The XFL’s proposed sale procedures and post-bankruptcy loan unfairly benefit owner Vince McMahon, creditors of the bankrupt alternative professional football league say.
The XFL “has done little more than act as a shill for McMahon,” who holds a majority stake in the short-lived sports league, the committee of unsecured creditors said in an objection filed Tuesday in the U.S. Bankruptcy Court for the District of Delaware.
The proposed asset sale would be free and clear of all liens and claims. Should McMahon be the ultimate purchaser, he would be insulated from complaints related to his conduct running, and terminating, the XFL, the creditors said.
The company also hasn’t taken the necessary steps to “ensure a fulsome and fair” sale process despite knowing well before its April 13 bankruptcy filing that it would have to sell its assets, the committee said. And there isn’t adequate time to properly market those assets, it said.
It’s also not fair that McMahon, who became a secured lender to the company on the eve of bankruptcy, is entitled to receive prospective bids and financial information from potential buyers, but other bidders aren’t afforded the same information, the creditors said.
In addition to the sale process, the committee also objected Tuesday to a proposed $1.5 million debtor-in-possession loan by McMahon. The loan is unnecessary and would fund a bloated budget for a league that isn’t operating, it said.
The DIP loan would impose restrictions on the league that would prevent it from maximizing the value of the assets in a competitive sale, it said.
NFL Still King
Alpha Entertainment LLC, the XFL’s parent corporation, April 13 filed Chapter 11, listing up to $50 million in both assets and liabilities. It’s one of several challengers to go into bankruptcy after failing to make ground against the vastly popular National Football League.
The XFL’s first attempt to break into the lucrative professional sports market closed after one season in 2001. The February 2020 reboot attempt lasted only half of its inaugural 10-week season before being forced to close because of safety measures imposed to prevent the spread of coronavirus, the XFL said in court filings.
The Alliance of American Football filed Chapter 7 in April 2019, leaving players stranded on the road in the middle of its first season. In Chapter 7, an independent trustee is appointed to take over and liquidate the debtor for the benefit of creditors.
The Arena Football League also threw in the towel by filing Chapter 7 in November 2019.
Bankruptcy judge Laurie S. Silverstein will conduct a hearing on the XFL’s sale and DIP loan motions May 27.
The case is In re Alpha Entertainment LLC, Bankr. D. Del., No. 20-10940, Committee’s Objection to Sale Motion filed 5/19/20.