Earlier this week, Miami-Dade County filed a Motion in the United States Bankruptcy Court for the District of Delaware, seeking to terminate the naming rights agreement between the county and FTX. FTX.US and its affiliated entities (“FTX”) filed for bankruptcy on November 11, 2022, which triggered a stay, preventing any entities from acting against FTX.
Miami-Dade County is the owner of the arena that is home to the Miami Heat. In April 2021, the county and FTX agreed to a naming rights agreement whereby FTX would pay the county $135 million spread over 19 years. In turn, FTX’s name would be placed atop and throughout the arena.
In the motion, the county identifies FTX’s failure to comply with federal and state laws as a default under the naming rights agreement. For further support, the county anticipates FTX’s future default by failing to pay over $5 million owed in January 2023. Thus, Miami-Dade County seeks to terminate the agreement and mitigate its damages.
Under the Bankruptcy Code, a judge can only grant relief for cause, which a judge determines on a case-by-case basis. As the county cites, “To establish cause, the party seeking relief from the stay must show that ‘the balance of hardships from not obtaining relief tips significantly in [its] favor.”’ Atlantic Marine, Inc. v. American Classic Voyages, Co. (In re American Classic Voyages, Inc.), 298 B.R. 222, 225 (D. Del. 2003); In re RNI Wind Down Corp., 348 B. R. 286, 299 (Bankr. D. Del. 2006).
Here, since FTX owes millions for the remaining years, it does not appear that FTX would suffer hardship from granting relief to the county. On the other hand, the county stands to lose millions if FTX fails to pay the remaining amounts due under the agreement. Thus, the county would suffer significantly more hardship, and the bankruptcy court should grant the county’s motion.
If the court grants the motion, expect the county to move quickly for a new deal. The big question is, will it be for the same amount as FTX’s deal?