LIV Golf League is under pressure to figure out how sustain its business after Saudi Arabia’s Public Investment Fund (PIF) decided to discontinue funding the upstart league. It has hired Gibson, Dunn & Crutcher as counsel, Alix Partners as financial advisor, and Ducera Partners as investment banker to evaluate how it can take a mulligan to restart with new investors or, in a worse case, be ready to file for bankruptcy in the US. Giving LIV players equity in the business is expected to be a key component of any deal to revive the League, said two sources familiar with the matter.

In this article, Debtwire’s legal analyst team takes a look at the company and discusses its options. While LIV Golf operates on a global scale with its creditors potentially scattered across continents, it likely could choose to pursue its next step in various jurisdictions. However, as we discuss below, reports that the company is eyeing Chapter 11 would seem to make the most sense in the event the League pursues an in-court restructuring or wind down operations should fundraising or sale efforts fail.

Fore! Litigation hits at the outset

LIV Golf is a professional men’s golf league founded in 2021 that, according to its website, boasts 57 players, including five wild card players, and 13 teams of four that compete throughout a 14-event season for individual and team championships. LIV Golf’s current model includes a player equity structure where team captains hold a 25% ownership stake in their respective teams. The four-player teams operate under a franchise model independent from the larger company. The golf league season ends in August, establishing a timeline for the company’s decisions.

LIV Golf set out to modernize golf and rival the PGA Tour, prompting PGA commissioner Jay Monahan to warn golfers who chose to play in the new league that, by doing so, they would be barred from PGA Tour events. According to the PGA Tour (in its response to antitrust litigation discussed below) Phil Mickelson reportedly received USD 200m to join the LIV Golf League, while Bryson DeChambeau and Dustin Johnson reportedly received over USD 100m each. The PGA Tour further asserted that Tiger Woods, on the other hand, rejected a USD 700m-800m offer from LIV.

The PGA Tour’s threat to bar professional golfers who played in the LIV Golf League from future PGA Tour events prompted antitrust litigation. In August 2022, Phil Mickelson, represented by Baker McKenzie, and 10 other LIV golfers,[1] represented by Gibson, Dunn & Crutcher and Quinn Emanuel Urquhart & Sullivan, filed an antitrust complaint against the PGA Tour in the US District Court for the Northern District of California. LIV Golf later joined as an additional plaintiff, represented by Gibson Dunn and Quinn Emanuel. In their complaint, the plaintiffs alleged that the PGA Tour violated the Sherman Act and California’s Cartwright Act, and breached contracts with the golfers.[2]

The PGA Tour, represented by Skadden, Arps, Slate, Meagher & Flom, argued in response that the allegations against it were baseless and without legal merit, and launched a counterclaim against LIV for tortious interference with the PGA Tour’s contracts with its players.[3] The PGA Tour further asserted that “LIV is not a rational economic actor, competing fairly to start a golf tour. It is prepared to lose billions of dollars to leverage Plaintiffs and the sport of golf to ‘sportswash’ the Saudi government’s deplorable reputation for human rights abuses.” The PGA Tour also asserted that as of the time the complaint was filed, PIF committed at least USD 2bn of funding to LIV and that, in perhaps a bit of foreshadowing, “[t]here is no discernible plan for how the PIF will recoup its [USD 2bn] investment in LIV.”

PIF joined the litigation as an interested party and was represented by White & Case and Faegre Drinker Biddle & Reath. The lawsuit was ultimately dismissed with prejudice on 16 June 2023 following negotiations between the PGA Tour and PIF.

According to a corporate disclosure statement filed on behalf of LIV Golf in that litigation, LIV Golf Incorporated is organized under the laws of the state of Delaware and is wholly-owned by LIV Golf Holdings Ltd, a private limited company incorporated under the laws of Jersey. LIV Golf Holdings is ultimately owned by PIF. The company operates on a global scale. It hosted tournaments across the globe, including in South Africa, Singapore, Hong Kong, Riyadh, and South Australia in 2026 alone, and has upcoming tournaments in South Korea, the UK, and the US.

