Monday, November 16, 2009

Catching up, refreshing.

I've received a number of e-mails recently asking about the next steps in the McCourt divorce litigation. I know that very many of you already know the basics, but some new information allows us to talk a little bit more about what will happen next month.

On December 15, the court will hear two motions:

Jamie's request for spousal support.

As we've discussed at some length, Jamie seeks approximately $488,000 each month from Frank. We've known for a while now that this number includes lost compensation--Frank, of course, fired her last month. Her numbers do not include the Dodgers-paid benefits, perquisites, and emoluments due her as  an owner of the Dodgers. Depending on the dollar values Jamie's attorneys assign to private jet travel, unlimited access to the Dodger Stadium owner's box (in and out of season), and the privilege of having such former Dodger greats as Kip Gross or Antonio Osuna at her beck and call, the monthly payment she seeks figures to skyrocket.

So what do we know about Jamie's support request that we didn't a week ago? Well, if the post-nup stands, she'll badly want this monthly cash from Frank. Her wealth will be mainly tied up in residential real estate, which Frank estimates to be worth "over $100 million." She also has some bank and investment accounts in her name, and she will keep all her vehicles and the couple's artwork. Still--the money's in the houses. And what do we know about high-end real estate now? The market ain't pretty, and who knows what it's all worth today.

Before, I thought she was liable for all the debts secured by the homes. I now know this not to be the case. She is responsible for debt which amounted to approximately $38 million in 2004. I don't know if that figure has gone up or down, but it does look like Frank agreed to pay all of the debt on certain after-acquired properties in California, although the deeds are solely in her name. The upshot here is she has significant personal wealth in the homes, but it's not unlimited. Not in the slightest. Getting a high monthly support payment from Frank is a big deal going forward, because otherwise she might have to at least think about her spending habits.

Frank's motion to bifurcate the post-nup litigation from the rest of the proceedings.

Here's where the Dodgers are on the line. Frank has requested that the court split the litigation over the post-nup from all other matters. To my knowledge, Jamie hasn't objected to this request. And she really has no need to--resolution of the post-nup first makes the most sense. It's the threshold issue to the rest of the divorce.

If the court upholds the post-nup, then the rest of the process should be pretty straightforward. Courts tend to function pretty darned efficiently once people stop needing them to actually decide anything. A determination that the post-nup is valid and binding as to all parties would mean the Dodgers (and related properties) are Frank's and the residential real estate is Jamie's. There will be little flare-ups here and there, but once the post-nup is upheld, there's a finite number of ways this can be resolved.

If Commissioner Gordon rules that the post-nup is invalid for whatever reason, that's when things get very, very ugly. In fact, it's at this point of the litigation that the Dodgers would likely be sold. Let's say the couple has a total net worth of $600 million. Each McCourt would need to get something darned near half of that. Since I don't expect that number to be reachable without touching the Dodgers, we're left with a number of possibilities.

The club could be sold to a third party and the cash put into the pot of community property to be split in the divorce. Alternately, one party could somehow take on partners in an attempt to buy the other out of ownership in the team. Another possibility that is dependent on how leveraged the Dodger assets are is that one party could borrow enough against the Dodgers to pay the other off. Judging by the tone of your e-mails, you all are not in favor of an owner encumbered by a ton of debt.

These are only three of many possibilities if the post-nup is invalidated. Frankly, I'm hesitant to even hypothesize more about it at this point. It's pretty easy to look at what might happen if the post-nup works. If it doesn't, we're in this for the long haul, and the viability of the Dodgers as a going concern will be in question. Generally speaking, businesses just don't run very well when there's significant doubt as to who will be in charge in a year or two.

Tonight's bottom line.

The post-nup issue won't be resolved on December 15. Heck, it will barely be introduced. Any fireworks for the day will likely concern Jamie's request for spousal support. But knowing what we know now, I think we can talk with much more certainty about what the post-nup litigation will look like.

I expect to have something else tomorrow morning. Well, it will be morning for most of you anyway.

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