XFL Creditors File Motion To Stop Sale Of The League To The Rock And His Partners

By Marc Middleton

As noted earlier today, it was announced that former WWE Champion The Rock, longtime business partner Dany Garcia and their partners at RedBird Capital have purchased the XFL from Vince McMahon. The group has reportedly purchased the league for $15 million, split evenly. It was noted then that the deal would be subject to bankruptcy court approval, which is to be done at a hearing this Friday. The sale was expected to close on or shortly after Friday, August 21.

In addition to all of the XFL's assets, the deal would see Rock's group take on "certain specified liabilities" and finance $8.5 million towards any payments that are needed to take care of previous financial defaults from the previous owner.

In an update, the Official Committee of Unsecured Creditors for Alpha Entertainment, the XFL's parent company started by McMahon, has filed a motion to stop the sale of the XFL's assets to Alpha Acquico LLC, which is the new LLC started by Rock and his partners for the purchase of the league.

A 13-page motion was filed this afternoon by the XFL's unsecured creditors, asking the court to pause the sale, according to PWInsider. The motion cites that Alpha Entertainment "has an ongoing obligation to negotiate terms with the Proposed Buyer that are most favorable to the estate and do not unduly prejudice its creditors. The proposed APA, however, does not reflect such terms and seeks to strip the estate of valuable assets for no consideration. As such, the Committee has significant concerns that the Sale contemplated with the Proposed Buyer does not satisfy the sound business purpose test, and is not in the best interests of the Debtor's estate."

The motion also claims that Alpha Entertainment has "failed to value significant assets that are now being included in the Sale, but were not contemplated as part of the assets to be purchased in the form asset purchase agreement prepared" by Alpha Entertainment.

The creditors are concerned that the XFL assets are being sold at a lesser value than what they are worth, and that the creditors could end up receiving nothing or very little from the sale to Rock's group, and that there are assets included with this sale that were not part of the financial evaluation of Alpha Entertainment when it filed for Chapter 11 bankruptcy earlier this year.

The motion also noted that while the creditors generally support the sale to The Rock's new group, they want the sale to be re-worked so the terms are better for the creditors who are still owed money, according to PWInsider. The motion states:

"This Objection is filed to preserve the Committee's right to submit these issues to the Court, including objections for the form of Sale Order, for adjudication if they cannot be resolved prior to the Sale Hearing. In the interim, the Committee will continue to engage in good faith negotiations with the Debtor [the XFL] and Proposed Buyer [Rock's LLC] regarding the objections raised herein in an effort to resolve the issues consensually."

The motion notes how the creditors are concerned about decisions made in regards to a quick sale resolving "a limited subset of potential claims" while also noting that the "Committee is at a loss with respect to claims that the Debtor may have against insiders. As noted above and in other filings with this Court, the Committee has identified substantial potential causes of action against insiders, including millions of dollars in payments made within the 1-year insider preference period, questionable loan transactions within the days and weeks leading up to the bankruptcy and questionable actions and decisions made by certain insiders of the Debtor. These claims may have very real value to the Debtor's estate?and to the unsecured creditors that were prejudiced by the insider conduct prior to the filing of this case and that will be further impaired if the Sale includes the insider claims?and, if retained by the estate, could form a significant source of recovery for the Debtor's many aggrieved creditors."

Stay tuned for updates on the motion as the court has not had a chance to rule on anything yet.

For those who missed them, below is the original press release on the acquisition along with Rock's tweet:

Dany Garcia, Dwayne Johnson and RedBird Capital Partners Acquire the XFL

XFL assets and intellectual property represent attractive sport and direct-to-consumer opportunity

LOS ANGELES and NEW YORK , Aug. 03, 2020 (GLOBE NEWSWIRE) — Dany Garcia, Dwayne Johnson and RedBird Capital Partners have been selected as the winning bidder for substantially all of the assets of Alpha Entertainment LLC, the parent company of the XFL. The XFL assets will be sold to Garcia, Johnson and RedBird for approximately $15 million, in accordance with the terms and conditions of the asset purchase agreement. The transaction is subject to bankruptcy court approval at a hearing this Friday, August 7 and, assuming that closing conditions are satisfied, is expected to close on or shortly after August 21. The sale auction previously scheduled for today will not occur.

Through this acquisition, the group secures the ability to option live entertainment intellectual property for further expansion across sports, live events and original entertainment programming.

"For Dwayne, Gerry and myself, this property represents an incredible opportunity. It is the confluence of great passion, tradition and possibility" said Dany Garcia. "Sports and entertainment are the foundations of the businesses I have built. Melding our expertise combined with our commitment to deliver exciting and inspiring unique content, has us all focused on developing the XFL brand into a multi-media experience that our athletes, partners and fans will proudly embrace and love."

"The acquisition of the XFL with my talented partners, Dany Garcia and Gerry Cardinale, is an investment for me that's rooted deeply in two things – my passion for the game and my desire to always take care of the fans," said Dwayne Johnson. "With pride and gratitude for all that I've built with my own two hands, I plan to apply these callouses to the XFL, and look forward to creating something special for the players, fans, and everyone involved for the love of football."

"It is a privilege to partner with Dany and Dwayne on the acquisition of the XFL," said Gerry Cardinale, Founder and Managing Partner of RedBird Capital Partners. "Their track record in building dynamic businesses speaks for itself, and their vision and passion for developing the XFL as a world class sports and entertainment property will enable a new future for this organization. As their partner in acquiring and relaunching the XFL, RedBird will bring its own track record and experience in building world class companies in sports and live entertainment to help realize their vision."

"We are grateful for today's outcome," said Jeffrey Pollack, XFL President and COO. "This is a Hollywood ending to our sale process and it is an exciting new chapter for the league. Dwayne, Dany and Gerry are a dream team ownership group and the XFL is in the best possible hands going forward."

Garcia and Johnson are co-founders of Seven Bucks Companies, a multi-platform enterprise pioneering original content for television, film, emerging technologies and digital networks, and have been behind some of the most successful platforms in global entertainment. Through their joint enterprise, Garcia and Johnson's work spans all entertainment and creative verticals involving investments, brand integrations, philanthropic endeavors, marketing, and film and television projects that are rooted in authenticity, passion and strong storytelling with a mission of promoting equality and inclusion.

Over the last twenty years, Cardinale has been responsible for the creation of several multi-billion dollar sports and entertainment companies in partnership with some of the most iconic rights holders in the world, including the YES Network with the New York Yankees; Legends Hospitality with the Yankees and Dallas Cowboys; On Location Experiences with the National Football League (NFL); and OneTeam Partners with the Players' Associations of the NFL, Major League Baseball, Major League Soccer, United States Women's National Soccer Team and Women's National Basketball Association.

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