitter.com/BizballMaury">@BizballMaury</a> Yes, Rockets refused a $6 million cash call last June. They still haven't paid according to Comcast.</p>— John Royal (@John_Royal) <a href="https://twitter.com/John_Royal/statuses/433025142977867776">February 10, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p><a href="https://twitter.com/John_Royal">@John_Royal</a> <a href="https://twitter.com/brettmo13">@brettmo13</a> <a href="https://twitter.com/BizballMaury">@BizballMaury</a> That was part of the original $30 million cash call that the partners approved May 29.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433028364165591040">February 11, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p><a href="https://twitter.com/John_Royal">@John_Royal</a> <a href="https://twitter.com/brettmo13">@brettmo13</a> <a href="https://twitter.com/BizballMaury">@BizballMaury</a> Comcast later proposed a $50m cash call and $110m loan that did not take place.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433028666289688576">February 11, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>The Astros have submitted a more abbreviated list of case citations for Tuesday hearing that presumably will meet w/judge's approva.l</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/statuses/433032048836485120">February 11, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>Time Warner Cable renews carriage deal with YES Network. This deal is in addition to TWC's FS San Diego deal that was just announced.</p>— John Ourand (@Ourand_SBJ) <a href="https://twitter.com/Ourand_SBJ/statuses/433031514092085249">February 11, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>
- It does not look like Judge Isgur is inclined to grant a stay pending the appeal. Can the Astros ask the District Court for a stay if the Bankruptcy Court denies it? I seem to recall that procedurally they can make the request. - Two major factors in these stay decisions are 1) probability that the appeal is successful and 2) the balance of harm/hardship to each party should the stay be granted/denied. On the hardship front, it seems that the main effect of denying the stay is that the parties get to move forward with the usual bankruptcy steps-- filing the housekeeping motions, fight over whether the media rights contracts can be assumed by CSNH or can be terminated by the Astros, propose an asset sale should they determine one makes sense, filing and trying to confirm a plan of reorganization. All these things are subject to further litigation and court approval and the Astros and everyone else will have a chance to object. So, it doesn't seem like that denying a stay will determine any substantive rights of the Astros, it just means that everyone gets to move forward arguing over these issues right now. I guess the big possible harm is that people have to spend $ on lawyers, which may turn out to be a waste if CSNH should have never been in chapter 11 in the first place. On the other hand, keeping things in limbo while the appeal is pending delays the reorganization steps and the Rockets seem to be arguing that such a delay is harmful toward the probability of salvaging the network.
On Factor 1, are you saying that the Judge seems to think the Astros appeal will be unsuccessful? Thanks for weighing in on this situation.
