Los Angeles Dodgers file for bankruptcy protection
Tuesday, June 28, 2011
LOS ANGELES (AP) — The Los Angeles Dodgers are headed to bankruptcy court, with owner Frank McCourt hoping a Delaware judge approves his plan to stabilize the financially troubled franchise.
McCourt has obtained $150 million in interim financing from a hedge fund, but it’s subject to approval by the court in a hearing Tuesday. If approved, McCourt would meet Thursday’s payroll deadline and could remain in charge of the club he bought in a highly leveraged deal in 2004.
“The action taken today by Mr. McCourt does nothing but inflict further harm to this historic franchise,” Baseball commissioner Bud Selig said in a statement Monday.
The team is deep into the red, with former players owed millions. Even Hall of Fame announcer Vin Scully is due more than $150,000 as part of his contract, court documents show.
Legal observers expect MLB to contest McCourt’s request for filing bankruptcy, arguing the dispute should remain within the confines of baseball. Baseball’s constitution allows Selig to take control of a team that seeks Chapter 11 protection.
MLB would have to file a motion to seek termination of the franchise. A person familiar with the filing, who spoke to The Associated Press on condition of anonymity because the situation is still in flux, said MLB will wait to see what happens in the hearing before deciding which way to go.
The main issue is whether “the bankruptcy court maintains control of the proceedings or acquiesce to baseball,” said Edward Ristaino, who chairs the sports practice at the law firm Akerman Senterfitt.
In court documents, team Vice Chairman Jeff Ingram cited a significant drop in attendance, contributing about 10 percent of Dodger revenues to the league’s sharing program last year, and paying about $22 million in deferred compensation as reasons for filing bankruptcy.
“To date, LAD has remained current in its obligations,” Ingram wrote. “However, LAD is now on the verge of running out of cash, the results of a perfect storm of events.”
McCourt has taken out loans to stay afloat this season but his mounting financial problems were expected to balloon this week, when he owed tens of millions of dollars to meet payroll and other obligations.
About $20 million is slated for current and deferred compensation by Thursday, while more than $18 million is required as a reserve to prefund money to be paid to players in 2012 under terms of the collective bargaining agreement, court documents show.
The bankruptcy filing lists assets of up to $1 billion and debts up to $500 million. The Dodgers are obligated to pay $92.5 million in guaranteed player contracts, not including signing bonuses, and the team has nearly 300 full-time employees.
It also noted a $67 million loan taken out against the parking lots at Dodger Stadium was set to mature Thursday. It was expected McCourt was going to refinance the loan.
Among the 40 largest unsecured claims, totaling about $75 million, are former Dodgers slugger Manny Ramirez at nearly $21 million; New York Yankees outfielder Andruw Jones at $11 million; pitcher Hiroki Kuroda at $4.4 million; shortstop Rafael Furcal at $3.7 million; and the Chicago White Sox, who are owed $3.5 million for outfielder Juan Pierre.
Selig said the Dodgers’ financial woes were “caused by Mr. McCourt’s excessive debt and his diversion of club assets for his own personal needs. We have consistently communicated to Mr. McCourt that any potential solution to his problems that contemplates mortgaging the future of the Dodgers franchise to the long-term detriment of the club, its loyal fans and the game of baseball would not be acceptable.”
McCourt blames his financing woes on Selig’s refusal to approve a multibillion-dollar TV deal, which would have provided McCourt with $385 million up front and was vital to a binding settlement reached this month by him and ex-wife Jamie McCourt as part of their divorce.
“He’s turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today,” McCourt said about Selig in a statement.
Associated Press writer Robert Jablon in Los Angeles and AP Sports Writer Dave Campbell in Minneapolis contributed to this report.