Dodger Thoughts

Josh Fisher has two pieces setting up the Dodgers’ bankruptcy court debut this morning, one at ESPNLosAngeles.com, the other at Dodger Divorce. Both are useful; here’s a sample from the latter:

… Ordinarily, the requests made at these hearings are granted, almost as a matter of course. However, baseball has likely been preparing for this day for some time, and does not intend to let Frank McCourt have full operational control of the team during the bankruptcy. The primary issue today is debtor-in-possession (DIP) financing.

McCourt has secured a $150 million commitment from a JP Morgan-owned hedge fund, Highbridge Capital Management, to finance the team until a TV deal can be approved. The Dodgers would have access to $60 million immediately, and the remaining $90 million would be available at specific times moving forward. The DIP financing is not cheap: there is a $4.5 million fee off the top, and the Dodgers will pay 10% interest.

Baseball will likely try to exert its influence on the bankruptcy immediately, offering to fund Dodgers’ operations at a cheaper rate and lower overall commitment. While it is nearly unfathomable that either the Dodgers or baseball will take an insurmountable lead today, Judge Kevin Gross’ decision will be at least instructive on the deference he will give to baseball’s own policies and rules. …

More from Tim Brown of Yahoo! Sports and Bill Shaikin of the Times.

Here’s the initial report from The Associated Press:

The Los Angeles Dodgers have filed for bankruptcy protection in a Delaware court.

Dodgers owner Frank McCourt cites Major League Baseball commissioner Bud Selig’s interference with club operations and refusal to approve a Dodgers TV deal with Fox Sports as the cause for Monday’s bankruptcy filing.

In a news release, the team says Chapter 11 bankruptcy protection will provide the Dodgers with a process to address its immediate financing requirements and obtain the capital necessary to ensure the baseball franchise’s long-term financial stability.

He says the Dodgers have tried for almost a year to have Selig approve the Fox transaction, saying it would make the Dodgers one of the strongest capitalized franchises in Major League Baseball.

Without the knowledge of how to make passive income, these gentlemen found themselves into trouble and now they are about to go bankrupt. Here’s the official news release from the McCourt camp:

… Dodger owner Frank McCourt cited Major League Baseball Commissioner Bud Selig’s refusal to approve the Fox transaction as the cause for the Chapter 11 filing.

“The Dodgers have delivered time and again since I became owner, and that’s been good for baseball,” McCourt said.  “We turned the team around financially after years of annual losses before I purchased the team.  We invested $150 million in the stadium. We’ve had excellent on-field performance, including playoff appearances four times in seven years.  And we brought the Commissioner a media rights deal that would have solved the cash flow challenge I presented to him a year ago, when his leadership team called us a ‘model franchise.’  Yet he’s turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today.  I simply cannot allow the Commissioner to knowingly and intentionally be in a position to expose the Dodgers to financial risk any longer.  It is my hope that the Chapter 11 process will create a fair and constructive environment to get done what we couldn’t achieve with the Commissioner directly.”

The Los Angeles Dodgers have tried for almost a year to have Commissioner Bud Selig approve a transaction, which would assure that the Los Angeles Dodgers would be one of the strongest capitalized franchises in Major League Baseball, both now and for years to come.  Indeed, for months, the Dodgers have sought approval from the Commissioner of a multibillion dollar media rights transaction negotiated between the Dodgers and FOX, which would immediately infuse hundreds of millions of dollars of capital into the Los Angeles Dodgers.  The Commissioner’s office last week rejected the deal, despite having been made aware by the Dodgers since the spring of 2010 of the franchises’ cash projections and in turn liquidity needs for 2011.

“The deal with Fox demonstrates that the Dodgers have enormous value which substantially exceeds the team’s current and future liabilities,” said Bruce Bennett, bankruptcy counsel from Dewey & LeBoeuf.  “The team is entering the bankruptcy case with enough committed financing to meet all of its short term expenses and to successful reorganize.  The media rights will, one way or another, generate enough value to facilitate a reorganization.”

Operating under Chapter 11, the Los Angeles Dodgers have received a commitment for $150 million in Debtor-in-Possession (DIP) financing.  This financing will enable the Dodger organization to fully meet its obligations going forward.  There will be no disruption to the Dodgers day-to-day business, the baseball team, or to the Dodger fans.

Under Chapter 11, the Dodgers will continue to operate in the ordinary course of business.  Pursuant to that authority, and additional authority the Dodgers have sought in motions filed today with the bankruptcy court:

• All salaries of Dodger employees doing remote jobs will be paid and all Dodger employee benefits will continue.
• The Dodgers will operate within their existing budget to sign and acquire amateur, international and professional players.
• Ticket prices will remain the same and purchased tickets will continue to be honored.
• All amenities at Dodger stadium will continue in place, and promotions will continue as usual.
• Dodger vendors and suppliers will be paid any post-petition amounts in the ordinary course, with the intention of paying any pre-petition amounts in full prior to or at the conclusion of the bankruptcy case.

McCourt concluded, “The Chapter 11 process provides the path on which to position the Los Angeles Dodgers for long-term success.  The process will allow us to focus on maximizing value in a manner that is transparent and driven by the best interests of the Los Angeles Dodgers and our fans.”

Major League Baseball is standing its ground against the McCourt ownership of the Dodgers, rejecting the proposed Fox television rights deal for the Dodgers and rendering Friday’s divorce settlement between Frank and Jamie McCourt void.

