Bloomberg News

Houston Astros Denied Halt to Network Bankruptcy on Appeal (1)

February 11, 2014

Major League Baseball’s Houston Astros lost a bid to halt the restructuring of the network that televises its games during an appeal of a judge’s ruling that Comcast Corp. (CMCSA:US) was allowed to force the broadcasting joint venture into bankruptcy.

U.S. Bankruptcy Judge Marvin Isgur in Houston today rejected the team’s argument that the effort to reorganize Houston Regional Sports Network LP was futile and the case should be dismissed.

“I think there is no shot of this on appeal,” the judge said in rejecting the ball club’s request to put the bankruptcy case on hold.

Isgur said it’s clear that Astros owner Jim Crane wants out of the network deal because he believes he can make more money elsewhere. The network is 46 percent owned by the Astros, 31 percent by the National Basketball Association’s Houston Rockets and 22 percent by Comcast, according to court papers. Comcast, the biggest U.S. cable operator, claims in court filings to be owed more than $100 million by the network.

The Astros called the involuntary bankruptcy a power grab by Comcast that’s intended to strip the network of its value and buy it on the cheap, according to court filings. Major League Baseball also opposed the bankruptcy, citing the Astros’ and its own control over intellectual property and media rights.

The appeal of Isgur’s ruling will be considered by U.S. District Judge Lynn N. Hughes in Houston.

Market Rates

The network’s bankruptcy has prevented the Astros from terminating the club’s media rights agreement, which it says is unprofitable, in favor of a new deal that the team claims would better reflect market rates.

Creditors, including affiliates of Philadelphia-based Comcast, filed the involuntary Chapter 11 bankruptcy petition against Houston Regional Sports on Sept. 27 “to avoid the destruction of the network’s substantial value,” according to court filings. Comcast has said it wants to buy the network.

The Astros didn’t show a “likelihood of success on the merits” of its appeal Isgur said today while addressing the first of the four criteria for determining whether the case should be stayed.

The Astros haven’t shown that “irreparable injury has occurred” as a result of his ruling, while putting the bankruptcy on hold could hurt other parties including the Rockets, which aren’t receiving their media rights payments.

Public Interest

The final factor, public interest, was especially important to the judge. “The Astros and the Rockets are important to our community” and “I think that the community I live in wants these games on television,” Isgur said.

Gene Dias, a spokesman for the Astros, didn’t immediately respond to a phone call seeking comment on the ruling

The judge said he wouldn’t delay the bankruptcy because, by Crane’s own admission in testimony, the network can be profitable .

“I conclude that the network can be run profitably” because it has “extremely valuable assets in the media rights,” Isgur said, adding that broadcasting arrangements needed to be completed. “The evidence is this case is not aging well, and we need to get carriage agreements in place.”

The case is In re Houston Regional Sports Network LP, 13-bk-35998, U.S. Bankruptcy Court, Southern District of Texas (Houston). The Astros appeal is In re Houston Astros LLC v. Astros HRSN LP Holdings LLC, 14-cv-00304, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net


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