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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
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Tuesday, October 25, 2011
Thursday, October 13, 2011
Could Frank McCourt lose everything?
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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:
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?
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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?
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Thursday, October 6, 2011
Running out of lifelines.
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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.
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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.
---
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.
---
Friday, September 23, 2011
MLB asks for sale of the Dodgers in bankruptcy.
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And the rhetoric intensifies. As reported by the Times' Bill Shaikin, Major League Baseball today asked Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware to order the Dodgers sold as part of the club's bankruptcy proceedings. Frank McCourt has asked the court instead to order the team's future television rights sold at auction, and his camp has long acknowledged that disposition of those rights is Frank's path to retaining the Dodgers. Among baseball's boldest language was this gem:
So, the question remains the same as it has been all summer: will Frank McCourt survive long enough to sell those television rights so necessary to his eventual plan for bringing the team out of bankruptcy?
We'll take a look at that this weekend.
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And the rhetoric intensifies. As reported by the Times' Bill Shaikin, Major League Baseball today asked Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware to order the Dodgers sold as part of the club's bankruptcy proceedings. Frank McCourt has asked the court instead to order the team's future television rights sold at auction, and his camp has long acknowledged that disposition of those rights is Frank's path to retaining the Dodgers. Among baseball's boldest language was this gem:
No one will pay the [Dodgers] to broadcast Dodgers games if the club is not part of Major League Baseball [...] Consequently, the [Dodgers'] path in this case is a dead end or worse.Baseball has pointed out to the court that selling the television rights would have all sorts of nasty consequences, potentially including, but not limited to, the suspension of the franchise from the league. That MLB is willing to threaten such dramatic action speaks to how strongly it desires Frank McCourt out of baseball for good.
So, the question remains the same as it has been all summer: will Frank McCourt survive long enough to sell those television rights so necessary to his eventual plan for bringing the team out of bankruptcy?
We'll take a look at that this weekend.
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Monday, September 19, 2011
Back in the game; three Octobers.
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It tells you most everything you need to know about the Dodgers' ownership troubles that I could fall off the face of the earth for two months, and come back to learn that not a whole lot has changed. Of course, that's not true: I've stayed abreast of the happenings, and in touch with folks close to the situation. But still, I definitely haven't spent much time here.
So what's happened? Well, I took the bar, started my new job, passed the bar, and got sworn in (just today, in fact!).
Oh, but you didn't mean me.
The most relevant quote is one that bounced around last week, when Los Angeles County Superior Court Judge Scott M. Gordon acknowledged that "[u]ntil it gets out of bankruptcy, the baseball team cannot be sold by this court." That reflects, of course, one of Frank McCourt's chief aims in filing for bankruptcy in the first place: it put an effective freeze on the disposition of the team.
So it appears the Dodgers will head into a third consecutive offseason with the ownership question still hanging over the proud franchise's head.
If October 2009 was about revelations and October 2010 about non-resolutions, what will October 2011 bring? The bankruptcy trial is making slow progress (which is, in many ways, the idea). The divorce litigation won't refocus on the case's most compelling issue until the calendar flips to 2012. The team is somehow thoroughly out of contention despite having viable candidates for both the National League Most Valuable Player and Cy Young Awards.
.500 seems a perfectly appropriate record for a team coasting down a hill in neutral on its way to a third winter of paralysis-by-divorce. The club seems neither to be coming nor going, neither contending nor rebuilding. That will all change, of course. Someone, Frank McCourt or otherwise, will get to sell the club's TV rights. At some point, the club will win again, and winning will bring people back to the Stadium. You can't keep a team with the Dodgers' built-in advantages down forever. But, my goodness, can you try.
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It tells you most everything you need to know about the Dodgers' ownership troubles that I could fall off the face of the earth for two months, and come back to learn that not a whole lot has changed. Of course, that's not true: I've stayed abreast of the happenings, and in touch with folks close to the situation. But still, I definitely haven't spent much time here.
So what's happened? Well, I took the bar, started my new job, passed the bar, and got sworn in (just today, in fact!).
Oh, but you didn't mean me.
The most relevant quote is one that bounced around last week, when Los Angeles County Superior Court Judge Scott M. Gordon acknowledged that "[u]ntil it gets out of bankruptcy, the baseball team cannot be sold by this court." That reflects, of course, one of Frank McCourt's chief aims in filing for bankruptcy in the first place: it put an effective freeze on the disposition of the team.
So it appears the Dodgers will head into a third consecutive offseason with the ownership question still hanging over the proud franchise's head.
If October 2009 was about revelations and October 2010 about non-resolutions, what will October 2011 bring? The bankruptcy trial is making slow progress (which is, in many ways, the idea). The divorce litigation won't refocus on the case's most compelling issue until the calendar flips to 2012. The team is somehow thoroughly out of contention despite having viable candidates for both the National League Most Valuable Player and Cy Young Awards.
.500 seems a perfectly appropriate record for a team coasting down a hill in neutral on its way to a third winter of paralysis-by-divorce. The club seems neither to be coming nor going, neither contending nor rebuilding. That will all change, of course. Someone, Frank McCourt or otherwise, will get to sell the club's TV rights. At some point, the club will win again, and winning will bring people back to the Stadium. You can't keep a team with the Dodgers' built-in advantages down forever. But, my goodness, can you try.
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Friday, July 22, 2011
Judge rejects McCourt's financing, limits MLB control over Dodgers.
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In a federal bankruptcy court sitting in Wilmington, Del. today, Judge Kevin Gross denied Frank McCourt's motion that would have allowed a hedge fund to finance the Dodgers during the club's bankruptcy proceedings. Concluding that a $5.25 million fee owed by Frank personally to the hedge fund if the financing was not approved compromised McCourt's independence and disinterest in the deal, Judge Gross ordered baseball to finance the team instead. My reactions to the ruling are at ESPN Los Angeles. The takeaway:
As for me, I'll be going pretty dark from now until late next week in final preparations for and then taking the bar exam. Thanks for your kind wishes. I may pop into Twitter now and then, but unless something enormous happens, this is likely goodbye for a week.
