Tuesday, June 28, 2011
Judge approves Dodgers financing
WILMINGTON, Del. -- A Delaware judge has authorized the Los Angeles Dodgers to enter into a $150 million bankruptcy financing
arrangement after the club satisfied certain concerns raised by
Major League Baseball.
After trading sharply worded briefs over the proposed financing,
attorneys for the league and the team agreed the Dodgers could
proceed with their proposed financing on an interim basis pending a
July 20 hearing.
The agreement includes reducing a proposed exit fee for the
lending group from $4.5 million to $250,000, and removing certain
deadlines regarding the sale of broadcast rights.
Earlier Tuesday, the league accused Dodgers owner Frank McCourt
of siphoning off more than $100 million in revenue and driving the
team into a liquidity crisis. The Dodgers said the league was
trying to exert a stranglehold on the team.
Earlier in the day, Judge Kevin Gross authorized the Dodgers to continue paying
vendors, utility providers and employees, and to keep up with tax
and insurance obligations. The granting of such motions is routine
in first-day hearings in bankruptcy court, but Gross noted that the
baseball club's case is unique in some aspects.
"I haven't seen a wage motion quite like this one," the judge
said, referring to the team's 44-page motion to continue paying
hundreds of full-time and part-time employees, including about 250
players, most of whom are in the minor league ranks.
Gross also granted the team's request to honor payments it is
required to make under collective bargaining agreements.
"The seamless, uninterrupted operation of the team is vital,"
said Richard Seltzer, an attorney for the Major League Baseball
After granting several of the motions, Gross ordered a 30-minute
recess, allowing time for discussions between attorneys for the
Dodgers and MLB, which opposed the team's request for authorization
to enter into the $150 million financing arrangement.
Saying that MLB can provide debtors with "substantially better terms," the MLB objection accused Dodgers owner Frank McCourt of "having siphoned off well over $100 million of club revenues and obviously unable to properly distinguish between his personal interests and those of the club."
MLB said that the Dodgers face "a liquidity crisis so severe that, absent extraordinary measures, the Club would be unable to make its payroll."
Selig has appointed overseer Tom Schieffer to investigate Dodgers finances. He also has rejected a Dodgers proposed TV deal with Fox that would have provided the cash to fund McCourt's divorce settlement with his wife, Jamie. Facing the prospect of missing payroll, McCourt and the Dodgers filed for bankruptcy in a Delaware court on Monday.
Dodgers officials said they reached out to numerous banks and investors and while several parties expressed interest in providing financing, they received only one commitment -- from Highbridge Principal Strategies. The financing should now come in two chunks from the investment firm, $60 million up front with the remainder being paid at a later date.
According to Bloomberg News, the Dodgers must pay a hefty 10 percent interest rate plus fees on the loan, and Highbridge receives first claim on the Dodgers' assets.
MLB's objection said that the league's solution to the Dodgers' debt crisis is "less expensive and otherwise superior" to the loan the Dodgers had approved. The league had said its proposal eliminates $4.5 million in fees, reduces the interest rate by 3 percent, does not require the Dodgers to encumber their assets, does not impose an artificial deadline to work out a TV deal, has fewer default triggers and complies with bankruptcy code.
The objection said that the Dodgers may have looked around for financing, but the team didn't come to MLB, with which it has its "most significant strategic relationship."
The league asked that a number of questions be answered in Chapter 11 proceedings: Whether the Dodgers' cases were properly filed, whether Schieffer can continue to perform his duties as monitor and whether Frank McCourt can retain control of the team in bankruptcy.
But the objection said that the first priority was to make sure that the Dodgers "have sufficient liquidity to continue operations on an uninterrupted basis."
Thomas Lauria, an attorney representing Selig's office,
disagreed with Dodgers lawyer Bruce Bennett that the league and the team were
adversaries, saying the league views the Dodgers as one of its
"cherished crown jewels," and an "essential component" of the
Lauria did suggest, however, that the league was at loggerheads
with McCourt, whom he blamed for "today's sorry mess."
In addition to the dispute with the league over financing, the
Dodgers are facing a challenge from McCourt's estranged wife,
Jamie, who is battling in a California divorce court for half of
his ownership assets.
"Jamie McCourt is a presumptive owner of 50 percent of
assets," said Laura Davis Jones, an attorney representing her.
Jones urged the judge to do only what is minimally necessary to
preserve the assets of the team.
"Nothing should be done today that locks the future of this
case into concrete," she said.
Information from The Associated Press was used in this report.