NEW YORK/LOS ANGELES (Reuters) - The Los Angeles Dodgers filed for bankruptcy protection on Monday, blaming Major League Baseball for rejecting a television deal that would have given the storied baseball team an urgent injection of cash.
The filing marks a dramatic attempt by Dodgers owner Frank McCourt, who is embroiled in a bitter divorce from his ex-wife Jamie, to prevent the league and MLB Commissioner Bud Selig from seizing the team, which McCourt bought in 2004.
In a court filing, the team said it had been “on the verge of running out of cash” but that the Chapter 11 filing will allow it to meet payroll, sign players, pay vendors and continue playing baseball.
“It is becoming rather clear and likely inevitable that Frank McCourt will end up selling part or all of the franchise,” said David Carter, a sports business professor at the University of Southern California. “I have to believe the back-and-forth between him and Major League Baseball leaves them where they won’t be able to coexist much longer.”
Selig responded to the bankruptcy filing with a statement blaming the Dodgers’ financial woes on McCourt’s excessive debt and his diversion of club assets to address personal needs.
“My goal from the outset has been to ensure that the Dodgers are being operated properly now and will be guided appropriately in the future for their millions of fans,” the commissioner said.
“The ideas and proposals that I have been asked to consider have not been consistent with the best interests of Baseball. The action taken today by Mr. McCourt does nothing but inflict further harm to this historic franchise.”
On June 20, the league vetoed the Dodgers’ proposed $3 billion, 17-year television contract with News Corp’s Fox Broadcasting Co, saying it ran contrary to the best interests of the team, the game and fans.
The deal promised an upfront payment to the Dodgers of $385 million, but Selig has criticized the proposed use of part of that money to fund McCourt’s divorce.
McCourt has said the payment was crucial to the team’s health. According to a court filing, the Dodgers need to pay or set aside more than $28 million for payroll by July 1.
“We brought the commissioner a media rights deal that would have solved the cash flow challenge I presented to him a year ago,” McCourt said in a statement. “Yet he’s turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today.”
Forbes magazine in March ranked the Dodgers as baseball’s third-most valuable team, worth $800 million. That is more than twice what McCourt paid, and trails only the New York Yankees and Boston Red Sox, it said.
Monday’s filing punctuates a stunning fall for one of baseball’s marquee teams, whose roots date to 1884 when it played in New York as the Brooklyn Atlantics.
The team became the Dodgers permanently in 1932, and broke Major League Baseball’s racial barrier when Jackie Robinson began playing in 1947. It began playing in Los Angeles in 1958 and has called Dodger Stadium home since 1962.
This year, the team has a 35-44 record and has seen home attendance decline sharply. The Dodgers have won six World Series championships, but none since 1988.
A call to the office of Los Angeles Mayor Antonio Villaraigosa was not returned.
Baseball took over day-to-day control of the Dodgers in April amid worries about team finances, and security concerns that followed a brutal Opening Day beating of San Francisco Giants fan Bryan Stow in the Dodger Stadium parking lot.
“The filing preserves the status quo,” said Jack Williams, a professor at Georgia State University College of Law in Atlanta who specializes in sports law. “Major League Baseball will have a major, if not the predominant, voice in the ultimate ownership structure for the team.”
Monday’s filing comes less than a year after the Texas Rangers baseball team emerged from bankruptcy, owned by a group that includes Hall of Fame pitcher Nolan Ryan.
Another marquee franchise, the New York Mets, is also overloaded with debt, and its owners, Fred Wilpon and Saul Katz, face a $1 billion lawsuit by the trustee seeking money for victims of Bernard Madoff’s Ponzi scheme.
The owners are in talks to sell part of that team to hedge fund manager David Einhorn for $200 million.
Other teams to file for bankruptcy in recent years include the Buffalo Sabres and Phoenix Coyotes of the National Hockey League.
The Dodgers arranged a $150 million, one-year financing from lenders led by affiliates of JPMorgan Chase & Co’s Highbridge Capital Management LLC, so the team can operate normally while in bankruptcy, court records show.
According to a court filing, the variable interest rate on the loan would be at least 10 percent, and the team could draw $60 million immediately and $90 million later.
The Dodgers’ filing in the U.S. bankruptcy court in Delaware shows between $500 million and $1 billion of assets and between $100 million and $500 million of liabilities.
Four other related entities also filed for protection from creditors, including one that owns Dodger Stadium.
The Dodgers said the team’s largest unsecured creditors include former outfielders Manny Ramirez and Andruw Jones, who are owed $21 million and $11.1 million, respectively.
Ramirez retired in April rather than accept a 100-game suspension for violating baseball’s drug policy, after serving a 50-game suspension in 2009. Jones plays for the New York Yankees.
Los Angeles Superior Court Judge Scott Gordon scheduled a one-day trial in August to decide whether the Dodgers belong to Frank McCourt, or whether the McCourts should split the team.
The McCourts’ lawyers on June 17 said the pair had resolved all issues in their divorce except for the Dodgers’ ownership.
Bankruptcy could give Frank McCourt “an exit strategy,” said Carter, the USC professor.
“The Dodgers have historically been one of the greatest brands in sports,” he said. “Buyers may view this as a chance to buy in with the knowledge they can rehabilitate the brand, rebuild the fan base, and add to its value over time.”
The case is In re: Los Angeles Dodgers LLC, U.S. Bankruptcy Court, District of Delaware, No. 11-12010.
Writing by Jonathan Stempel; Editing by John Wallace