LIVin’ on the edge

Still in its relative infancy, it has been reported that LIV is considering a number of options to address PIF’s withdrawal of funding. According to LIV Golf, the League “is firmly focused on securing a transaction that positions the organization for the long-term. As we begin presenting our go-forward business plan to prospective capital partners, we are focused on achieving a sustainable future and there are multiple pathways under active exploration.” LIV Golf further stated that “ . . . with support through the 2026 season and a clear plan to raise capital, leadership is focused on identifying the right long-term strategic partners who believe in our mission to grow the game of golf worldwide. These conversations are just getting underway, and as they progress, the company expects to gain further clarity around the structure and timing of a potential transaction.”

If the League opts to avail itself of an in-court mechanism for a sale, restructuring or winddown, Chapter 11 would be a strong option for the company. While the company clearly operates on a global scale, a bankruptcy filing in the US, as opposed to other jurisdictions, appears to make the most sense notwithstanding PIF’s investment. For one, both PIF and LIV Golf worked with law firms in the antitrust litigation that have highly respected restructuring attorneys in the US. Gibson, Dunn (the League’s current restructuring advisor) and White & Case both appeared in Debtwire’s most recent US and Canada Restructuring Advisory Mandates Report.

More substantively, a Chapter 11 filing would allow the company to market itself through a section 363 sale process, which provides well established and organized rules for conducting auctions and the submission of bids. Section 363 sales also incentivize purchasers because they require bankruptcy court approval, and the order approving a sale must include a finding that the sale was negotiated in good faith and for value. Section 363 of the Bankruptcy Code would also allow the company to sell its assets free and clear of liens, claims, and encumbrances, while section 365 of the Bankruptcy Code arguably could make the company more marketable by allowing it to reject unprofitable contracts, leaving counterparties with unsecured damages claims.

In terms of potential buyers, secured lenders and competitors of distressed companies typically top the list of those interested in snatching up assets in bankruptcy. As we are unaware of any secured lenders, a potential group of unsecured creditors could emerge as potential bidders – the LIV golfers themselves. While the LIV golfers were enticed to join the League with large payouts, it is unclear whether those golfers have been paid in full or whether they hold claims against the company for any amounts still owing. To the extent that the golfers have claims against the company, it is likely (but not certain) that those claims would be unsecured.

It is also unclear whether the contracts between LIV Golf and the players include provisions whereby LIV’s payment obligations to the players were tied to any milestones, or whether there were any other payment contingencies in the contracts that could allow LIV to dispute its payment obligations to the players. Another unknown variable regarding LIV’s contracts with its players is whether those contracts could be rejected or assigned in Chapter 11 in the event that a third party were to purchase the League. It is also unclear whether PIF guaranteed LIV’s payment obligations to the players. In any event, the LIV Golf League’s most valuable assets are likely its contracts with its players – without whom there likely would be no league, and no sponsors – and the factors noted above likely would be relevant to any negotiations between the League and its players concerning a sale or other transaction where the players could emerge as the League’s new owners.

Aside from a sale process, Chapter 11 also would allow the company to tap into any necessary DIP financing, provided that it is able to secure DIP lenders. DIP lenders often agree to provide secured DIP financing with the condition that they have a right to subsequently credit bid that secured debt to acquire the company, subject to higher or better offers. We would expect any lenders who agree to provide DIP lending to LIV to seek to reserve all rights to credit bid that debt.

If the company fails to attract a buyer, Chapter 11 also provides an organized mechanism for LIV Golf to pivot to an orderly wind-down, including allowing it to establish a litigation trust to recover on any outstanding claims it may have and then distribute any proceeds of those claims to its creditors.

However, Chapter 11 is not without its share of risk to management and shareholders (such as PIF). Shareholders often receive no recoveries in Chapter 11 unless senior creditors (including any DIP lenders, parties who provide services to the debtor after the bankruptcy filing, secured lenders, and unsecured creditors) are paid in full. Moreover, if creditors believe that management is not acting independently and/or in the best interests of the estate (e.g., that it is acting instead in PIF’s best interests) or if the debtor is insolvent without any likelihood of paying in full all administrative priority claims (including the claims of its professionals and post-petition vendors and providers), then creditors could move to replace management with a Chapter 11 trustee or convert the case to a liquidation under Chapter 7, in which case a Chapter 7 trustee would be appointed to displace management. These factors could have a chilling effect on PIF and/or management when weighing the pros and cons of a Chapter 11 case. The appointment of independent board members often mitigates risks of challenges to management’s actions.