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In a federal bankruptcy court sitting in Wilmington, Del. today, Judge Kevin Gross denied Frank McCourt's motion that would have allowed a hedge fund to finance the Dodgers during the club's bankruptcy proceedings. Concluding that a $5.25 million fee owed by Frank personally to the hedge fund if the financing was not approved compromised McCourt's independence and disinterest in the deal, Judge Gross ordered baseball to finance the team instead. My reactions to the ruling are at ESPN Los Angeles. The takeaway:
While Gross did not approve the deal McCourt proposed, he ordered one that will cost the Dodgers less money without appearing to enable a seizure of the club. The Order specifically forbids the financing from including "default triggers for violations of Baseball's rules and regulations."
[...]
MLB, of course, won the day on paper. McCourt won the day on paper. McCourt's motion was denied, and baseball will finance the team going forward. Commissioner Selig's office also struck a public relations blow; fans weary of the bicoastal McCourt litigation may look at MLB financing as a sign the McCourt era in Los Angeles is closer to coming to an end.
Whether that proves true depends almost entirely on the disposition of the club's television rights.There's more analysis of what went into today's decision and further discussion of the TV rights in the article, so I hope you'll check it out.
As for me, I'll be going pretty dark from now until late next week in final preparations for and then taking the bar exam. Thanks for your kind wishes. I may pop into Twitter now and then, but unless something enormous happens, this is likely goodbye for a week.
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Monday, July 18, 2011
Paying the bills.
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In case you missed it, here's a piece that ran on ESPNLosAngeles.com last Friday about Frank McCourt's request to Judge Gordon for a reduction in his monthly obligation to Jamie McCourt. Essentially, Frank is arguing that doesn't have the means to support the couple's seven homes due to significantly reduced resources thanks to the Dodgers' bankruptcy. The heart of the matter:
In case you missed it, here's a piece that ran on ESPNLosAngeles.com last Friday about Frank McCourt's request to Judge Gordon for a reduction in his monthly obligation to Jamie McCourt. Essentially, Frank is arguing that doesn't have the means to support the couple's seven homes due to significantly reduced resources thanks to the Dodgers' bankruptcy. The heart of the matter:
According to [Frank's] filing, Jamie McCourt has refused to rent or sell the properties, which are all titled in her name.
Frank McCourt contends that the Dodgers are his own property and the homes belong exclusively to Jamie. He would have Jamie sell or rent the residences to fund her lifestyle. In the case the court finds that both the team and the properties belong to the McCourts together, Frank has officially requested the homes be sold.
Due to the Dodgers' bankruptcy, the documents state, Frank McCourt's annual income is $5 million, which would not cover the court-ordered obligations to his former wife. Frank McCourt also declared in the filings that he has spent nearly $8 million in the past year on support to Jamie McCourt, compared to about $600,000 for his own expenses.
This issue will be heard in Los Angeles on August 10.
Across the country, Frank's attorneys also filed a motion in the Dodgers' bankruptcy case today. At issue is the source of funding that will see that the club's financial obligations are met until the bankruptcy proceedings conclude, one way or the other. Frank McCourt has arranged for a $150 million debtor-in-possession (DIP) facility through a hedge fund, though it comes with fees and a relatively high interest rate. Major League Baseball has offered its own financing, through the same MLB fund it closed to Frank McCourt prior to the Dodgers' bankruptcy filing. Baseball argues that its financing is less expensive, and therefore more responsible to the club's creditors and the game, generally.
Unsurprisingly, Frank's attorneys disagree. Saying that the court should defer to the Dodgers' business judgment in selecting a DIP financier--as is very common in Chapter 11 bankruptcies--Frank's lawyers characterize Bud Selig as "not driven by the economic motives (or elementary practices) of a standard DIP financier and instead [...] is motivated by non-economic, frankly personal objectives." Translated: the Commissioner wants Frank out, and MLB's proposed financing is merely a trap designed to lead to McCourt's ouster.
That trap operates, McCourt argues, by setting Frank up to fail. "The Debtors also remain justifiably concerned that, if any default occurred, the Commissioner would be unwilling to grant a waiver that might otherwise be available from a lender concerned with profit and repayment of the loan rather than the ulterior and strategic goals of the Commissioner," state Frank's attorneys in today's filing.
A United States Trustee has sided with Major League Baseball, citing concerns over fees and other aspects of Frank McCourt's preferred financing. Ultimately, if Frank is not allowed to proceed with his own financing, the door will be open for MLB to exert a level of control over the Dodgers as yet unattainable due to the protections afforded the club by virtue of its bankruptcy filing.
Courts are typically quite deferential to a debtor's choice of DIP financing. Indeed, the chief purpose of the system is to protect creditors, and an attorney for Major League Baseball has admitted in court that the club's creditors are expected to be paid in full. Frank's attorneys agree, calling the team "wildly solvent." That may be true following the disbursement of the first $60 million of the team's DIP financing, but it was very doubtful immediately prior to filing the case. Indeed, if the Dodgers were technically solvent as of the commencement of the bankruptcy, there might be significant questions as to the good faith of the filing itself.
The outcome of Wednesday's hearing will not necessarily be determinative of the case, generally, or of the future of McCourt ownership of the Dodgers. Even if baseball wins, Frank's suspicion of baseball's motives is well-noted and I would not expect Judge Gross to allow MLB to assume immediate control of Dodgers operations. Should Frank win, he would still have to overcome the significant hurdle of baseball's objection to his marketing of the club's future television rights. Remember, Frank's plan for the Dodgers to emerge from bankruptcy healthy and under McCourt control depends almost entirely on his ability to sell the TV rights over baseball's currently-strict objections. A win Wednesday means he's likely to at least have a chance at that.
We'll have more, here or elsewhere, tomorrow.
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Friday, July 15, 2011
Tuesday, July 5, 2011
The information battle begins.
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Barely a week after sending the Los Angeles Dodgers into bankruptcy, Frank McCourt has commenced with his effort to make baseball open its books. In a motion and supporting papers filed today in the United States Bankruptcy Court for the District of Delaware, McCourt's attorneys lodged requests for a wide range and deep volume of information. Among the Dodgers' requests:
Barely a week after sending the Los Angeles Dodgers into bankruptcy, Frank McCourt has commenced with his effort to make baseball open its books. In a motion and supporting papers filed today in the United States Bankruptcy Court for the District of Delaware, McCourt's attorneys lodged requests for a wide range and deep volume of information. Among the Dodgers' requests:
- Pretty much everything to do with Major League Baseball's investigation of Dodgers' operations.
