July 22, 2011 / 7:00 PM / 6 years ago

Dodgers ordered to take league loan to stay afloat

3 Min Read

<p>A view shows the Dodger Stadium in Los Angeles, California July 16, 2011.Eric Thayer</p>

WILMINGTON, Delaware (Reuters) - A judge directed the Los Angeles Dodgers to negotiate a $150 million loan from Major League Baseball to finance their bankruptcy, dealing a blow to embattled team owner Frank McCourt on Friday.

But the Dodgers said in response that if MLB sticks to the terms the judge ordered, the loan combined with other sources of revenues should give the team "ample liquidity" to meet payroll and other expenses and emerge from Chapter 11 by year's end.

Delaware Bankruptcy Judge Kevin Gross rejected the team's choice, a loan from a hedge fund unit of JPMorgan Chase & Co. The judge said that McCourt personally benefited by pursuing that loan.

Gross also rejected the team's proposed financing arrangement because the Dodgers had refused to negotiate with the league, which offered a loan that it said could save the team $14 million.

The money would be used to keep the team operating and give it time to try to sell cable TV rights, which should put the Dodgers on sound financial footing.

However, the team and the league seem certain to collide again over blame for the bankruptcy: whether it rests with the league's hostility toward McCourt or with McCourt due to his mismanagement.

The dispute could drag others into the fighting, as McCourt may try to show that several other financially ailing teams are being propped up by the league while the Dodgers were undercut by Selig.

A Trojan Horse?

Commissioner Bud Selig rejected the team's proposed $3 billion deal for the cable TV rights last month, and days later the Dodgers filed for bankruptcy in a bid to prevent the league from seizing the team.

The team argued at a bankruptcy court hearing on Wednesday that the league loan was a "Trojan horse" packed with covenants that would allow Selig to seize the team.

Gross was reassured by baseball's promises in court to remove the contentious language in the league's proposed loan.

Gross's eight-page opinion seemed to carry a few warnings for McCourt. The judge noted that the team's witness at Wednesday's hearing, Dodger executive Jeffrey Ingram, testified that baseball is not hostile to the team.

The judge also said "it was unclear to the court how debtors think they can successfully operate a team within the framework of baseball" if they are unwilling, when under the court's protection, to sit down with the league to negotiate a loan.

In a statement on Friday, the Dodgers noted the ruling said the MLB loan "must be independent of and uncoupled from Baseball's oversight and governance of the Dodgers."

MLB said in a statement that "we are pleased that the court has agreed with our position."

The bankruptcy case is In re: Los Angeles Dodgers LLC, U.S. Bankruptcy Court, District of Delaware, No. 11-12010.

Reporting by Tom Hals; Editing by Gary Hill

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