A Delaware judge has rejected the Los Angeles Dodgers' proposed $150 million bankruptcy financing plan, a decision that likely will force owner Frank McCourt to accept a financing offer from Major League Baseball.
“The Court finds that the baseball loan is not a vehicle to baseball to control debtors," wrote Judge Kevin Gross, of the United States Bankruptcy Court for the District of Delaware. Click here to read his full decision.
"Had debtors negotiated with baseball, a more economically viable loan may have developed – but at a high cost to the debtors’ decision-maker, Mr. McCourt," Gross continued. "The court therefore concludes that debtors’ decision is not entitled to deference.”
Complete coverage of the Dodgers front office upheaval at The Changeup
Gross issued his eight-page decision Friday, two days after presiding over a hearing on the competing financing plans.
The team had sought approval of its proposed arrangement with hedge fund Highbridge Capital.
But the league, which has been locked in a bitter dispute with McCourt, countered with a competing plan that carried better financial terms.
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The Dodgers rejected MLB's offer, saying it likely would result in legal battles and was an attempt by baseball commissioner Bud Selig to take control of the team and force a sale.
Frank McCourt era timeline here.
A proposed TV rights deal with Fox was supposed to infuse $385 million into the financially strapped club, and allow McCourt to pay other expenses, including money he owes his ex-wife.
However, in an 11-page letter, obtained by the Los Angeles Times from court papers in the bankruptcy case, Selig expressed his belief that the TV deal would lead to another financial disaster for the team within the next two seasons.
"Despite your pledge to make the Dodgers the 'best franchise in baseball,' you are not selling the club's media rights … to improve the club's on-field performance, renovate Dodger Stadium or enhance the fan experience," Selig wrote.
"Rather, you would be continuing an eight-year pattern of exploiting the Dodgers franchise to finance your own personal needs, which would undoubtedly risk further erosion of public confidence in the Dodgers."
Gross' decision compells the Dodgers to negotiate with the MLB for a loan, a circumstance McCourt hoped to avoid. Depending on the terms the financing could save the team millions in interest and fees.
“From the Dodgers’ perspective, a short form unsecured credit agreement with MLB, when combined with other sources of revenues, should provide the Dodgers with ample liquidity to meet team payroll and other expenses, as the Dodgers proceed forward with their business plan, with the objective of emerging from the Chapter 11 process before the end of 2011,” Dodgers attorney Bruce Bennett said in a statement.