It would seem all signs point to MLB seizing control of the Dodgers (pending the completion of Tom Schieffer’s investigation and/or McCourt failing to make the June 30 team payroll) and McCourt suing the sport. However, the next milestone could be as soon as Thursday, the day Judge Scott Gordon of Los Angeles Superior Court was scheduled to hear arguments from Jamie McCourt’s representatives on whether to order the immediate sale of the Dodgers. The divorce settlement had rendered that hearing moot, but with the settlement itself nullified, the question now is whether that hearing will take place after all.

The fight between Frank McCourt and MLB could be long and bruising, but for you bottom-liners out there, the McCourt ownership could be in suspension by the end of next week.

Update: Molly Knight of ESPN the Magazine talked to ESPN AM 710 about the latest.

Update 2: From the updated news story …

Jamie McCourt had requested that the courts demand an immediate sale of the Dodgers. She had rescinded that request as part of the settlement. Sources tell ESPN The Magazine’s Molly Knight that she had wanted a more global settlement that did not rely on the Fox deal being approved by Selig because she is ready to move on from this nasty, nearly two year legal battle. A spokesman declined to say whether she will go back into court an request a Dodgers sale.

Update 3: “We are extremely disappointed with the Commissioner’s rejection of the proposed FOX transaction which would inject $235 million into the Los Angeles Dodgers,” said Steve Susman, senior partner of Susman Godfrey in a statement, waxing proudly about the dollar figure while of course ignoring the fact that there’s another $150 million up front from Fox that wouldn’t be injected into the Dodgers. Here’s the rest of his statement:

“As Commissioner Selig well knows, this transaction would make the Dodgers financially secure for the long term and one of the best capitalized teams in Major League Baseball.

“Commissioner Selig’s letter of rejection is not only a disappointment, but worse, is potentially destructive to the Los Angeles Dodgers, and Major League Baseball. Accordingly, we plan to explore vigorously our options and remedies with respect to Commissioner Selig’s rejection of the proposed Fox transaction and our commitment to protect the long-term best interests of the Los Angeles Dodgers.”

So is this what shaking hands while going off a cliff feels like?

Like two skydivers who finally stopped fighting over their single parachute, Frank and Jamie McCourt have reached a settlement in their intergalactic divorce battle, turning the bitter enemies into allies trying to save the family’s ownership of the Dodgers before it goes over the edge.

Like so much in the McCourt saga, the latest news creates more questions than it answers. Such as:

• The settlement is likely contingent on the proposed television rights deal with Fox being approved — a deal that logically undervalues the Dodgers in exchange for the quick fix. But will that deal be approved by Bud Selig and Major League Baseball, which, if it declines, would risk a lawsuit they don’t want from a now-united McCourt opposition?
• Are the Dodgers sole or community property? Ruling on this issue by the courts has yet to be determined, and isn’t scheduled to be until August 4.
• How much does Jamie’s cooperation increase the chances for the Dodgers making their balloon payroll payment of June 30?

Those are lots of moving parts in a story that has been built on a veritable earthquake fault, but fans hoping for a swift end to the McCourt ownership might have more to fear than to celebrate from today’s news, which no doubt strengthens the family’s bid to keep the team.

Even if Los Angeles Superior Court Judge Scott Gordon determines that the team is community property, splitting it between Frank and Jamie, there remains the possibility that ex-husband could buy out ex-wife (though that would seem to go against the promise that the Fox money would be used for the Dodgers and not personal affairs).

The sense here is that much will depend on just how resolved Selig is to rip the McCourt parachute for good.

Update: New details about the proposed divorce settlement, which can be addressed by  a Family solicitors, between Frank and Jamie McCourt offer encouragement to fans looking for a forced sale. If you’re interested in the reasons behind the end of their marriage, read the end of marriage causes for more insights.

A source told ESPN The Magazine’s Molly Knight (see link above) there is skepticism that MLB will approve the Fox television rights deal. That would void today’s settlement and send both parties back to the drawing board.

In addition, if the Dodgers are ruled community property on August 4, Judge Gordon would order an immediate sale of the Dodgers. I’m not sure how “immediate” is defined, but “order” plus “sale” surely means something.

These notes don’t eliminate doubt, but they do paint a rosier picture for the anti-McCourt faction, since so much depends on the actions of MLB and the court.

I do agree with those who have said that if Frank McCourt does come away from all this with ownership of the team, he would probably aim to make a grand gesture (the “buy the fans a pony” thing I have written about at times) to improve the on-field product. You can file that under short-term gains for long-term costs if you like, since I really don’t doubt that the proposed Fox deal, if approved, undervalues the team’s TV rights. McCourt is just in too poor of a negotiation position for anything else to be true, I believe.

Update 2: From today’s court filing, here’s how the $385 million loan from Fox would be allocated, subject to MLB approval:

• $5 million to each party for attorney’s fees
• $5 million to each party  “to use as she and he desires”
• “Approximately $235 million will be used for the Dodgers (including repayment to Frank’s moneys advanced to the Dodgers in 2011, not to exceed $23.5 million), but not for any payments to or between entities (other than the Dodgers) owned or controlled, directly or indirectly, by Frank
• Approximately $80 million to pay off indebtedness
• Approximately $50 million “will be put in an account subject to the Court’s orders.”

Update 3: Per the agreement, Frank will owe Jamie $650,000 per month in spousal support until the Aug. 4 community property trial.

If the Dodgers are declared community property, Jamie will continue to receive $625,000 per month — paid out of the $50 million court account described in my second update above, “until the assets are divided and distributed.” That’s $7.5 million per year.

If the Dodgers are declared Frank’s sole property, Jamie will receive the first $55 million of the $100 million she is owed as part of the settlement within 10 days of the decision. Jamie will then receive $325,000 per month until Frank pays the remaining $45 million, due within two years of the court’s decision or August 2013.