Axios

LIV Golf is asking a bankruptcy judge's permission to reject its player contracts, including lucrative deals with stars such as Bryson DeChambeau, Jon Rahm and Phil Mickelson.

Why it matters: The league filed for Chapter 11 bankruptcy protection on Tuesday after Saudi Arabia's Public Investment Fund stopped funding it.

What they're saying: LIV's current player contracts "do not provide any material benefit" to the league, which is hoping to emerge from bankruptcy with a more sustainable tour, its lawyers said in a court filing.

• "The current contracts ... do not reflect the contemplated compensation structure under LIV 2.0," the attorneys wrote in a document filed late Tuesday in New Jersey Bankruptcy Court.
• The contracts the league wants to reject include deals with prominent players like DeChambeau, Rahm, Mickelson, Joaquin Niemann, Sergio Garcia, Dustin Johnson, Tyrrell Hatton and Cameron Smith.
• The league is also asking Judge Michael Kaplan for permission to file the actual contracts under seal, calling it "commercially sensitive" information.
• "In addition, given the high-profile celebrity nature of the Players, disclosure of the Personal Information, would create a real risk to the safety of the Players and could be used to harm or harass them," LIV attorneys said in their motion to seal.

Zoom in: A federal judge's approval will be required for the league to exit the contracts, but that's generally standard procedure for unsecured creditors in a Chapter 11 case.

• The league said in a court filing that it remains "hopeful and optimistic that, notwithstanding the rejection of these particular contracts, they will be able to negotiate new, long-term contracts with Players as part of LIV 2.0."
• The players will be treated as unsecured creditors and could receive a portion of their promised compensation when the bankruptcy estate is settled, though unsecured creditors often get far less than what they are owed in Chapter 11 cases.

The league also revealed in a court filing late Tuesday that PIF had invested $5 billion in LIV since 2021 but that the Saudi fund demanded numerous conditions when LIV went looking for capital to continue operating during bankruptcy, known as debtor-in-possession financing (DIP).

• Those conditions include that the league must file a reorganization plan within a month and emerge from bankruptcy within 120 days, investment banker Bradley Robins of Ducera Partners LLC said in a court filing.
• PIF is the league's owner and its only secured lender, according to Robins.

Behind the scenes: After seeking investments to continue operating before deciding to file for bankruptcy, the league received two non-binding term sheets, including one from BC Partners, which offered a $300 million investment contingent on LIV surviving bankruptcy.

• Robins said LIV didn't get any DIP offers, other than the one from PIF, because its "due to the perceived lack of collateral value to support the required amount of DIP financing."
• The league said Tuesday in a statement that it hopes to reorganize operations and emerge "majority owned by players."

The bottom line: LIV plans a major reduction in costs that won't involve massive windfalls for players like it provided when it initially launched.