June 28, 2011 / 9:36 PM / 8 years ago

Dodgers win court approval for $60 mln bankruptcy loan

* Team gets approval of $60 million bankruptcy loan

* Jamie McCourt lawyer: Bankruptcy ‘sprung on all of us’

By Tom Hals

WILMINGTON, Del., June 28 (Reuters) - The Los Angeles Dodgers were cleared on Tuesday to borrow $60 million to make payroll, but the team spent its first full day in bankruptcy battling with Major League Baseball.

The team needs the money to pay salaries, including those of its players, while it tries to sort out its long-term finances against the backdrop of team owner Frank McCourt’s bitter divorce and the demands of the league.

The Dodgers on Monday became the sport’s third team in three years to file for bankruptcy. But unlike the Chicago Cubs and Texas Rangers before it, the team did so with the league as an adversary, not an ally.

The bankruptcy apparently caught off guard the league and McCourt’s former wife, Jamie, who is fighting a California court battle for half of her ex-husband’s stake in the team.

“This was sprung on all of us,” attorney Laura Davis Jones, who represents Jamie McCourt, told the U.S. Bankruptcy Court in Wilmington, Delaware.

The bankruptcy court judge said he would approve the team’s request to borrow $60 million. The Dodgers will return to court on July 20 to seek approval to borrow up to an additional $90 million.

The Dodgers are incorporated in Delaware, whose bankruptcy court has a reputation for being friendly to debtors. The hearing in one of the courthouse’s smallest courtrooms drew dozens of dark-suited attorneys, and kicked off with Judge Kevin Gross announcing: “Batter up.”

The teamed has blamed Major League Baseball for the bankruptcy by rejecting a television deal that would have provided an urgent injection of cash as millions of dollars in debt and deferred compensation came due later this week.

An attorney for the Dodgers told the judge that the team and league were “at loggerheads,” which drew a swift rebuttal from the league’s attorney.

“Nothing could be further from the truth. Major League Baseball views the Dodgers as one of its cherished crown jewels,” said league attorney Tom Lauria. “If there is anyone we are at loggerheads with, it is Mr. McCourt.”

The league accused McCourt of “having siphoned off well over $100 million of club revenues” and bringing the team to the brink of missing payroll, according to court papers filed on Tuesday. A spokesman for the Dodgers did not immediately respond to a request for a comment.

On June 20, the league vetoed the Dodgers’ proposed $3 billion, 17-year television contract with News Corp’s (NWSA.O) Fox Broadcasting Co, saying it ran contrary to the best interests of the team, the game and fans.

The Dodgers plan a second attempt to sell the TV rights in bankruptcy, according to court papers.

The bankruptcy hearing was put on hold while attorneys for the league and the team spent 90 minutes in a conference room to work out differences over the emergency $60 million loan to be provided by a unit of JPMorgan Chase & Co (JPM.N)

The lender has agreed to provide a total of up to $150 million.

Providers of bankruptcy loans often are able to use the loans to gain leverage over bankrupt companies, and the league offered to provide its own loan at a lower rate of interest than the 10 percent the Dodgers agreed to pay.

Lawyers for the Dodgers told the judge that the team’s financial problems are short term.

The team has payroll to meet this week, as well as a one-time $10.5 million deferred compensation payment. It also is required to set aside $18 million under its collective bargaining agreement with the baseball players union.

Unlike most bankrupt companies, the team’s assets exceed its liabilities, which should give the Dodgers room for financial maneuvering. But the McCourts’ divorce battle further complicates the bankruptcy, as does the team’s soured relations with Major League Baseball.

Forbes magazine in March ranked the Dodgers as baseball’s third-most valuable team, worth $800 million — more than twice what McCourt paid. Only the New York Yankees and Boston Red Sox are worth more, Forbes said.

The case is In re: Los Angeles Dodgers LLC, U.S. Bankruptcy Court, District of Delaware, No. 11-12010. (Reporting by Tom Hals; editing by Carol Bishopric)

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