Dodgers Bankruptcy Filing Approved by Judge


A Delaware judge on Tuesday 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, which had filed an objectionoffering its own financing proposal and blasting owner Frank McCourt's stewardship of the team.

LA Dodgers

The proposed financing agreement with hedge fund Highbridge Capital, which was approved on an interim basis pending a July 20 hearing, allows the Dodgers to draw an initial $60 million to maintain operations.

Baseball Commissioner Bud Selig's office had objected to the financing proposal in court papers Tuesday, accusing McCourt of siphoning off more than $100 million in club revenue and driving the Dodgers into a liquidity crisis. Selig's attorneys argued that his office could provide a loan on better terms, and that McCourt's financing proposal should be rejected because it compels the team to sell valuable future broadcast rights to meet current expenses and to provide money for the personal use of McCourt, whom the league accused of using team proceeds to lead a "lavish lifestyle" with his ex-wife.

But after attorneys huddled behind closed doors for more than an hour Tuesday afternoon, the league agreed to let the Dodgers proceed with their proposed financing arrangement, with two modifications.

One of the modifications reduces the exit fee that would be due to Highbridge from $4.5 million to $250,000. The other removes certain milestones in the financing agreement regarding the sale of the team's broadcast rights. Those milestones included weekly updates on the team's effort to license its broadcast rights, and a July 29 deadline to agree on a sale process calling for bankruptcy court approval of a sale within six months of Monday's bankruptcy filing, and a closing within 45 days of the court order.

The Dodgers have blamed their bankruptcy filing on Selig's refusal to approve a multibillion-dollar TV deal that McCourt was counting on to keep the cash-starved franchise afloat. Selig said in court papers that the deal was not in the best interests of the team or the league.

While agreeing to the interim financing, both sides reserved their rights to argue all issues surrounding the bankruptcy filing, including the possibility that the league might seek to have the case dismissed, and whether former Texas Rangers President Thomas Schieffer should remain as monitor of the Dodgers. Schieffer was appointed to monitor the team on Selig's behalf after the commissioner took the extraordinary step in April of assuming control of the troubled franchise, saying he was concerned about the team's finances and how the Dodgers are being run.

"I recognize that there is a lot ahead of us," Judge Kevin Gross said before adjourning Tuesday's hearing.

In addition to issuing the interim financing order, Gross granted several routine motions that will allow the team to continue operations, 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 Players Association.

Thomas Lauria, an attorney representing Selig's office, disagreed with 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."

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 ex-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.