How does an owner drive a perfectly good baseball team in one of the largest markets in the United States into bankruptcy? Ask Tom Hicks. The Texas Rangers had a beautiful ballpark and a solid fan base when Hicks bought the team in 1998. The Rangers were a competitive ball club that started regularly making the playoffs in the 90’s. Hicks took a burgeoning young ball club and drove it into bankruptcy in just 10 years.
In 2000, Hicks signed Alex Rodriguez to the largest contract in baseball history at 10 years, $252 million dollars. There were no other suitors offering even $200 million for A-Rod’s services. How could Hicks offer such a large contract to one player? The answer is debt. Tom Hicks is a perfect example of the misuse of leverage. He has a track record of buying perfectly healthy companies and loading them up with debt. He then takes the cash out of the debt ridden business and buys another one.
Hicks currently owns the Texas Rangers, Dallas Stars, and the Liverpool Football Group. The Texas Rangers are the 1st major league baseball team to go into bankruptcy in 17 years. The Dallas Stars are so debt laden that Hicks is being forced to sell the team by creditors. Hicks saddled the Stars with $600 million in debt. Now Hicks and partner George Gillett are trying to sell the Liverpool Football Club after loading the franchise up with nearly half a billion dollars in debt..
It goes to show that it doesn’t matter how much money you have; too much debt can be the downfall of anyone.