Los Angeles Dodgers owner Frank McCourt files for bankruptcy
Facing the takeover of his franchise by Major League Baseball if he were not able to make team payroll by Thursday, Los Angeles Dodgers owner Frank McCourt officially filed for bankruptcy on Monday.
McCourt then sought the court’s approval of a $150 million private loan that would allow him to pay off the team’s creditors on time and keep him in control of the Dodgers organization during the bankruptcy proceedings.
The proposed loan comes with a hefty price tag though: 10 percent interest and a $4.5 million fee.
According to a Los Angeles Times report on Tuesday afternoon, the ploy might have worked—for the time being.
On Tuesday, MLB attempted to block McCourt’s actions by proposing a financial plan of its own; a loan that would cover the Dodgers’ immediate debt while only charging the team seven percent interest and no fee.
However, according to the report, the court ruled that McCourt would be allowed to use the private loan to pay his debts until a July 20 court hearing, at which MLB will then seek to implement its own loan.
At this point, it seems likely that decision would effectively put an end to McCourt’s ownership of the franchise given that Commissioner Bud Selig’s actions over the past several months seem to indicate that he wants McCourt gone.
McCourt’s presence in a courtroom has become quite a common occurrence since 2009, when he and his wife, Jamie, began a heated divorce settlement that has yet to be decided.
It was during those proceedings that the McCourts’ very lavish private lifestyle—one that was being paid for with over $100 million of Dodgers’ funds while the team continued to struggle to pay its bills—came to light.
In April, Commissioner Selig’s office took over the day-to-day operations of the Dodgers, citing that it was in the best interest of the club’s financial situation.
McCourt then proposed a television deal between the Dodgers and Fox Sports estimated to be worth about $3 billion, including a $358 million loan up front that would allow the team to pay its bills, according to both Sports Illustrated and ESPN. The deal would have also brought the McCourts’ divorce proceedings to a close by allowing Frank enough money to pay Jamie in a settlement that had been reached.
However, MLB has final say on all TV deals and last week Commissioner Selig rejected the proposal, effectively leaving McCourt without the money to pay his team’s bills or settle his divorce.
The owner had little choice left other than to file for bankruptcy protection while attempting to come up with a new solution, possibly in the form of another TV deal proposal, for his team’s financial woes.
The Dodgers’ debt is somewhere in the ballpark of $775 million, according to the L.A. Times.
During the bankruptcy proceedings, McCourt will likely argue that by not approving the Fox deal, the commissioner forced him into this position. If he were granted the right to auction off the team’s broadcast rights without MLB’s approval, he would earn enough money to be able to get his team out of debt and remain in control.
The commissioner’s office will likely counter that argument with a point of their own: that the Dodgers’ current financial mess could have been avoided if it wasn’t for an owner taking money from the team’s pockets for his own personal use in the face of ever-growing debt.
Of course, it all depends on whether Commissioner Selig will let it go that far. When a team files for Chaper 11 bankruptcy protection, baseball by-laws allow Selig to take control of the franchise and terminate its ownership if he chooses to.
Whether Selig decides to file that motion or the proceedings play out in court, Frank McCourt’s future at the helm of a storied Dodgers franchise could be settled in just a matter of weeks.
Photo courtesy of Neon Tommy via Flickr