- McCourt is especially concerned with the details behind the MLB-appointed monitor, Tom Schieffer, and even asks about Schieffer's potential interest in acquiring a portion of the Dodgers. Frank's filings also indicate a suspicion about Joe Torre's communications with Major League Baseball concerning Dodgers operations.
- Frank McCourt seeks information regarding baseball's rejection of the Fox deal.
- The Dodgers asked baseball for details of other teams' TV deals. Specifically, McCourt wants to openly compare the proposed Fox deal to those entered into by the Mariners, Rangers, Astros, Mets, and one currently being explored by the Padres. McCourt's goal is to show that the Fox deal was favorable to the Dodgers and that Selig's rejection was motivated primarily by a desire to force Frank McCourt out of baseball.
- The Dodgers also want information about steps taken by baseball to squeeze McCourt financially.
- In addition to denying McCourt the Fox deal, the Dodgers' filing also indicates that MLB cut off the Dodgers from the MLB-offered seasonal line of credit. McCourt also claims that in the weeks leading up to the Dodgers' bankruptcy filing, baseball changed its rules for obtaining debt financing, forcing Frank's hand further. Frank also asked baseball to turn over any documents about MLB's plans to remove McCourt as owner or even terminate the franchise altogether.
- Finally, McCourt also wants baseball to reveal its handling of other teams in periods of financial stress.
- Frank wants to know about baseball's approval of the Rangers' prepackaged bankruptcy, how baseball dealt with the Mets during their recent struggles, and baseball's action (or inaction) concerning other teams in violation of the sport's debt service rules.
McCourt's goal in these information requests is two-fold. First, he wants to begin establishing his claim that he has been treated wrongfully by Bud Selig and the Commissioner's office. Second, he would like to make this process as painful as possible for MLB. Forcing baseball to open its books might be painful, indeed.
For its part, attorneys for Major League Baseball have also filed their own extensive requests for document production. Baseball seeks information primarily on the debtor-in-possession (DIP) financing McCourt arranged to get the club through its bankruptcy. MLB, of course, seeks to persuade the court that the financing is on highly unfavorable terms, and that the interest and fees charged are unfair to the team's creditors.
Baseball also seems to cast doubt upon the McCourt camp's assertion that it went to enough effort to secure affordable financing. Additionally, MLB seeks more detailed information on how the Dodgers are budgeting cash over the next few months.
Fans accustomed to the McCourt divorce's slow trek through court might be surprised at how fast the bankruptcy is unfolding. Indeed, both Frank McCourt and MLB's document production requests call for full responses very soon. The scope of discovery is a fight of its own, but the haste with which the sides are proceeding is indicative of the urgency of the situation. Either Frank McCourt gets a TV deal pushed through, and relatively quickly, or he'll have a hard time preparing an approvable plan to emerge from the bankruptcy.
One of the more interesting developments on the horizon is a liquidation analysis of the five McCourt entities currently in bankruptcy. Prior to gaining approval of any plan, the Dodgers must make a showing of what the creditors would receive if the assets of the five companies were sold at auction. The Dodgers' plan will then be judged by the extent to which it is more beneficial to creditors. It is in this liquidation analysis, at the latest, that McCourt and MLB might first square off on the related-company transactions implicating the Dodger Stadium parking lots and the right to sell non-premium Dodgers tickets.
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Tuesday, June 28, 2011
First day's motions.
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Yesterday, the Los Angeles Dodgers, and four related companies, filed for bankruptcy in Delaware. Because bankruptcy very often, as here, requires immediate judicial intervention into a foundering company's operations, representatives of the Dodgers and Major League Baseball will be in court this morning (if you are on Pacific Time). The purpose of this preliminary hearing is for the debtor--here, the Dodgers--to present its first day's motions.
Ordinarily, the requests made at these hearings are granted, almost as a matter of course. However, baseball has likely been preparing for this day for some time, and does not intend to let Frank McCourt have full operational control of the team during the bankruptcy. The primary issue today is debtor-in-possession (DIP) financing.
McCourt has secured a $150 million commitment from a JP Morgan-owned hedge fund, Highbridge Capital Management, to finance the team until a TV deal can be approved. The Dodgers would have access to $60 million immediately, and the remaining $90 million would be available at specific times moving forward. The DIP financing is not cheap: there is a $4.5 million fee off the top, and the Dodgers will pay 10% interest.
Baseball will likely try to exert its influence on the bankruptcy immediately, offering to fund Dodgers' operations at a cheaper rate and lower overall commitment. While it is nearly unfathomable that either the Dodgers or baseball will take an insurmountable lead today, Judge Kevin Gross' decision will be at least instructive on the deference he will give to baseball's own policies and rules.
Also at issue today will be certain motions from the Dodgers seeking approval of how it spends money during the bankruptcy. In bankruptcy, debtors are often asked to rework their banking practices after the case has been filed. The Dodgers argue that the best way to preserve continuity going forward is for the court to allow them to handle cash, pay players, and address other obligations just as they have in the past.
Unless something dramatic happens and this gets out of bankruptcy very abruptly, we'll do something of a bankruptcy primer later on.
As today's events unfold, a couple misconceptions you should be aware of. First, Manny Ramirez is not the Dodgers' largest creditor. He is the club's largest unsecured creditor. This distinction, while not very important now, will loom large as it comes time for Frank to formulate a plan.
Second, it is very unlikely Jamie McCourt can stop this process from moving forward. Jamie is, today, in no position of power with any of the five filing entities. The Dodgers have not been ruled to be community property. To halt the bankruptcy, she would either need to convince the state court to issue an emergency declaration that she has decision-making power, or the bankruptcy court to dismiss the filing as made in bad faith or so prejudicial to her potential rights as to be inequitable. Those are tall orders.
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Yesterday, the Los Angeles Dodgers, and four related companies, filed for bankruptcy in Delaware. Because bankruptcy very often, as here, requires immediate judicial intervention into a foundering company's operations, representatives of the Dodgers and Major League Baseball will be in court this morning (if you are on Pacific Time). The purpose of this preliminary hearing is for the debtor--here, the Dodgers--to present its first day's motions.
