Dwayne “The Rock” Johnson Purchases XFL from Former Boss Vince McMahon in Bankruptcy Sale
Dwayne “The Rock” Johnson has been able to leverage his wrestling career into A-lister status, starring in blockbusters like Jumanji, Moana, and Baywatch. Even though it may be partially or fully thanks to WWE CEO Vince McMahon, that didn’t stop Johnson from buying his former employer’s failed football league in a recent Chapter 11 bankruptcy sale.
What is Chapter 11 Bankruptcy?
As businesses continue to struggle due to the coronavirus pandemic, big companies filing for Chapter 11 bankruptcy has become nearly an everyday occurrence. Except for sole proprietorships that meet certain debt limits, among other criteria, Chapter 11 is the only option of bankruptcy for companies that want to continue running.
When a company files its Chapter 11 petition, there will be a freeze on the company’s assets and an attorney known as a bankruptcy trustee will be appointed to oversee the case. The company’s major creditors will form a committee that will need to give approval for decisions like entering new contracts and converting debts into ownership shares. The usual management can continue to make everyday decisions necessary to run the business. The company will need to propose a plan on how it should restructure its debts and emerge from the bankruptcy. The committee can either approve of this proposal, or submit their own.
If a business doesn’t file bankruptcy under Chapter 11, more often than not the bankruptcy will be filed as a Chapter 7. Partnerships, limited liability companies, and corporations may use Chapter 7 to discharge unsecured non-priority debts. If a business chooses to discharge its debts in Chapter 7 bankruptcy, it must shut down permanently.
XFL and Chapter 11 Bankruptcy
The XFL was founded in 1999 and currently has 8 teams. However, after years of underperformance emphasized by a near shutdown of the economy over the past few months, the XFL has thrown in the towel. In its bankruptcy petition, the XFL reported nearly equal assets and liabilities of around $14 million each. The league owes wages for 7 of its 8 team coaches, which is a debt that can’t be discharged in Chapter 7. It also owes money to the stadiums that host the league’s games. The XFL shut down operations and laid off nearly all of its employees when it filed in April 2020. The league’s playoffs have been canceled and the XFL is in the process of refunding pre-purchased tickets.
Before the onset of the pandemic, the XFL was drawing decent crowds. The average audience size for live games was 18,000 people. Viewership ranged from 1-3 million. XFL drew fans with slightly different rules than the NFL and wrestling-style antics.
Despite objections by other creditors, the bankruptcy judge has approved of the $15 million sale of XFL to Johnson, Dany Garcia, and Redbird Capital. Creditors may disapprove, but who better to reboot the franchise than a former wrestler who is now one of Hollywood’s foremost leading men? Johnson is known for his feel-good actions like buying his relatives extravagant gifts and empowering his three daughters. Johnson may be able to combine his Disney-approved political correctness and macho sports appeal to take the XFL in a new, more successful direction.