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Will LIV Golf survive its bankruptcy filing? It’s up to the players

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Will LIV Golf survive its bankruptcy filing? It’s up to the players

LIV Golf’s future will be decided in court after the league filed for Chapter 11 bankruptcy on Sept. 8 and detailed plans to restructure under a new investor. Whether the league survives, however, is up to its players — many of whom are owed millions of dollars by the tour.

In documents filed with United States Bankruptcy Court for the District of New Jersey, LIV Golf proposes reforming as a player-owned league with financial backing from private equity firm BC Partners, which has offered a total investment of $300 million. Saudi Arabia’s Public Investment Fund (PIF), which is stepping away as the league’s primary investor, has offered to provide up to $49.6 million as a bridge loan.

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But the bankruptcy is unusual because that agreement is premised on bringing LIV players on board as part-owners, according to corporate bankruptcy expert Jared A. Ellias, the Scott C. Collins Professor of Law at Harvard.

“This is very much not a done deal,” Ellias told USA TODAY Sports. “They’ve set this up where they have some money to try to do this reorganization, and the question is going to be whether or not the players want to try to make this work.”

The catch is that many of the tour’s players are owed significant sums of money by LIV Golf. According to the bankruptcy petition, top players including Jon Rahm and Bryson DeChambeau are among the tour’s 30 largest unsecured debts and claim they are owed millions of dollars from their player contracts.

It may not matter if the players believe that continuing to be involved with LIV Golf is more profitable than walking away.

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According to BC Partners’ term sheet for LIV Golf, players who agree to be part of LIV Golf 2.0 would receive amended contracts that include signing bonuses, equity in the league and return of certain NIL rights. It is unclear whether those players would get paid cash for their pre-bankruptcy claims.

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Bankruptcy gives LIV Golf the power to cancel player contracts it doesn’t want to keep, Ellias explained. While the tour would still potentially owe damages on pre-bankruptcy contracts, there’s no guarantee how much money would be available to pay out those claims.

While the Saudi PIF loan and BC Partners funding offers LIV a potential lifeline, the restructured league wouldn’t be funded like it has been, with the PIF pumping more than $5 billion into the league since 2022 before pulling funding earlier this year.

LIV’s court filings show the PIF owned 98.48% of the league.

What LIV ownership would look like under new model

The plan’s viability also depends on which golfers agree to participate. The term sheet lays out several conditions for the deal, including, “Execution of go-forward player contracts consistent with the LIV 2.0 business plan that include players required by the Investors.” The document does not name the specific players required by BC Partners.

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Under the new agreement, players would own 52% of the organization while BC Partners would own 45% and “management” would own 2.5%.

“BC Partners are going to be creditors and preferred shareholders, so they’re going to be senior in the capital structure to the players, and what that means is that the players are going to bear the risk of this new transaction,” Ellias said. “BC Partners will as well, but players are going to be at the bottom of the totem pole if things go badly for LIV 2.0.”

What happens next for LIV Golf?

The term sheet stipulates that BC Partners and PIF have 35 days from the Sept. 8 petition filing to come to an agreement with a requisite number of players, but Ellias said negotiations could extend beyond that deadline. It is possible that the players hire an attorney to represent them collectively in negotiations.

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Even if players agree to participate, the restructuring agreement also needs to be approved by Judge Michael Kaplan. The agreement requires that a hearing on the restructuring agreement assumption motion and the Saudi fund’s loan be held within 10 days of the bankruptcy filing.

“It seems like a very creative structure,” Ellias said. “If things go well, I think BC Partners is set up to really make a lot of money. BC Partners also is set up to do well if things go poorly because they will get whatever’s left because they’re going to be the debt piece of the new capital structure. The downside of being that, though, is will there actually be any value if they end up liquidating? And there I have no idea.”

Ellias said that the Chapter 11 system is designed to create a structure for successful bargaining and try to achieve the best possible outcome for the most people. LIV Golf is attempting to use the Chapter 11 process to create a clean slate by reaching a resolution with players and obtaining an order to wipe its pre-bankruptcy debts.

“If you have a bankruptcy, definitionally, somebody is not going to get paid what they’re owed and they’re going to be unhappy,” Ellias said. “How do we try to make the most number of people happy? Usually, that’s by giving the business some new lease on life, some fresh start and new opportunities to succeed.”

This article originally appeared on USA TODAY: Will LIV Golf survive its bankruptcy filing? It’s up to the players

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