Ordinarily, the requests made at these hearings are granted, almost as a matter of course. However, baseball has likely been preparing for this day for some time, and does not intend to let Frank McCourt have full operational control of the team during the bankruptcy. The primary issue today is debtor-in-possession (DIP) financing.
McCourt has secured a $150 million commitment from a JP Morgan-owned hedge fund, Highbridge Capital Management, to finance the team until a TV deal can be approved. The Dodgers would have access to $60 million immediately, and the remaining $90 million would be available at specific times moving forward. The DIP financing is not cheap: there is a $4.5 million fee off the top, and the Dodgers will pay 10% interest.
Baseball will likely try to exert its influence on the bankruptcy immediately, offering to fund Dodgers' operations at a cheaper rate and lower overall commitment. While it is nearly unfathomable that either the Dodgers or baseball will take an insurmountable lead today, Judge Kevin Gross' decision will be at least instructive on the deference he will give to baseball's own policies and rules.
Also at issue today will be certain motions from the Dodgers seeking approval of how it spends money during the bankruptcy. In bankruptcy, debtors are often asked to rework their banking practices after the case has been filed. The Dodgers argue that the best way to preserve continuity going forward is for the court to allow them to handle cash, pay players, and address other obligations just as they have in the past.
Unless something dramatic happens and this gets out of bankruptcy very abruptly, we'll do something of a bankruptcy primer later on.
As today's events unfold, a couple misconceptions you should be aware of. First, Manny Ramirez is not the Dodgers' largest creditor. He is the club's largest unsecured creditor. This distinction, while not very important now, will loom large as it comes time for Frank to formulate a plan.
Second, it is very unlikely Jamie McCourt can stop this process from moving forward. Jamie is, today, in no position of power with any of the five filing entities. The Dodgers have not been ruled to be community property. To halt the bankruptcy, she would either need to convince the state court to issue an emergency declaration that she has decision-making power, or the bankruptcy court to dismiss the filing as made in bad faith or so prejudicial to her potential rights as to be inequitable. Those are tall orders.
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Monday, June 27, 2011
The Dodgers are in bankruptcy. Now what?
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At ESPNLosAngeles.com, I offered some questions and answers on today's news. The link is here:
At ESPNLosAngeles.com, I offered some questions and answers on today's news. The link is here:
http://sports.espn.go.com/los-angeles/mlb/news/story?id=6711188
More here tomorrow morning well before the hearing. We'll get into more technical detail and discuss some of the thornier issues ahead.
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Sent via BlackBerry
The Los Angeles Dodgers file for bankruptcy.
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Much more as the day develops, maybe here, maybe somewhere else. For now, here is one of the five filings made today in the United States Bankruptcy Court for the District of Delaware:
Los Angeles Dodgers LLC
And here is the statement of the Los Angeles Dodgers, released this morning:
Press Release FINAL
I wrote about the possibility of bankruptcy last month. The takeaway was that Jamie probably couldn't keep Frank from putting the Dodgers into bankruptcy, and that this course of action might be Frank's last best chance to force baseball to green-light the Fox deal.
In the time since then, Frank and Jamie McCourt reached a settlement that was almost immediately nullified by baseball's rejection of said TV deal. Bill Shaikin of the Los Angeles Times has reported that Fox would not join forces with Frank should he file bankruptcy, and it is unclear at this point whether the embattled owner has, indeed, won Fox's support.
Much of the chatter so far this morning has focused on the list of the Dodgers' unsecured creditors, prominently featuring former Dodgers Manny Ramirez, Andruw Jones, and even Marquis Grissom. There are other, larger creditors out there, likely including inter-Enterprise debt, but for now a list of players and minor trade creditors is all we've got.
The most interesting part of the filings, to me, is that all five Dodger entities which are now in bankruptcy list between $500 million and $1 billion in assets. Just one, however, shows any significant debt. That one: the Los Angeles Dodgers baseball team.
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Much more as the day develops, maybe here, maybe somewhere else. For now, here is one of the five filings made today in the United States Bankruptcy Court for the District of Delaware:
Los Angeles Dodgers LLC
And here is the statement of the Los Angeles Dodgers, released this morning:
Press Release FINAL
I wrote about the possibility of bankruptcy last month. The takeaway was that Jamie probably couldn't keep Frank from putting the Dodgers into bankruptcy, and that this course of action might be Frank's last best chance to force baseball to green-light the Fox deal.
In the time since then, Frank and Jamie McCourt reached a settlement that was almost immediately nullified by baseball's rejection of said TV deal. Bill Shaikin of the Los Angeles Times has reported that Fox would not join forces with Frank should he file bankruptcy, and it is unclear at this point whether the embattled owner has, indeed, won Fox's support.
Much of the chatter so far this morning has focused on the list of the Dodgers' unsecured creditors, prominently featuring former Dodgers Manny Ramirez, Andruw Jones, and even Marquis Grissom. There are other, larger creditors out there, likely including inter-Enterprise debt, but for now a list of players and minor trade creditors is all we've got.
The most interesting part of the filings, to me, is that all five Dodger entities which are now in bankruptcy list between $500 million and $1 billion in assets. Just one, however, shows any significant debt. That one: the Los Angeles Dodgers baseball team.
---
Tuesday, June 21, 2011
Mechanics.
---
In yesterday's piece, which ran at ESPNLosAngeles.com, I discussed certain Dodgers financing arrangements designed, among other reasons, to make an MLB forced takeover or sale of the club unpalatable. I summed up the basics in this paragraph:
Frank held the land currently used for Dodger Stadium parking with a business entity with no direct relationship to the Dodgers. That entity flows up to other McCourt entities, but never back down to the Dodgers. Frank then caused the Dodgers to enter into a long-term lease under which the Dodgers owe the entity--Blue LandCo--$21 million annually for the use of the parking lots. This money does not go back into the team. This is illustrated in blue below:
The green line represents the lease payments; the organizations are not connected on the original flowchart. So the upshot here is that, for at least the next two decades, the team owes a non-team, Frank McCourt-held company $21 million per year as rent on the parking lots.
