Post by Chris on May 24, 2010 12:39:59 GMT -5
Are the Rangers going to stiff Alex Rodriguez?
Mon May 24,2010 1:15 PM ET By Craig Calcaterra
Pfun Pfact from the Rangers bankruptcy filing: the largest unsecured creditor is Alex Rodriguez, who is still owed $24.9 million in deferred compensation from his big $250 million deal.
"Unsecured" means that Mr. Rodriguez does not have any collateral for the amount of money he is owed. Unsecured creditors rarely if ever get any of the money they're owed when the debtor goes into bankruptcy. Your mortgage company is secured (i.e. it has a lien on your house) which means that if you stiff them, they can take the house back to satisfy what you owe them. Your credit card company, in contrast, is an unsecured creditor. If you stiff them they can try to collect from you and can ruin your credit rating, but they can't take your stuff and, for the most part, once you file bankruptcy, its game over for them. Which is the biggest reason why credit card companies donate a lot of money to Congressmen in order to get them to make it harder for you and I to file bankruptcy.
But that's a subject for another blog. Let's you and I stick to Alex Rodriguez. Is A-Rod SOL? Are the Rangers going to really just walk away from the money they owe him? The short answer: I don't know.
The longer answer: man, I can't see them just doing that. Lots of teams owe deferred compensation to players. Indeed, I think the Diamondbacks spent more time in the last decade working on deferred comp deals than they did playing baseball games. If a team were to suddenly renege on a major deferred compensation deal you'd have to think that the union would scream and the other teams -- who might like to convince some of their own high-priced players to take deferred compensation -- would scream even louder. If there's a chance they're going to get burnt, why would any player take such a deal again?
As is the case with the Tom Hicks creditors, I can't help but think that there is a side deal to pay Mr. Rodriguez what he is owed, be it from the Rangers or some other source.* Otherwise, the team and the league will have just created a big labor headache that no one needs.
*How that is specifically being done -- if indeed it is being done -- is a pretty interesting question, because I think it's unprecedented in baseball history. The most recent parallel I can think of is Mario Lemieux, who was owed so much in deferred compensation that he just up and converted all that debt into an equity stake with the Penguins and now owns the team. That can't happen with A-Rod because baseball prohibits players from doing such a thing. Seems like it would have to be a cash thing.
Mon May 24,2010 1:15 PM ET By Craig Calcaterra
Pfun Pfact from the Rangers bankruptcy filing: the largest unsecured creditor is Alex Rodriguez, who is still owed $24.9 million in deferred compensation from his big $250 million deal.
"Unsecured" means that Mr. Rodriguez does not have any collateral for the amount of money he is owed. Unsecured creditors rarely if ever get any of the money they're owed when the debtor goes into bankruptcy. Your mortgage company is secured (i.e. it has a lien on your house) which means that if you stiff them, they can take the house back to satisfy what you owe them. Your credit card company, in contrast, is an unsecured creditor. If you stiff them they can try to collect from you and can ruin your credit rating, but they can't take your stuff and, for the most part, once you file bankruptcy, its game over for them. Which is the biggest reason why credit card companies donate a lot of money to Congressmen in order to get them to make it harder for you and I to file bankruptcy.
But that's a subject for another blog. Let's you and I stick to Alex Rodriguez. Is A-Rod SOL? Are the Rangers going to really just walk away from the money they owe him? The short answer: I don't know.
The longer answer: man, I can't see them just doing that. Lots of teams owe deferred compensation to players. Indeed, I think the Diamondbacks spent more time in the last decade working on deferred comp deals than they did playing baseball games. If a team were to suddenly renege on a major deferred compensation deal you'd have to think that the union would scream and the other teams -- who might like to convince some of their own high-priced players to take deferred compensation -- would scream even louder. If there's a chance they're going to get burnt, why would any player take such a deal again?
As is the case with the Tom Hicks creditors, I can't help but think that there is a side deal to pay Mr. Rodriguez what he is owed, be it from the Rangers or some other source.* Otherwise, the team and the league will have just created a big labor headache that no one needs.
*How that is specifically being done -- if indeed it is being done -- is a pretty interesting question, because I think it's unprecedented in baseball history. The most recent parallel I can think of is Mario Lemieux, who was owed so much in deferred compensation that he just up and converted all that debt into an equity stake with the Penguins and now owns the team. That can't happen with A-Rod because baseball prohibits players from doing such a thing. Seems like it would have to be a cash thing.
