Bankruptcy is a potent word and one that means different things in different countries. With the news that LIV Golf has filed for bankruptcy in the United States, what does that represent for what is a global entity?
RELATED: LIV Golf files for bankruptcy, with Bryson DeChambeau and Jon Rahm owed millions
For comparison, in Australia there are two types of bankruptcy: voluntary and involuntary. In a voluntary bankruptcy, petitioners lodge a petition with the court to go bankrupt. This is called a debtor’s petition. In an involuntary bankruptcy, creditors (who have been unable to recover debts totalling $5,000) can take action against you to have a court declare you bankrupt. This is called a sequestration order.
In the US, bankruptcy exists under Chapters 7, 11 and 13. For LIV, Chapter 11 is a court-supervised process in the US that allows companies to, among other things, address their financial obligations and pursue a strategic transaction under the supervision of the court.
Some of the world’s most prominent companies and sports organisations have taken this path before LIV Golf, including Marvel, Delta Airlines and Caesars Entertainment, along with franchises like the Los Angeles Dodgers, Pittsburgh Penguins and Leeds United FC.
RELATED: LIV Golf files for bankruptcy protection, Cam Smith free to go?
LIV Golf is calling its Chapter 11 filing the next step in a process to transition away from its legacy business model and finalise a transaction that will bring LIV Golf 2.0 to fruition.
The next phase of LIV Golf would be the first major global sports league majority-owned by its players, with a focus on long-term growth and sustainability. This action now clears the way for LIV Golf to complete its productive discussions with players about their participation in the go-forward league.
The Public Investment Fund of Saudi Arabia has agreed to provide debtor-in-possession (DIP) financing on the terms set forth in a DIP credit agreement, subject to court approval. The PIF has agreed to provide $US49.6 million in DIP financing on those terms.
RELATED: LIV Golf CEO Scott O’Neil’s letter to fans after ‘bankruptcy’ bombshell
Upon the league’s emergence from Chapter 11, BC Partners Credit and other potential minority investors are expected to provide exit financing and serve as plan sponsor to capitalise the reorganised company after court approval.
LIV Golf says it intends to emerge from Chapter 11 and begin its new era in early 2027.
