Dodgers file for bankruptcy, arrange for $150 million loan

Jun 27 2011 - 3:06pm

LOS ANGELES -- The Los Angeles Dodgers filed for bankruptcy protection on Monday, a move that owner Frank McCourt said would stabilize the financial future of the team. The move also could extend the battle for ownership of the Dodgers well beyond this season.

McCourt has obtained $150 million in interim financing, according to the court filing in Delaware. If the bankruptcy court approves that financing Tuesday, McCourt would meet Thursday's payroll deadline and could remain in control of the club throughout the bankruptcy proceedings, with the intention of negotiating a television rights deal within 180 days that would satisfy the court by paying off all creditors in full.Major League Baseball is expected to challenge McCourt's move at Tuesday's hearing in Delaware.

Under the MLB constitution, the act of filing for bankruptcy enables the commissioner to strip McCourt of ownership. But bankruptcy court proceedings generally override MLB rules.

Manny Ramirez is the Dodgers' largest creditor, according to the bankruptcy filing. The Dodgers owe Ramirez $21 million, followed by Andruw Jones ($11 million), Hiroki Kuroda ($4.5 million), Rafael Furcal ($3.7 million) and the Chicago White Sox ($3.5 million, for Juan Pierre).

The list of creditors includes much of the current Dodgers roster, Hall of Fame broadcaster Vin Scully ($152,778), the city of Los Angeles ($240,563 in tax debt) and two players yet to play for the Dodgers (prospects Zach Lee at $3.4 million and Alexander Santana at $499,500).

In their bankruptcy filing, the Dodgers said they owed almost $40 million this week alone, including $20 million in current and deferred salaries and $18.7 million to fund future deferred payments, in accordance with baseball's collective bargaining agreement.

The Dodgers intend to hold a "competitive sale process" to secure a new cable television contract within 180 days, according to the team's bankruptcy filing.

The Dodgers' current contract with Fox extends through 2013 and forbids the team from negotiating with any other entity before Nov. 30, 2012, according to the filing.

Commissioner Bud Selig last week rejected a proposed new contract with Fox, so the Dodgers have asked the bankruptcy court to consider an auction. Time Warner Cable's new Lakers channel would be a likely bidder, which could force Fox to choose between joining MLB in opposing an auction and risking the loss of a valuable television property.

MLB claims approval rights for all television contracts. McCourt is asking a bankruptcy judge to impose a new television contract, overriding MLB in the interest of ensuring that creditors get paid.

The Dodgers have agreed to pay at least 10 percent interest on the $150 million interim financing loan, which was obtained from Highbridge Principal Strategies of New York, which is affiliated with JP Morgan and Chase. The Dodgers also agreed to pay a deferred fee of $4.5 million.

In a statement issued on McCourt's behalf, the filing was said to have been done "in order to protect the franchise financially and provide a path that will enable the club to consummate a media transaction and capitalize the team."

In the statement, McCourt cited Selig's refusal to approve a proposed television contract with Fox -- one McCourt said could have been worth $3 billion -- and said the commissioner had forced the filing by jeopardizing the future of the Dodgers.

"He's turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today," McCourt said. "I simply cannot allow the commissioner to knowingly and intentionally be in a position to expose the Dodgers to financial risk any longer. It is my hope that the Chapter 11 process will create a fair and constructive environment to get done what we couldn't achieve with the commissioner directly."

According to the statement, the Dodgers will work within their existing budget, with "no disruption to the Dodgers' day-to-day business, the baseball team or to the Dodger fans."

David Boies, an attorney for Frank McCourt's ex-wife Jamie, issued a statement calling the bankruptcy filing "disappointing and disturbing." He added that Jamie McCourt had made repeated proposals to end the divorce battle that has lasted nearly two years that would have preserved the "value and integrity of the Dodgers."

The statement also said: "The rule or ruin philosophy that appears to have motivated today's filing is bad for everyone who cares about, or has an interest in, the Dodgers."

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