April 18, 2014

Decision on Ownership of the Dodgers Expected This Week

To describe the slow, grinding road toward the eventual sale of the Dodgers as tortuous would be too kind, but my friends, the end is in sight.  The final three bidders have been identified, and per Bill Shaikin, a modified auction will take place with Frank McCourt selecting the eventual winner.  The two parties then have until April 3o to close on the transaction.

While there are lots of details still to be worked out, Shaikin’s article answers some of the most burning questions Dodger fans have.  The most interesting, of course, is what happens to the Dodger Stadium parking lots.  If Dodger fans have their way, they will be part of the sale, leaving McCourt with no stake in Chavez Ravine.  Per Bill Shaikin:

McCourt and his advisers have projected a sale price of at least $1.5 billion. Is that going to happen?
That might depend on whether McCourt includes the Dodger Stadium parking lots in the sale. The bidders would like him to sell the lots. He is not required to do so, and he has said he intends to keep them.

If he does, the offers for the Dodgers could drop to the point in which McCourt might not make much more than $1.1 billion, the approximate amount he needs to pay off debts and taxes, according to multiple people familiar with the sale process. McCourt could bet on revenue from future development.

The parking lot options might not be limited to “sell” or “keep.” A bidder could get an option to buy them a later date, for example, or offer McCourt a share of any development revenue.

So what does that really mean?  Well, if the parking lots are not included and the offers come in “low” (around the $1.1 billion mark), McCourt may change his mind and include them in the deal, driving up the value of the offers and leaving him with a profit after taking care of the debt, taxes and his divorce settlement.  And if I was a betting man, I would say that favors the really rich ownership bid of billionaire hedge fund manager Steven Cohen and local LA billionaire Dr. Patrick Soon-Shiong.

But if there’s one thing Dodger fans have learned over the past few years, Frank McCourt rarely does what’s expected, so buckle up and get ready for some fireworks.

 

Does Dodgers Bankruptcy Put McCourt in the Drivers Seat For Now?

Dodgers owner Frank McCourt filed for Chapter 11 bankruptcy protection today, citing the rejection of a 17-year TV deal with Fox for roughly $2.7 billion as a prime factor. The McCourts were close to finalizing their divorce proceeding and McCourt allegedly planned to use about $150 million from the agreement to settle a divorce with his wife, Jamie, and to pay off outstanding debts. McCourt and his former wife have previously acknowledged using about $100 million in salary and loans taken against the club to finance their lifestyle.

How does bankruptcy help McCourt and the Dodgers fend off what many are calling inevitable – the sale of the team?

Attorney Chris Ward told the Wall Street Journal that McCourt’s filing may eventually pave the way for a bankruptcy court to approve the Fox Sports deal previously rejected by MLB:

Given that Major League Baseball didn’t approve the TV contract, without that revenue they’re not going to be able to operate. They may have some more leverage to get the Fox TV transaction approved in bankruptcy court over the objections of Major League Baseball. That’s what really precipitated the bankruptcy filing.

McCourt will likely be able to stay in an ownership position while all of this plays out despite the fact that the MLB consitution gives Selig the right to strip McCourt of ownership should he file bankruptcy. That’s because, according to the Los Angeles Times, bankruptcy courts can overrule MLB rules while the actual bankruptcy proceedings play out. So while MLB will likely get its way in the end, McCourt has played the one card he had left after the rejection of the Fox deal and has graced the Dodger community with more antics as the ownership saga continues to unfold.

Attorney Chris Ward also agrees that the move was really the best one McCourt could make at this point:

Deal Journal: What do you think of what the Dodgers are trying to do?

Ward: It gives them an upper hand that they didn’t have before. Strategically it was probably the right move to make.

DodgerDivorce.com was kind enough to post the filing so you can read the details. Manny Ramirez is the largest creditor with over $20 million due (no surprise there) but lots of other current, former, and minor league players are on that list as well. Poor Vin Scully is stilll owed over $100k on his contract (here’s hoping he gets all of it) and the team apparently also has over $300k in unsecured credit card debt with Bank of America according to the filing.

Video summary courtesy of ESPN