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Home MLB News MLB Club Sales Dodgers Bankruptcy Hearing Reveals McCourt Putting Club in Deeper Debt

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Dodgers Bankruptcy Hearing Reveals McCourt Putting Club in Deeper Debt PDF Print E-mail
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MLB Club Sales
Written by Maury Brown   
Wednesday, 20 July 2011 14:02

A hearing in a Delaware bankruptcy courtroom today will seek to determine whether a hedge fund or Major League Baseball will fund all or part of the remaining balance of $150 million in debtor in possession (DIP) financing for the Dodgers as it weaves through the process.

As the hearing has unfolds before Judge Kevin Gross, some details are emerging:

  • Frank McCourt refinanced a $67 million loan for Blue Land Co. an entity McCourt has created, and pays $14 million in year in rent to – ostensibly moving money from one hand to the other. Initially, Sovereign Bank declined the refinance, but later agreed to at higher fees and interest.
  • McCourt’s lawyer has argued that the difference between the loan from hedge fund Highbridge and the one MLB is offering, is really $6.5 million, not $15 million as the league has said, when other bookkeeping is factored in.
  • McCourt’s lawyer said that the league is ill-equipped to handle a loan of the size needed for DIP financing, yet in a deposition, Exec. VP of Administration for MLB, John McHale, Jr. said the league had $400 million in Central Fund money with which to work from, more than enough to satisfy the DIP funding.
  • On cross-examination, Jeff Ingram, the Dodgers Vice-Chairman admits that Highbridge has never provided DIP financing to anyone in the past.
  • Ingram also admits that the loan from MLB would actually be $14 million cheaper than the one from Highbridge.
  • The Dodgers are still holding firm that they believe that money aside, the true endgame by MLB is to take control of the club, and that they would rather use Highbridge DIP financing than MLB’s as they believe it will offer more control by the league as a threat to remove McCourt.
  • If the loan from MLB is approved, McCourt is personally on the hook for $5.25 million. If the loan goes to Highbridge, just the fees and interest would apply.

Follow @EricFisherSBJ, @BillShaikin, and @Boomskie on Twitter for a running account of the hearing as it plays out.

The hearing is continuing. Updates as they become available.

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Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).

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