The tickets piece is less straightforward, but more significant. Frank caused the Dodgers to transfer the right to sell non-premium tickets to a non-Dodgers entity, simplified on the chart as Tickets. That entity then took out nine figures of debt secured by revenue from non-premium ticket sales. Service on that debt runs at about $6 to $7 million annually. This is represented in red below:
As above, the green line represents a relationship between the Dodgers and, here, Tickets. There is no underlying black line. The Dodgers transferred the rights to sell non-premium tickets to that entity, although I do not understand the Dodgers to pay Tickets any money.
And here's where it gets interesting: Tickets is entitled to keep all non-premium ticket sale revenue beyond its $6-7 million annual debt service. In 2005 alone, the excess revenue above that debt service was more than $65 million. That's money from ticket sales that, unless Frank McCourt so decides, never gets to the Dodgers. And it is also a contractual relationship that, Frank's side will argue, baseball cannot modify.
The takeaway: Frank is essentially painting a picture that baseball, should it take over the Dodgers, would not have access to very significant revenue streams. The rest of baseball's owners would be footing a great load of the bills. A new owner, purchasing the Dodgers at some sort of forced sale, would have to also buy out Frank's contractual relationships above or run the franchise without them.
I don't know if these mechanisms were designed with this sort of scenario in mind. There are all kinds of valid reasons businesses allocate revenue in facially-illogical ways. It could well be that tax implications drove these decisions, or creditors preferred assets and liabilities arranged just so.
But it could also be that Frank McCourt always wanted it to be harder to make him go away than it is to let him stick around. I don't know if we're there yet. Only Bud Selig does, for sure, and he seems willing to go to
the mat. It won't be pretty.
---
In yesterday's piece, which ran at ESPNLosAngeles.com, I discussed certain Dodgers financing arrangements designed, among other reasons, to make an MLB forced takeover or sale of the club unpalatable. I summed up the basics in this paragraph:
Sources familiar with McCourt's strategy indicated Monday that significant sources of Dodgers revenue would not be available to Major League Baseball or another owner without McCourt's consent. These are said to include a $21 million annual lease obligation owed from the team to a McCourt entity for the club's use of the parking lots surrounding Dodger Stadium and any ticket revenue in excess of the $6-7 million per year of service on certain McCourt debt, according to the sources. This year's figures were not available, but the surplus cash after debt service exceeded $60 million in 2005. Both of these revenue streams are slated to stay with McCourt for at least 20 more years.Let's tackle this stuff in a little greater depth. To begin with, note that the team and the land were sold to the McCourts as separate pieces in the context of a single transaction. My sources tell me baseball was not happy with this arrangement, but still reluctantly approved it. What happened next?
Frank held the land currently used for Dodger Stadium parking with a business entity with no direct relationship to the Dodgers. That entity flows up to other McCourt entities, but never back down to the Dodgers. Frank then caused the Dodgers to enter into a long-term lease under which the Dodgers owe the entity--Blue LandCo--$21 million annually for the use of the parking lots. This money does not go back into the team. This is illustrated in blue below:
The green line represents the lease payments; the organizations are not connected on the original flowchart. So the upshot here is that, for at least the next two decades, the team owes a non-team, Frank McCourt-held company $21 million per year as rent on the parking lots.
The tickets piece is less straightforward, but more significant. Frank caused the Dodgers to transfer the right to sell non-premium tickets to a non-Dodgers entity, simplified on the chart as Tickets. That entity then took out nine figures of debt secured by revenue from non-premium ticket sales. Service on that debt runs at about $6 to $7 million annually. This is represented in red below:
As above, the green line represents a relationship between the Dodgers and, here, Tickets. There is no underlying black line. The Dodgers transferred the rights to sell non-premium tickets to that entity, although I do not understand the Dodgers to pay Tickets any money.
And here's where it gets interesting: Tickets is entitled to keep all non-premium ticket sale revenue beyond its $6-7 million annual debt service. In 2005 alone, the excess revenue above that debt service was more than $65 million. That's money from ticket sales that, unless Frank McCourt so decides, never gets to the Dodgers. And it is also a contractual relationship that, Frank's side will argue, baseball cannot modify.
The takeaway: Frank is essentially painting a picture that baseball, should it take over the Dodgers, would not have access to very significant revenue streams. The rest of baseball's owners would be footing a great load of the bills. A new owner, purchasing the Dodgers at some sort of forced sale, would have to also buy out Frank's contractual relationships above or run the franchise without them.
I don't know if these mechanisms were designed with this sort of scenario in mind. There are all kinds of valid reasons businesses allocate revenue in facially-illogical ways. It could well be that tax implications drove these decisions, or creditors preferred assets and liabilities arranged just so.
But it could also be that Frank McCourt always wanted it to be harder to make him go away than it is to let him stick around. I don't know if we're there yet. Only Bud Selig does, for sure, and he seems willing to go to
the mat. It won't be pretty.
---
Monday, June 20, 2011
Selig blocks Fox deal.
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Over at ESPN Los Angeles, I wrote about the day's events. Hope the link works the first time this time.
Over at ESPN Los Angeles, I wrote about the day's events. Hope the link works the first time this time.
http://sports.espn.go.com/los-angeles/mlb/news/story?id=6685326
If it doesn't, comment or email me.
---
Sent via BlackBerry
Friday, June 17, 2011
On Bud Selig's coming decision.
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Over at ESPN Los Angeles, I wrote about the commissioner's hugely influential role in how the remainder of the divorce shakes out. I'm posting from my Blackberry, so I can't make the link streamlined, but here it is.
Over at ESPN Los Angeles, I wrote about the commissioner's hugely influential role in how the remainder of the divorce shakes out. I'm posting from my Blackberry, so I can't make the link streamlined, but here it is.
http://sports.espn.go.com/los-angeles/mlb/news/story?id=6674247
I'll be on Fox Sports Radio in about 20 minutes, and then ESPN Radio out of Honolulu later this evening. Remember to keep track of my Twitter updates using the box on the upper left side of this page.
---
Sent via BlackBerry
Few questions remain.
