Thursday, February 24, 2011

Selig halts Fox financing...is the squeeze on?

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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.
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12 comments:

  1. Sweet. Never liked Bud until now!

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  2. It's about time Bud. Show some leadership here.

    It's not enough, but it's a step in the right direction.

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  3. <insert obligatory Stealer's Wheel reference here>

    The best news of the offseason after Judge Gordon ruled Jamie was a co-owner.

    This isn't the end of McCourt ownership, but you can see the dominoes falling. McCourt needs money now if he hopes to retain ownership — he needs to buy Jamie out — but the current Fox TV deal goes through 2013. That's three seasons' worth of drama. Does Frank put up with his ex-wife that long? I think he might surprise us and tough it out, but I also have strong doubts that, given her increased demands and unwillingness to cede anything to him (she's only strengthened her hand in this divorce, remember), he may not have a lot of choices but to put the team on the block. I take this move by Selig as a direct condemnation of the messy McCourts and their profligate lifestyle.

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  4. When it became publicly obvious that Frank and Jamie's interest in the Dodgers was for enriching themselves and didn't have the brains to consider that improving the team might enrich everyone was when I wanted them gone as soon as possible. They also didn't seem to anticipate how much making this mess public would hurt all the parties--not exactly far sighted management.

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  5. My days spent at the trial, and writing late at night appear to have paid off. Endgame is at hand!!!

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  6. Is it possible for Frank and Fox to frontload a new deal before the old deal expires?

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  7. Hey Josh,

    The Mets are also a financial mess but MLB and Selig seem to be helping them out more than they have the Dodgers. Could this possibly set up a law suit for McCourt based on the precedent being set with Mets? Both franchise have about a half a billion in debt each and are in need of money to cover operating expenses yet the Mets seem to be getting preferential treatment.

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  8. Toasting Jamie for filing lots of law suits until the Commissioner makes a final decision about the community property status of the Dodgers.

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  9. The Dodgers need an owner that can take this franchise into the 21st century. Dodger stadium still needs a major renovation (start with the bleachers) how about a huge scoreboard in center field? How about buy players that can hit?

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  10. I like how you write your articles! Thank you.

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  11. Great article explaining this.
    Great objections, Anthony. Another layer of opacity and further removal of accountability (which is what happens when a quango gets involved) should NOT be added to the expenditure of our tax dollars. To see more info please visit http://essayswriters.org/assignment/.

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  12. Really, this is awesome article It's very Informative....

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