Cubs may file for bankruptcy

Bloomberg is reporting that the Chicago Cubs may file for bankruptcy in order to clear the team from any liability in the Tribune bankruptcy and expedite the sale of the club.

Tribune sought Chapter 11 protection in December. It is contemplating a separate filing for the Cubs to expedite the team’s estimated $900 million sale to interested bidders, including Incapital LLC Chairman Tom Ricketts, according to four people familiar with the plan.

A brief Cubs bankruptcy would be a legal maneuver to clear the team from any future liability in the Tribune bankruptcy, according to two of the people familiar with the matter. Sam Zell, chief executive officer of Chicago-based Tribune, pledged the company’s interest in the Cubs as collateral when he negotiated the deal to take the publisher private in 2007, according to one of those people.

“You take it in the front door, and it’s just like you’re getting radiation,” said Michael J. Cramer, a former president of the Texas Rangers who teaches sports business at New York University. “It comes out the other door about a half minute later. It’s clean.”

This bankruptcy would be a move to protect the new owner and make the divorce from TribCo complete. It would also be a short process, possibly 20 days:

Sale of the Cubs is subject to approval by Major League Baseball. The move could guarantee that the Cubs are sold free and clear of Tribune’s creditors, Cramer said.

“This would make sense for Major League Baseball,” he said. “They would like to see that asset be stand-alone, very clean, not tied up in other issues.”

People familiar with the negotiations said a Cubs bankruptcy filing would be designed to allow for the fast disposition of the team’s assets. It could be accompanied by a motion to sell the team with an agreed-upon bidder. The entire process could take as little as 20 days, said Gregory A. Cross, the attorney who heads the bankruptcy practice at Washington- based Venable LLP and isn’t involved.