Tuesday, October 25, 2011

The two plans.

I just filed to ESPNLA about this week's back-and-forth in the Dodgers' bankrtuptcy case. I'll update this post with a link when one is available (UPDATE: here's the link), and I'll tweet it out as well. Meanwhile, here's a chart offered by MLB to summarize the differences between its plan (selling the Dodgers) and Frank's (selling the TV rights). Some zooming may be necessary.

MLB Chart


Thursday, October 13, 2011

Could Frank McCourt lose everything?

Short answer: yes. Bill Shaikin and the Times put together an excellent article today detailing the potential for Frank McCourt to end up losing money on his (and Jamie's?) purchase of the Dodgers. Let's cut to the chase:
McCourt's intention in putting the Dodgers into bankruptcy is to keep the team, not to sell it. However, the debt load and tax liability have increased to the point where the $150-million loan assumed in bankruptcy funding could wipe out much — if not all — of whatever profit he would make if he is ordered to sell the team.
In case of a sale, McCourt would have to pay off taxes as well as debts. In July, McCourt told the divorce court that "a sale would result in … the incurrence of between $80 million and $200 million in tax liabilities."
That tax bill could rise with penalties. In a divorce court filing in August, Frank McCourt's accountant noted that the 2006, 2007 and 2008 tax returns for Frank and Jamie McCourt "as well as certain entities that allocate income to them" are currently being audited "by federal and state taxing authorities," with any liability yet to be determined.
So what's behind that ticking tax time bomb? Basically, Frank McCourt has held substantial loss carryforwards dating back to those halcyon parking lot days, and that bill--which I have been assured is over $100 million--would come due upon sale of the Dodgers. Add that to the team's debt load, and all the sudden Frank must sell the club for damn near a billion dollars to make a profit.

And, of course, there's the very real chance that whatever equity remaining in the Dodgers will have to be split with Jamie. Granted, just about every single person who reads this site would kill to even be only "very wealthy," so Frank's potential descent from "obscenely wealthy" won't be the cause of much sympathy.

But what happens if Frank can't satisfy the debt and tax obligations following a potential sale? Both Frank's most admirable and most troublesome trait is his perseverance, or perhaps stubbornness. He's made a pretty fabulous life operating on a "damn the torpedoes" basis, but this might be the most accurately aimed one yet. The last few years have seen the fall of numerous personal financial empires. Is the owner of one of the most storied franchises in American sports next?

As is often the case, it's probably wise to temper expectations of such an extreme outcome. After all, baseball desperately wants Frank out of the game. You have to figure that, should Frank become convinced he can't win the right to sell off the club's TV rights, he'd finally go to baseball and try to cut a deal.

That'd be the prudent thing to do. Right?

Thursday, October 6, 2011

Running out of lifelines.

You can't turn around without finding another reason to believe the McCourt era may soon come to an end in Los Angeles. It's long been assumed that Frank McCourt's only way to emerge as Dodgers owner when the team exits bankruptcy would be to somehow win the chance to sell the club's television rights. Well, baseball doesn't want that. And Jamie McCourt doesn't want that. And perhaps most importantly, Fox doesn't want that.

One of the few arrows remaining in Frank's quiver was the threat of using the bankruptcy to expose MLB and its teams' books, potentially causing a rift between players and owners on the eve of what is expected to be a peaceful labor renegotiation. That option, too, is now off the table: Judge Kevin Gross is expected to reaffirm last week's decision not to allow Frank's lawyers to engage in discovery of other teams' financial information.

Shoot, Major League Baseball is threatening to terminate the Dodgers' franchise should Frank somehow maintain a grip on the team. Things really are that bad. Friend of the site Maury Brown argues that Frank's expose-the-books gamebit was like "running into the building strapped with dynamite, and if he’s going to go down, he’s going to inflict as much collateral damage as possible." And, yes, that does fit Frank's long history of stubborn refusal to search for a peaceful way out of contentious litigation.

In the past, I've expressed regret that it's had to come this far, and I still feel that way. There's nothing left for Frank McCourt to win. Even if he bludgeons the bankruptcy court into allowing an auction of the TV rights over the sincere objection over several relevant parties, and even if he can somehow win an injunction forcing baseball to stay out of his franchise, Frank McCourt would escape this firestorm with an openly hostile customer base wholly uneager to support his ownership.

There's nothing left to win.

I've spent a lot of time thinking about the failure of Frank and Jamie McCourt to settle their differences amicably two years ago. At the heart of one of the most bitter and protracted public sagas to unfold in American sports was the simple failure of two people to realize they had more to lose by fighting than they could possibly gain.

I don't know what was happening behind closed doors two years ago today. I do know what's happened in the press and in the courtroom since, though, and I suspect that fighting over a couple hundred million dollars might end up costing Frank and Jamie some multiple of whatever amount truly separated them.


In about a month, barring some sort of resolution before then, the relevant parties will converge on Wilmington, Delaware for a week in court. Several times in the last few years, we've thought a finish line was, well, if not in sight, then at least just beyond the horizon. Each time we've been proven wrong.

As for this site...well, we're going to go back to our roots a little bit. Expect more frequent posts keying off news items, and a touch less (rambling) analysis and commentary until major developments emerge.