Nicklaus Co. Bankruptcy Kicks Off High-Stakes Fight for Control

The bankruptcy of Jack Nicklaus’ former golf services business tees up a potential showdown between the golf legend and businessman Howard P. Milstein over control of the company.

Palm Beach Gardens, Fla.-based Nicklaus Cos. filed for Chapter 11 in November after years of bitter disputes that culminated in a $50 million judgment in Nicklaus’ defamation suit against the company. Those issues, combined with a contested insider loan and a potential sale of the business—which Nicklaus himself may bid for—will steer the bankruptcy.

Whether Milstein’s company holds about $476 million in secured debt or merely a subordinate preferred equity interest will be a key question. The answer will help determine where in the recovery pecking order Nicklaus’ $50 million judgment lands.

It will also clarify who has an advantage in any sale of the company, which designs golf courses, develops real estate, and markets and licenses products such as watches and shirts under Nicklaus’ Golden Bear brand.

One week into the case, the parties are already disputing Nicklaus Cos.’ lenders’ role in a proposed financing and sale scenario.

“It’s like we’ve set up the racetrack and we’ve given them first choice on what car they they want to use,” said former Nevada bankruptcy judge Bruce Markell, now a Northwestern Pritzker School of Law professor.

Multiyear Dispute

Milstein, the CEO of Emigrant Bank, grew into the controlling executive and principal creditor of Nicklaus Cos. through his bank entities. He resigned from the board shortly before the bankruptcy filing.

Milstein-affiliated PMP Nick LLC supplied a $145 million secured convertible loan to finance a 2007 deal shifting Nicklaus’ Golden Bear International to Nicklaus Cos., which Nicklaus also controlled.

Because the company couldn’t make interest payments, the loan ballooned to more than $476 million, mostly through compounding interest, court records show. A Milstein company took over board control of Nicklaus Cos. in 2011.

Relations soured in 2022 when Nicklaus resigned from the board, attempted to assign his equity back to the company, and started competing in golf course design services. Litigation followed over the use of Nicklaus’ name, image, and likeness, the validity of the equity assignment, and his competition efforts.

Nicklaus then sued his former company for defamation in Florida, accusing it of making false allegations that it had to persuade Nicklaus to stop exploring an endorsement deal with the Saudi-backed LIV Golf. A jury awarded Nicklaus $50 million in October.

When the judgment hit, the company had annual revenues of $15 million to $20 million.

Many Hats

A Milstein-affiliated company is supplying $17 million in bankruptcy financing, including a controversial roll-up provision to repay a pre-bankruptcy bridge loan.

Judge Craig T. Goldblatt of the US Bankruptcy Court for the District of Delaware granted interim approval of the deal despite objections from Nicklaus’ attorney, who argued the arrangement improperly granted priority to an equity investment.

“It’s an insider DIP,” Goldblatt said during a Nov. 25 court hearing. “And that isn’t a thing that we encourage, per se, but I’m satisfied that that was what was available in the marketplace.”

Bankruptcies involving a single insider serving simultaneously as a company manager, equity holder, and lender, are common, said Douglas Mintz, a restructuring partner at Cadwalader Wickersham & Taft LLP.

That can prompt fears that the financing would be used as a credit bid in a bankruptcy sale, allowing the insider to reacquire the assets free and clear of a judgment.

But creditors have options to challenge insider actions, Mintz said, including requesting an examiner or trustee, seeking to recharacterize insider debt as equity, or moving to subordinate the insider’s claims for misconduct. Creditors can also try to pursue estate litigation if management declines.

“There are a lot of tools in a case where one person is sort of wearing this many hats,” Mintz said.

Control and Good Faith

Milstein’s dual role may still give him outsized control despite his resignation and a special committee’s authority over critical aspects of the restructuring.

Given the structure of the financing and debt held by Milstein-affiliated entities, the same people who controlled the company before bankruptcy could remain in control afterward—which generally doesn’t occur in Chapter 11—while working to shed the $50 million defamation liability, Markell said.

Nicklaus’ attorneys could argue that the bankruptcy is fraudulent and an abuse of the Chapter 11 process, Markell said.

A key question is whether Nicklaus can convince the court it’s unfair or inconsistent to use bankruptcy to render the defamation judgment worthless while allowing pre-bankruptcy insiders to stay, he said.

Defamation judgments are often not permitted to be discharged in personal bankruptcies. But they can be wiped out under a standard corporate Chapter 11 case, Markell said.

Nicklaus’ attorneys could deconstruct the financing to identify terms that unfairly benefit insiders, such as an unreasonable timelines, veto rights, or credit-bidding powers, he added.

“There are so many ways in which this can be leveraged to the advantage of the person providing the DIP financing,” Markell said.

Sale Fight

Nicklaus’ litigation counsel, Eugene E. Stearns of Stearns Weaver Miller Weissler Alhadeff & Sitterson PA, said in an email that Nicklaus is a potential bidder even though he doesn’t need to regain control of his brand because he owns his NIL and publicity rights.

Meanwhile, Milstein’s bankruptcy financing gives him a potential competitive advantage.

Stearns has said the financing isn’t necessary, serving only as a strategy to improperly leverage bankruptcy to extinguish the defamation claim.

“If the Court directs a sale of the Nicklaus Companies,” Stearns said, “it is certainly conceivable that Mr. Nicklaus could be part of that process, as the Nicklaus Companies are worth more with Mr. Nicklaus and his family involved than without them.”