---
Below, you'll find the term sheet signed this morning by both Frank and Jamie McCourt, in which the warring couple agrees to a settlement. Peruse through it at your leisure, but here are the two major outstanding questions, resolution of which will set the franchise's course over the months and years to come.
1. Will Major League Baseball approve the Fox deal?
The key to the settlement agreement is MLB's approval of a near-$400 million TV rights deal with Fox. Of that money, $10 million would go to Jamie directly, $50 million would be placed in a lock box (more on that in a moment), and about $80 million would go to paying off debt on Dodgers land.
Baseball has been reluctant to approve the deal, which formerly did not have Jamie McCourt's approval. Her newly given consent, however, does not mean MLB will automatically rubber-stamp the deal. Baseball is still investigating Dodgers finances and operations, and will not approve the deal until and unless it deems the franchise to be in good hands.
If Baseball does not approve the deal by June 30, the club is in danger of missing payroll. Should that happen, Baseball seems likely to meet the Dodgers' financial obligations and fully seize the team. I will be writing more about the considerations going into Baseball's decision this afternoon, but suffice it to say it is far from a slam dunk. Oddly, should Baseball block the deal, Frank and Jamie will find themselves allies in litigation, after twenty months of opposition.
2. Pending MLB approval of the deal, there will be a one-day trial on August 4 to characterize the Dodgers assets at Frank's separate property or the marital estate's community property.
Once feared to last weeks and weeks, the final litigation in the McCourt divorce will take just one day, as Judge Gordon determines whether the Dodgers being titled in Frank's name alone is a basis sufficient to characterize the team as his separate property. From there, it's pretty easy:
If Frank wins: He keeps the team, hands over the $50 from the lock box, and pays Jamie $45 million within two years of Judge Gordon's ruling. Importantly, he also indemnifies Jamie from any tax liability associated with the team. Jamie gets her money, has no claim to the Dodgers, and the club moves forward owned solely by Frank McCourt.
If Jamie wins: The team will be sold and the assets divided. End of story.
Much more as the story develops, including expanded thoughts on the meaning of the shortened trial. The takeaway is that Commissioner Selig is now the most important figure in the McCourt divorce. His decision to allow or block the Fox transaction will clear the path for this story to be over by the end of the Summer.
---
Below, you'll find the term sheet signed this morning by both Frank and Jamie McCourt, in which the warring couple agrees to a settlement. Peruse through it at your leisure, but here are the two major outstanding questions, resolution of which will set the franchise's course over the months and years to come.
1. Will Major League Baseball approve the Fox deal?
The key to the settlement agreement is MLB's approval of a near-$400 million TV rights deal with Fox. Of that money, $10 million would go to Jamie directly, $50 million would be placed in a lock box (more on that in a moment), and about $80 million would go to paying off debt on Dodgers land.
Baseball has been reluctant to approve the deal, which formerly did not have Jamie McCourt's approval. Her newly given consent, however, does not mean MLB will automatically rubber-stamp the deal. Baseball is still investigating Dodgers finances and operations, and will not approve the deal until and unless it deems the franchise to be in good hands.
If Baseball does not approve the deal by June 30, the club is in danger of missing payroll. Should that happen, Baseball seems likely to meet the Dodgers' financial obligations and fully seize the team. I will be writing more about the considerations going into Baseball's decision this afternoon, but suffice it to say it is far from a slam dunk. Oddly, should Baseball block the deal, Frank and Jamie will find themselves allies in litigation, after twenty months of opposition.
2. Pending MLB approval of the deal, there will be a one-day trial on August 4 to characterize the Dodgers assets at Frank's separate property or the marital estate's community property.
Once feared to last weeks and weeks, the final litigation in the McCourt divorce will take just one day, as Judge Gordon determines whether the Dodgers being titled in Frank's name alone is a basis sufficient to characterize the team as his separate property. From there, it's pretty easy:
If Frank wins: He keeps the team, hands over the $50 from the lock box, and pays Jamie $45 million within two years of Judge Gordon's ruling. Importantly, he also indemnifies Jamie from any tax liability associated with the team. Jamie gets her money, has no claim to the Dodgers, and the club moves forward owned solely by Frank McCourt.
If Jamie wins: The team will be sold and the assets divided. End of story.
Much more as the story develops, including expanded thoughts on the meaning of the shortened trial. The takeaway is that Commissioner Selig is now the most important figure in the McCourt divorce. His decision to allow or block the Fox transaction will clear the path for this story to be over by the end of the Summer.
---
Thursday, June 16, 2011
On Bryan Stow.
---
I should say from the outset that I do not know that my feelings on this matter are correct. I do not actually know that I can precisely put my feelings here into the right words. I also do not demand that you agree with me. I do not even expect you too. I might, indeed, be surprised if you do. But this has been gnawing at me for a few weeks now, and yesterday evening's Shaikin report brought it to the forefront:
I am not entirely comfortable turning Bryan Stow's savage beating at the hands of Dodger "fans" into a point of argument in the ongoing drama surrounding Frank McCourt's ownership of the Dodgers.
Some quick background: yesterday, Bill Shaikin reported that Tom Schieffer's investigation into Dodgers operations goes beyond the team's books. It stretches, Shaikin notes, to interviews conducted with former employees on, among other topics, stadium security. Such is the extent of Baseball's concern that it sent a six-person tax force to evaluate these issues on-site.
Now, I am all for addressing too-real dangers of being in the wrong place at the wrong time at Dodger Stadium. I am also all for holding the appropriate people accountable for their actions via both civil and criminal legal processes. That may very well include the Los Angeles Dodgers. Stow's family has already sued the club, and I would not be human if I did not hope that the club's liability to Stow, if any, be resolved quickly and justly.
All that said, I can't get all the way on board with using this tragedy to support the boisterous (and still growing) call for Frank McCourt's ouster. It is very difficult to explain why I feel this way. I've edited this piece more than perhaps any other I've written. But I think my gut opinion on this issue comes from two places: one is the logical and methodical side of my brain, and the other is purely emotional.
First, I think it's important to remember that people did this to Bryan Stow. People I do not know, but who I am certain I do not like. People who see a black-and-orange clad fan, and, through some combination of ignorance, substances, anger, and lack of respect for themselves and others, beat that fan to as close as someone who is alive could be to being dead. I do not think that, when you're dealing with people so obviously immoral and perhaps inhuman, you can ever systemically eliminate the risk of something like this happening.
