Los Angeles Dodgers file for bankruptcy
Los Angeles, California (BDCi) – The Los Angeles Dodgers have filed for chapter 11 bankruptcy protection in a Delaware court today.
The action appears a last ditch effort to avoid default on an estimated $30+ million in payroll due this Thursday June 30th. In conjunction with the bankruptcy, Dodger owner Frank McCourt has secured short term funding of $150 million primarily from affiliates of JPMorgan Chase & Co’s Highbridge Capital Management LLC so the team can operate normally while in bankruptcy, court records show.
Since early in the season, McCourt has been embroiled in a fight with Major League Baseball over control over the Dodgers’ operations. At issue is an estimated $3 billion television contract with Fox Sports for 17 years of rights to cover the Dodgers from 2013-2030. McCourt finalized the deal with Fox which would have given him ample funding to meet payroll and other obligations, but he could not get MLB’s approval on the contract.
“We brought the commissioner a media rights deal that would have solved the cash flow challenge I presented to him a year ago,” McCourt said in a statement. “Yet he’s turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today.”
A couple weeks ago, McCourt and his wife settled their divorce agreement conditional on MLB’s approval of the Fox deal. With the deal essentially null and void, the divorce will still move forward with determination of Dodger ownership scheduled for a court hearing in the first week in August in a Los Angeles superior courtroom.
One condition of the Fox deal, the $385 million upfront payment, was something that MLB Commissioner Bud Selig assumed would be used inappropriately given the huge burden of money McCourt needs to litigate his already expensive divorce with estranged wife Jamie, once the CEO of Dodger operations. In May, the Commissioner’s office assumed control over the ball club so that the finances could be sorted out and used in the best interests of the team and the game.
More than finances, Bud Selig was concerned about the Dodgers product which seems to be souring more and more as evident by the decline in the team’s performance, farm clubs, attendance and even security given the opening day beating of Giant Fan Bryan Stow.
Listed in the bankruptcy filing as unsecured creditors were among others: former Dodgers Manny Ramirez and Andruw Jones ($21 million and $11 million respectively), the City of Los Angeles ($246 thousand, tax debt) and Hall of Fame announcer Vin Scully ($157 thousand).
Experts indicate that the filing only delays the inevitable. “The filing preserves the status quo and prevents baseball from invoking its powers to take control,” said Jack Williams, a professor at Georgia State University College of Law in Atlanta who specializes in sports law. “Major League Baseball will have a major, if not the predominant, voice in the ultimate ownership structure for the team.”
By Don Weinstein Source: Reuters
27 June 2011