A management firm overseeing the development of a 320-acre youth sports complex in Arizona ended up overspending and shifting some money intended for construction into its own account, according to a bankruptcy court filing.
The former manager, Legacy Sports, was tied to Randy Miller, a former professional baseball player who was the driving force behind the complex known as Legacy Park. Miller spent more than a decade pitching his vision for the facility, and a separate non-profit entity he founded with his son, Legacy Cares, was able to raise $280 million of debt in the municipal bond market starting in 2020 to help build it.
But the complex faced construction delays, labor shortages and cancellations amid the pandemic. Its opening was pushed back, and even when it did start operating in 2022, Covid spikes cut into business. In May, Legacy Cares filed for bankruptcy.
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In a filing last week, Legacy Cares said that Legacy Sports, a for-profit entity that is no longer managing the facility, expected to be able to raise more money for the complex, and therefore spent money on additional improvements beyond the construction budget outlined in the offering materials for the bonds. Legacy Sports also asked for bond proceeds for its own operating expenses, beyond what the firm was entitled to receive, depleting funds available for construction, the filing said.
Randy Miller said in a phone call with Bloomberg that Legacy Sports didn’t use any bond funds for “outside the operating company,” and referred further questions to Legacy Sports lawyer Michael Baggett. Baggett’s voice mail was full, and he didn’t immediately respond to an email.
US Trustee’s Request
The filing from Legacy Cares last week came in response to a request from the Justice Department’s US Trustee Program that the court name a trustee to help oversee the complex and ensure it is run for the benefit of creditors. The US Trustee said in a filing last month that Legacy Cares had improperly lent millions of dollars to firms tied to Miller.
In a filing of its own, Legacy Sports said it disputed any allegation and claims of wrongful conduct made by the US Trustee or by anyone else.
Legacy Cares said in its July 20 filing that the US Trustee’s office was mischaracterizing legitimate balance sheet items, such as receivables due from customers of the park, as loans to Legacy Sports. But it also said that Legacy Sports had asked for and spent money beyond what it was entitled to.
Attorneys for Legacy Cares and the bond trustee UMB Bank objected to appointing a bankruptcy trustee, saying such a step would delay any sale of the property for months, potentially reducing its value significantly.
The bond trustee has provided $9 million in debtor-in-possession financing so the park can continue operating while Legacy Cares works to sell the park by the end of October. It’s losing about $1 million a month, according to Legacy Cares’ filing last week.
A hearing to resolve the matter of appointing a bankruptcy trustee is scheduled for Thursday in Phoenix.
The Millers resigned their positions with the Legacy Cares nonprofit in February 2020, before it sold bonds, while retaining control of Legacy Sports. The park’s new manager, Elite Sports Group is owned by another of Randy Miller’s sons, Brett.
‘Investigated Vigorously’
Legacy Cares listed $353.3 million in total secured claims and $13.4 million of unsecured claims and assets of $242.3 million when it filed in US Bankruptcy Court for the District of Arizona. Municipal bond funds hold the vast majority of Legacy Cares debt, according to data compiled by Bloomberg.
Tax-exempt funds from the Vanguard Group are the biggest holder, with about $97 million of the securities. AllianceBernstein Holding LP municipal bond funds were the second-biggest holder, with about $60 million
The bond trustee said it was troubled by the federal monitor’s allegations, even if it didn’t want a bankruptcy trustee.
“The bond trustee’s resistance to the appointment of a trustee at this stage should not be in any way construed as condoning the debtor’s alleged pre-petition or post-petition conduct,” UMB’s attorneys wrote. “Indeed the bond trustee believes these matters, and potentially others, should be investigated vigorously.”
Author: Martin Z. Braun
