Players now know what to expect from the XFL bankruptcy case
When the XFL filed for Chapter 11 bankruptcy in April 2020, no one affiliated with the league had a clue what would happen to it.
Slowly we learned from court records which groups were submitting claims.
Many players were excluded from the roster because they were not duly informed of the “deadline”, which is the last day on which a complaint can be submitted. Thanks to the hard work of Kenneth Farrow, Nick Temple and all the other members of the UFPA, the players were granted an extension to file their claims.
Initially, players filed as priority claims. This was challenged in court, and the plan administrator – someone hired by the debtor, in this case Vince McMahon, to handle everything, once the proposed final order was accepted – determined that the claims of the players are not a priority. Claim.
If you are asking what would give a claim priority status, wages owed to people who have NOT been paid in the 180 days prior to the Chapter 11 filing. Because the league says everyone got paid until the last week of the contract, the claim cannot get the priority status.
In the filing, and the reclassification order of each claim is the explanation of the court:
“The debtor has paid all wages, salaries or
commissions earned within 180 days of
Date of the petition. Therefore, the applicant is not
right to priority under section 507 (a) (4) of
the Bankruptcy Code, and the complaint must be
reclassified as general unsecured receivable.“
File number 669 Annex 1
We have the file available here for you to read, in case there are any further questions.
We learned in November how the Plan would be treated, who were the secured claimants and how unsecured claims were to be handled. Although players attempted to file a priority claim – which takes precedence over unsecured claimants – the Administrator determined that all eligible salaries had been paid. In this case, due to bankruptcy law, the receivables are reclassified as general unsecured receivables, as indicated above.
here is a photo of the distribution of indemnities according to the type of claim:
Because the players’ contracts were rejected on the first day of filing, they are entitled to “damages for refusal”. The plan administrator determined that these damages amounted to seven weeks of base salary, or $ 1,040, according to the player’s contract which is in the court record linked above.
Now that the claims have been reclassified and determined to be due in the total of $ 7,280, the above notice kicks in. You can see that in November it was found that each unsecured debt would receive between 8% and 12% of its initial claim. It’s all unsecured claimants.
The photo above is the analysis that was done to determine if a Chapter 7 – total wind up – would have benefited unsecured claimants, and as you can see they had already found that the claim total was around $ 45 million, but the total distributions were about 10% of that.
In December, the Unsecured Creditors Committee voted in favor of these conditions.
Recently, the UFPA sent a letter to players updating them on the status of their claims. Of course, they were hoping to get 100% of their claim because they would be entitled to it if they were given priority. But since the league has always said that they had already paid their players base salary, players were not owed salary money, but rejection damages because their contracts were rejected.
This has taken them from a senior debt to a general unsecured debt, and these will get about 10% of their total amount.
Is it right? No, but it’s bankruptcy. Nothing about it is new, happens every time a business claims Chapter 11. None of their creditors get all the money they are owed. Farrow says the players weren’t paid in full, but the league says otherwise, and the plan administrator has seen the books and agrees.
None of this has anything to do with the new XFL, owned by Dany Garcia, Dwayne Johnson and RedBird Capital in any way. Even if the sale took place in the middle of the process, they do not have any debt or litigation.
This is still an ongoing situation, and when we have more information for you, we will post it.
For the love of football