Now, did Frank McCourt do everything reasonably prudent to mitigate the risk of this happening? It is sure damning that, at the time of the incident, the club did not employ a full-time head of security. As well all know too well, it is not like there were no indications of serious problems with security in (and particularly around) the stadium. It is very sad to say that this incident probably did not shock anyone who has spent much time in Dodger Stadium parking lots during Giants series.
And the potential failure to adequately provide for fan safety is, I think, very much fair game for MLB's investigation into how Frank McCourt has run the Dodgers. If cutting security costs was done without sufficient exploration of the cuts' impact on fan safety, that's another reason to believe that Frank McCourt may not be the right person to helm the ship going forward. If such cuts were made because Frank and Jamie wouldn't even travel first class--no, they needed to travel by private jet--then yeah, that's obviously bad.
But I just can't help myself from having a negative reaction every time I perceive someone as making a direct link between the premise (Bryan Stow was savagely beaten after the Dodgers made cuts in security spending) and the conclusion (MLB needs to force Frank out). There's just too much in the middle we don't know. There's too much in the middle that truly determines whether the link is real. The conclusion is so powerful, so damaging--that Frank McCourt played an integral role in a series of events that resulted in a man's near-death--that I am just uncomfortable taking it as truth without much more information.
By nature, I guess, I am just suspicious of conclusions drawn on the recent occurrence of an extreme event. I am especially suspicious of such conclusions when employed for use in furthering an agenda; here, using Bryan Stow's awful fate as a major factor in MLB's seemingly-inevitable determination that Frank is unfit to own the Dodgers.
It might be true. There is certainly voluminous evidence that Frank and Jamie did not run the Dodgers as we, or Major League Baseball, would have the club run. And I've still done a terrible job here putting my thoughts into words: I do not mean to relieve Frank of any responsibility when it comes to what happened to Bryan Stow. I do not mean to say that Frank's potential failure to take all reasonably prudent steps to create a safe fan environment should not be a factor in MLB's investigation.
So maybe the emotional approach will make my feelings clearer: I do not want Bryan Stow's story to somehow be cheapened by becoming a front in the ongoing battles between Frank McCourt and Major League Baseball, and Frank McCourt and fans of the club. I do not want the tragedy of what happened to Bryan Stow to be somehow dulled by turning his story into something agenda-carrying groups--MLB, Frank McCourt, ourselves--use to make a related-but-not-immediately-so point.
I worry that, the more we use Bryan Stow's beating to call Frank a negligent owner, and the more Frank has to defend the club's actions and attempt to show that security was adequate, the less Bryan Stow's tragic fate stands on its own. It gets turned into something else. And maybe that something else is something bigger. Maybe it ends up being emblematic of Frank's failure as the owner of the Los Angeles Dodgers. Maybe it is the stark and overwhelmingly obvious impetus forcing the Dodgers to finally make Dodger Stadium as safe as it ought to be.
But maybe it also makes us feel less sad about what happened to Bryan Stow. This is the wrong word, but when you politicize an incident, you risk stripping that incident of its own emotional weight. And I, personally, would feel that something would be lost about the individual tragedy that is Bryan Stow's story if it becomes something else, even if that something else is something bigger.
But you can't have it both ways, I guess, and the future of fan safety at Dodger Stadium is, regrettably, more important than any one fan, regardless of the colors he wore. So as Bryan Stow's story becomes something bigger, which seems inevitable, I hope the last couple paragraphs will remind me to always be sad about Bryan Stow himself.
---
I should say from the outset that I do not know that my feelings on this matter are correct. I do not actually know that I can precisely put my feelings here into the right words. I also do not demand that you agree with me. I do not even expect you too. I might, indeed, be surprised if you do. But this has been gnawing at me for a few weeks now, and yesterday evening's Shaikin report brought it to the forefront:
I am not entirely comfortable turning Bryan Stow's savage beating at the hands of Dodger "fans" into a point of argument in the ongoing drama surrounding Frank McCourt's ownership of the Dodgers.
Some quick background: yesterday, Bill Shaikin reported that Tom Schieffer's investigation into Dodgers operations goes beyond the team's books. It stretches, Shaikin notes, to interviews conducted with former employees on, among other topics, stadium security. Such is the extent of Baseball's concern that it sent a six-person tax force to evaluate these issues on-site.
Now, I am all for addressing too-real dangers of being in the wrong place at the wrong time at Dodger Stadium. I am also all for holding the appropriate people accountable for their actions via both civil and criminal legal processes. That may very well include the Los Angeles Dodgers. Stow's family has already sued the club, and I would not be human if I did not hope that the club's liability to Stow, if any, be resolved quickly and justly.
All that said, I can't get all the way on board with using this tragedy to support the boisterous (and still growing) call for Frank McCourt's ouster. It is very difficult to explain why I feel this way. I've edited this piece more than perhaps any other I've written. But I think my gut opinion on this issue comes from two places: one is the logical and methodical side of my brain, and the other is purely emotional.
First, I think it's important to remember that people did this to Bryan Stow. People I do not know, but who I am certain I do not like. People who see a black-and-orange clad fan, and, through some combination of ignorance, substances, anger, and lack of respect for themselves and others, beat that fan to as close as someone who is alive could be to being dead. I do not think that, when you're dealing with people so obviously immoral and perhaps inhuman, you can ever systemically eliminate the risk of something like this happening.
Now, did Frank McCourt do everything reasonably prudent to mitigate the risk of this happening? It is sure damning that, at the time of the incident, the club did not employ a full-time head of security. As well all know too well, it is not like there were no indications of serious problems with security in (and particularly around) the stadium. It is very sad to say that this incident probably did not shock anyone who has spent much time in Dodger Stadium parking lots during Giants series.
And the potential failure to adequately provide for fan safety is, I think, very much fair game for MLB's investigation into how Frank McCourt has run the Dodgers. If cutting security costs was done without sufficient exploration of the cuts' impact on fan safety, that's another reason to believe that Frank McCourt may not be the right person to helm the ship going forward. If such cuts were made because Frank and Jamie wouldn't even travel first class--no, they needed to travel by private jet--then yeah, that's obviously bad.
