Thursday, February 24, 2011

Selig halts Fox the squeeze on?

Very interesting news reported this evening by--who else?--the Times' Bill Shaikin. According to the article, Frank McCourt attempted to use the club's television rights as security for a $200 million loan from Fox. I'll pass the microphone to Bill for a moment:

Baseball Commissioner Bud Selig has rejected a proposal under which Fox would have loaned about $200 million to Dodgers owner Frank McCourt, three people familiar with the discussions told The Times.
McCourt would have used the Dodgers' cable television rights as collateral, extending the team's current contract with Fox by as many as four years if he did not repay the loan, according to the individuals, who were briefed on the proposal but who are not authorized to discuss it.
My initial reaction to this news was: $200 million is not a little extra cash to cover operating expenses during a tough stretch. It's a big, maybe-we-can't-make-this-work-after-all number. But I'm not sure it's quite as shocking as it seems at first blush, and here's why: a $200 million loan secured by the TV rights is a middle ground of sorts. 

Everyone knows that the Dodgers' contract with Fox ends in a few years, and the assumption is that the club will either re-up with Fox or create its own network, Yankees/YES-style. So where would this financing have fit in? You probably recall that Fox advanced the Dodgers money on the existing TV deal a few weeks ago. Think of this potential financing as an advance on a deal that doesn't exist just yet. If the Dodgers failed to pay it back, they would essentially renew with Fox at a below-market rate, but would have the benefit of this $200 million up front. And if the Dodgers paid it back on time, they'd still have the freedom to explore the market.

What really grabs my attention is Bud Selig's role here. Neither he nor Jamie McCourt would allow Frank to simply sell a 20-25% stake in the team to raise this kind of cash, and now the commissioner has prevented Frank from engaging in an interesting financing arrangement which would have had the potential to devalue the Dodgers if and when the club reaches the market. By putting the kibosh on this innovative TV-rights-as-collateral deal, Selig sure looks to be showing his hand: for a number of reasons, he'd have trouble simply forcing Frank McCourt out of baseball. But he can sure as heck make it uncomfortable for him to stay around.

Friday, February 11, 2011

Silly season.

How can you tell we're in a lull in the McCourt divorce proceedings? Well, I guess you could go by my suffering post rate. That, or you could notice that what scant news there is concerns those usually paid to be quiet--the lawyers. Lately, there's been a small flurry of activity. Recently, the Times' Bill Shaikin noted that Bingham McCutchen--Larry Silverstein's firm--and the Dodgers have parted ways. The timing of all this is a bit in question...Shaikin suggests the relationship was severed in late December, while my understanding is it happened weeks prior. That's a distinction without a difference, however: the takeaway is that Bingham and Frank McCourt are no longer working together.

This should come, of course, as no surprise. Given everything that has transpired over the last several months, it's difficult to imagine either Frank or Bingham wanting to remain working with the other. In fact, it's easy to imagine Frank and Bingham working against each other at some point in the future. After all, whichever McCourt ends up losing out in the divorce will likely go after Bingham. As many other of the dozen-plus lawyers related to this case would tell you, we're still months--if not years--from finishing this case. But it will end some day, and whoever loses will look for scalps elsewhere. And what better place to start then the law firm that could be ultimately responsible for the allegedly-lacking actions of one of its attorneys?

To that end, Bingham McCutchen has hired another very prominent law firm, Gibson, Dunn & Crutcher, to represent its interests in any potential litigation. (Shaikin's report here.) Specifically, Gibson Dunn's Kevin Rosen will be responsible for keeping Larry Silverstein's mistakes from costing Bingham dearly. I have heard that Rosen has been working with Bingham for some time, likely well before the December ruling in which Judge Gordon invalidated the MPA. Hiring an attorney isn't an admission of guilt, but it is a sign of concern. As someone familiar with the situation told me recently, "It's a prudent practice to anticipate all those scenarios and that includes seeking advice internally and externally." One of 'those scenarios,' of course, is a possible malpractice action aimed at Bingham.

Still, that litigation is months and months off, if not longer. In the mean time, Bingham is likely evaluating all its defenses: those it might use in a courtroom, to be sure, but also proactive defensive measures designed to avoid litigation entirely. It has been reported in the past that Bingham was a party to settlement discussions between the McCourts; in theory, it could offer some much-needed cash in exchange for both parties' agreements not to pursue their future claims--if any--against Bingham. Within or without a courtroom, Bingham's involvement in the McCourt divorce will not end soon. And so Bingham's own retention of a law firm with significant expertise in this area is perfectly reasonable.