ESPN objects XFL

ESPN files objection to remaining a part of the XFL’s assets

Spring Football Top Headlines XFL

In recently released court documents, the XFL/Vince McMahon has attempted to keep the broadcasting deal with ESPN alive, and part of the league’s assets. ESPN has filed a limited objection to that in court.

In bankruptcy court, the debtor (Alpha/XFL/Vince McMahon) can choose to assume, or reject certain ongoing contracts. These deals are usually with players, employees, stadiums, and office buildings. But can be extended to equipment rental and other entities.

According to the document, when McMahon and ESPN agreed to have the XFL televised on the Disney family of networks, the deal was in two separate, but connected parts.

One was the broadcasting rights, and the other was what is called a Profit Participation Interest Agreement (PPIA). While they are separate contracts, they were merged by a signature from McMahon. Neither can be assumed without the other.

Both were agreed upon and stipulated that McMahon-and others that had ESPN approval-as reasons that ESPN signed. The PPIA stipulated that ESPN’s compensation came straight from Alpha’s profits. Therefore, and according to bankruptcy code, the PPIA cannot be included as an asset.

Now that McMahon and/or Alpha will no longer be part of the league, ESPN has objected to continuing the agreement.

” Accordingly, under section 365(c) of the Bankruptcy Code, the Telecast Agreement and the PPIA constitute both a personal service contract and a financial accommodation agreement that the Debtor may not assume and assign without ESPN’s consent. Without knowing the identity and business plan of the proposed Successful Bidder, ESPN objects and does not consent to the potential assumption and assignment of the Telecast Agreement and the PPIA pursuant to the Notice.”

The limited objection by ESPN does not mean that the network will not follow the league into the future. It means it reserves the right to reject the deal with the new owner, if said ownership does not meet their standards.

Also in the document, it says, ” If Vincent McMahon and his team of professionals are not running the XFL enterprise, then a key consideration for the Telecast Agreement and the PPIA has disappeared, and ESPN cannot be compelled to join in a partnership with an assignee absent ESPN’s express consent.

The telecast rights, and profit agreement cannot be separated, if the debtor (Alpha/McMahon) assumes one, he assumes them both. And ESPN reserves the right to negate them both, depending on who buys the league.

It’s a limited objection, because ESPN could kill the deal in its entirety. Per the PPIA contract, Alpha is in breach by trying to separate it from the Telecast Agreement. But ESPN has chosen not to, and remains at least partially interested as to who the buyer may be. But again, reserving the right to walk away.

Having a contract with ESPN as part of the assets available would have made the league much more attractive. But that won’t be the case now. To what effect this will have on the sale is yet to be determined.

The first bid is due by Friday, July 23rd. Another hearing is scheduled for July 16th.

Stay with PSN as this unfolds.