Late in 2023, Jon Rahm signed with LIV Golf. The contract ran to hundreds of millions of dollars, enough to put him among the richest golfers anywhere. Three years on, the league is in bankruptcy court. Rahm has signed a separation deal and is giving up much of what he was promised.
The Journal's Andrew Beaton laid out the terms on Friday, Oct. 16. LIV directly owed Rahm $7.5 million when it filed for bankruptcy in September. The contract promised far more than that. He had over $100 million left on it, a person familiar with the matter told the paper. The settlement ends his claims against the league. In exchange, he gets his name, image and likeness, and other rights.
The unraveling took three years. When Rahm signed, LIV's Saudi backers had just agreed on a framework deal with the PGA Tour. Peace in golf looked close. The deal collapsed. Saudi Arabia's Public Investment Fund then pulled its backing, after putting over $5 billion into LIV since its 2022 start. The two-time major champion read the room and left.
What's left of the league
LIV is trying to restart as a league the players mostly own. BC Partners, a British investment firm, has committed up to $300 million. That money depends on enough players signing on, and there's a deadline later this month. LIV has only days to keep its big remaining names on board, Bryson DeChambeau first among them. Meanwhile the doors are closing elsewhere. Europe's DP World Tour banned LIV players from next year's events. Brooks Koepka got back to the PGA Tour through a one-time program with stiff penalties. Rahm didn't take it. He may follow Patrick Reed's route, playing in Europe to earn membership back. He's scheduled for a DP World Tour event next month.
Our read
This is Career, with an Investments and Risk (IN04) lesson underneath. The money in a contract is only as real as the party that has to pay it. Rahm's deal didn't change. The payer did. Once the fund stopped writing checks, hundreds of millions on paper became a claim in bankruptcy court, with $7.5 million of it already due. We take no side on the league or its owners. We just note the order of events. Backer leaves, league files, player settles for less.
Your plan has promises like this in it. A pension promises a monthly check. An annuity, an insurance contract that pays you income, promises a stream of payments. Deferred pay from an employer, money you earned but agreed to take later, promises a payout down the road. Each one is only as good as whoever has to pay it. This week, pick the biggest promise in your plan and look up who stands behind it. For an annuity, that's the insurer's financial strength rating. For a private pension, it's the plan's funded status and the federal insurance behind it. For a public pension like a teacher's, it's the plan's funded ratio and the state law that backs it. For deferred comp, remember it's usually an unsecured promise, so you'd stand in line with the other creditors if the company failed. Rahm found out in bankruptcy court who really stood behind his deal. You'd rather check the roof before the storm rolls in.