The PGA Tour superstar Rory McIlroy earlier this year questioned whether the economics of the upstart LIV Golf league could be made to work if a backer like the Saudi Arabian government failed to do so.
Ted Goldthorpe, a longtime Wall Street investor, is determined to prove McIlroy — and much of the sports world — wrong. Goldthorpe has for a decade run the private credit business at BC Partners, the private capital manager that manages about $40bn of assets and is now seeking to revive LIV.
He cut his teeth almost 30 years ago at the famed special situations desk at Goldman Sachs where he sat among a group of future luminaries, including the likes of Alan Waxman and Julian Salisbury. After Goldman, Goldthorpe was a top executive at Apollo, perhaps the pre-eminent credit-investing firm of the past 40 years.
The Saudi Public Investment Fund spent $5.5bn on LIV in the past five years, only to place it in Chapter 11 bankruptcy last month. PIF, as the FT has reported, is happy to shut down the circuit, cut its losses and move on.
Yet in the spring, LIV’s chief executive, the longtime sports executive Scott O’Neil, was also given the freedom to see if he could quickly cobble together a successor league. Of hundreds of parties approached, including the likes of Apollo, Oaktree and Ares, all passed. Except BC.
At a sports industry conference last week in London, Goldthorpe explained why he was optimistic about setting up a successor “LIV 2.0”.
“There’s a big opportunity in global golf, and there’s a space for team golf. There’s a lot of ability to create franchise and team value, which is very difficult to do in other parts of the golf ecosystem. If an outside investor wants exposure to golf, this is the way to do it.”
I’ve covered distressed debt and corporate bankruptcy for many years, finding all the drama and the big personalities fascinating, as well as the finance and legal technicalities.
But one other important element of the turnaround world is entrepreneurship. The US Chapter 11 system, unlike some other bankruptcy regimes around the world, encourages reorganisations in order to promote job creation and economic vitality.
Plenty of investors like to trade — buy a distressed bond or loan at 55 cents on the dollar in order to get paid off at, say, 73 cents. But in this instance, LIV and Goldthorpe believe they can build a shining enterprise on top of the wreckage of the old one — and make an even bigger fortune.
BC and Goldthorpe have bristled at the suggestion that they are vulture investors circling LIV to scavenge on an existing $5bn LIV tax loss. Those losses can shield future profits from tax levies and a LIV 2.0 combined with other sports businesses could create an acquisition conglomerate, a strategy BC has successfully deployed elsewhere.
Goldthorpe, who is based in New York but originally from Toronto, himself has made previous personal investments in professional lacrosse and minor-league hockey teams such as the Binghamton Black Bears and the Baton Rouge Kingfish.
As for the new LIV, BC has said both itself and partners will commit up to $300mn. The league is supposed to have 17 tournaments in total with 10 “signature” stops around the world. Goldthorpe has insisted that there are plenty of co-investors expressing interest in a golf league and a potential adjacent lifestyle brand.
But what LIV 2.0 does not have so far but needs in the next two weeks, under BC’s deal agreement, are player commitments (people close to BC say that after one star joins, others will feel safe to jump in too). After the bad blood of recent years in pro golf, the US PGA Tour and Europe’s DP World Tour are naturally playing hardball about allowing their talent to appear on LIV.
For all the talk of growth markets and franchise values, LIV remains a blockbuster bankruptcy and there are several bare-knuckled showdowns yet to play out. BC so far has put in only $4mn, requiring more players to jump aboard before putting any more money in. And their mooted $300mn comes with various legal bells and whistles like rights under liquidation and the tiered distributions of returns to protect its own interests.
At the same time, PIF is looking to craft releases from any liability from both players who are owed $400mn in contracts as well as trade creditors who separately are reported to have more than $100mn in claims, setting up a tense bartering.
Is it going to work out for BC? The deck is stacked against it but its mere legwork has proved both entertaining and provided evidence that finance nerds can be, among other things, visionaries too.