Global reach

In any event, the Delaware-incorporated company would be eligible to be a Chapter 11 debtor and could file its case in the US Bankruptcy Court for the District of Delaware, or practically any other US bankruptcy court where it may choose by placing assets (i.e., paying a retainer to counsel or opening a bank account) in that jurisdiction.

Where a company’s creditors are located is also a factor for determining an appropriate venue for a bankruptcy or restructuring. Given PIF’s funding, we are not aware that the company has any syndicated or other secured debt and would expect that its unsecured creditors could include not just the players discussed above, but also any vendors with which it has relationships. On its website, LIV boasts that it has various global partners, including HSBC, Aramco, a Saudi Arabian energy and chemical company, Maaden, a Saudi Arabian Mining Company, Riyadh Air, which is also a PIF company, and Salesforce, among others. It lists its suppliers as including Arena, a global provider of large-scale temporary infrastructure & integrated event solutions, Canadian-headquartered Corpay Cross-Border, which assists LIV Golf with managing its international currency exposure, and Fever, a global live-entertainment discovery platform based in New York, among others.

If LIV Golf were to commence a Chapter 11 case, it could then seek to have that case recognized in other countries where it needs creditors to be bound by the proceeding. Recognition of the Chapter 11 cases would be easiest in countries that have enacted UNCITRAL’s Model Law on Cross-Border Insolvency into their domestic bankruptcy law. For example, this Model Law was enacted by the US as the then-new Chapter 15 of the Bankruptcy Code. With the issuance of the Rules of Cross-Border Bankruptcy Proceedings on 16 December 2022, Saudi Arabia became the 56th United Nations member state to have enacted legislation based on the UNCITRAL Model Law. Canada formally adopted the Model Law in 2009, and Australia, Japan, South Korea, Singapore, and South Africa have also adopted the Model Law, arguably making recognition of a US Chapter 11 case more easily enforceable in those regions.

In short, given the League’s relationships with experienced US restructuring and insolvency law firms, the various options under Chapter 11, and the likely ability to obtain recognition of a Chapter 11 case in regions where the company has conducted business and may have creditors, it appears that Chapter 11 would be a realistic option for the company in light of PIF’s refusal to continue providing funding.

Related Links:

Antitrust Action Complaint
PGA Tour Opposition to TRO
PGA Answer and Counterclaim
LIV Golf Corporate Disclosure Statement

Prior to joining Debtwire, Sara was a law clerk to two judges in the United States Bankruptcy Court, S.D.N.Y. and practiced in the Financial Restructuring Group at Clifford Chance, where she represented financial institutions (as secured and unsecured creditors, defendants in adversary proceedings, and participants in DIP financings) in high-profile restructurings. She also represented foreign representatives in Chapter 15 cross-border cases.

This report should not be relied upon to make investment decisions. Furthermore, this report is not intended and should not be construed as legal advice. ION Analytics does not provide any legal advice, and clients should consult with their own legal counsel for matters requiring legal advice. All information is sourced from either the public domain, ION Analytics data or intelligence, and ION Analytics cannot and does not verify or guarantee the adequacy, accuracy or completeness of any source document. No representation is made that it is current, complete or accurate. The information herein is not intended to be used as a basis for investing and does not constitute an offer to buy or sell any securities or investment strategy. The information herein is for informational purposes only and ION Analytics accepts no liability whatsoever for any direct or consequential loss arising from any use of the information contained herein.

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[1] The other plaintiffs included Talor Gooch, Hudson Swafford, Matt Jones, Bryson DeChambeau, Abraham Ancer, Carlos Ortiz, Ian Poulter, Pat Perez, Jason Kokrak, and Peter Uihlein.

[2] According to the plaintiffs, before the launch of LIV Golf, professional golfers “had no meaningful option but to play on the [PGA] Tour if they wanted to pursue their profession at the highest levels,” which gave the PGA Tour “enormous power” over players. The PGA Tour crossed the line to illegal monopolistic activity, according to the players and LIV, when in an attempt to “defeat competition,” it threatened lifetime bans on players who play in any LIV Golf event. The plaintiffs also alleged that the PGA Tour suspended the plaintiff players and threatened sponsors, vendors, and agents.

[3] According to the PGA Tour, the professional golfers who filed the complaint agreed not to play in, and thereby contribute their media rights to, non-PGA golf events held in North America that conflict with PGA Tour events. According to the PGA Tour, the plaintiffs “willfully breached their contracts with the TOUR for a pile of cash supplied by LIV.”