But I just can't help myself from having a negative reaction every time I perceive someone as making a direct link between the premise (Bryan Stow was savagely beaten after the Dodgers made cuts in security spending) and the conclusion (MLB needs to force Frank out). There's just too much in the middle we don't know. There's too much in the middle that truly determines whether the link is real. The conclusion is so powerful, so damaging--that Frank McCourt played an integral role in a series of events that resulted in a man's near-death--that I am just uncomfortable taking it as truth without much more information.
By nature, I guess, I am just suspicious of conclusions drawn on the recent occurrence of an extreme event. I am especially suspicious of such conclusions when employed for use in furthering an agenda; here, using Bryan Stow's awful fate as a major factor in MLB's seemingly-inevitable determination that Frank is unfit to own the Dodgers.
It might be true. There is certainly voluminous evidence that Frank and Jamie did not run the Dodgers as we, or Major League Baseball, would have the club run. And I've still done a terrible job here putting my thoughts into words: I do not mean to relieve Frank of any responsibility when it comes to what happened to Bryan Stow. I do not mean to say that Frank's potential failure to take all reasonably prudent steps to create a safe fan environment should not be a factor in MLB's investigation.
So maybe the emotional approach will make my feelings clearer: I do not want Bryan Stow's story to somehow be cheapened by becoming a front in the ongoing battles between Frank McCourt and Major League Baseball, and Frank McCourt and fans of the club. I do not want the tragedy of what happened to Bryan Stow to be somehow dulled by turning his story into something agenda-carrying groups--MLB, Frank McCourt, ourselves--use to make a related-but-not-immediately-so point.
I worry that, the more we use Bryan Stow's beating to call Frank a negligent owner, and the more Frank has to defend the club's actions and attempt to show that security was adequate, the less Bryan Stow's tragic fate stands on its own. It gets turned into something else. And maybe that something else is something bigger. Maybe it ends up being emblematic of Frank's failure as the owner of the Los Angeles Dodgers. Maybe it is the stark and overwhelmingly obvious impetus forcing the Dodgers to finally make Dodger Stadium as safe as it ought to be.
But maybe it also makes us feel less sad about what happened to Bryan Stow. This is the wrong word, but when you politicize an incident, you risk stripping that incident of its own emotional weight. And I, personally, would feel that something would be lost about the individual tragedy that is Bryan Stow's story if it becomes something else, even if that something else is something bigger.
But you can't have it both ways, I guess, and the future of fan safety at Dodger Stadium is, regrettably, more important than any one fan, regardless of the colors he wore. So as Bryan Stow's story becomes something bigger, which seems inevitable, I hope the last couple paragraphs will remind me to always be sad about Bryan Stow himself.
---
Tuesday, June 14, 2011
Another payroll, another life raft. But is it the last one?
---
For months now, speculation has run wild that embattled Dodgers owner--or co-owner, as Jamie McCourt would like you to know--Frank McCourt has flirted with insolvency. He has seemingly tapped just about every potential source of cash available to him. In the past, he's pledged revenue from future ticket sales to secure massive loans, a significant part of the proceeds of which was lopped off the top and given directly to the McCourts. Later, following last Fall's trial, news broke that Frank had taken advances from Fox, attempted to pledge the club's future television rights as collateral, attempted to outrightly sell those same rights, and (most recently) took advances from corporate sponsors in order to meet payroll.
That last step, which I have been told by several knowledgeable people to have been previously unheard-of in the baseball world, will allow Frank to meet tomorrow's payroll obligation. However, only yesterday, it was reported by two stalwarts of the saga's coverage that the next looming payroll date, June 30, posed even greater problems than such days have in the past. The reason: over $8 million is due former Dodger Manny Ramirez as part of his agreement to defer salary.
If, as Bill Shaikin's sources suggest, the Dodgers truly have "no chance" to meet their June 30 obligations, it would be somewhat fitting that the last straw is the coming-due of a deferred debt; indeed, the McCourt Era in Los Angeles may be best-remembered for an unsustainable pattern of debt-incursion and a cascading series of small crises seeming nearly certain to lead to an imminent failure of the club as a going concern.
Of course, Frank McCourt doesn't believe such doom to be as inevitable as most folks think. Frank is still insistent that, if Major League Baseball would simply approve a massive television deal he has ready to sign with Fox, then both the Dodgers' immediate and long-term liquidity issues would be rendered moot. And, assuming Jamie would approve of such a deal--all indications are she would not--Frank would not be wrong, per se.
But it's widely and reasonably believed that Major League Baseball has determined that McCourt ownership is no longer viable, and it will not hurry its investigation and face the prospect of actually having to rule on Frank's proposed TV deal. For months now, Frank has been playing chicken with MLB; he's doing his best to establish his position in future litigation that Major League Baseball caused the coming failure of the Dodgers, and that its refusal to (a) finish its investigation--which Frank will call a sham--and (b) approve the TV deal should render it liable to Frank.
You didn't think we'd get out of this without more law suits, did you? Still, it seems obvious that, should Frank be unable to make the end-of-the-month payroll, Baseball will immediately seize complete control of the Dodgers and McCourt ownership will be almost certainly at an end. Yes, Frank might extract some blood from Baseball further down the line, but it is nearly impossible to imagine a scenario in which he is restored to the owner's box.
After that, I see two scenarios as more likely than the others. First, Baseball might assume all the club's assets and liabilities, paying the club's marital estate the net worth of the franchise. Then, Baseball would run the club as a ward of the state, taking its time to find an appropriate long-term buyer for the team. Frank--and perhaps Jamie--would litigate every aspect of this: the seizure, the valuation, the amount and manner of compensation, and every other conceivable point.
The second possible scenario is one we've discussed in this space before: bankruptcy. In such a scenario, Baseball might itself or through an ally finance the Dodgers during the pendency of the bankruptcy proceedings; upon a showing that jumping ahead of the majority of the franchise's creditors is the only way the Dodgers can obtain financing during the bankruptcy, Baseball could assume a super-priority status. In English: Baseball would get paid back before nearly all of the club's other creditors. The club would eventually be sold at auction, and Frank (and Jamie) wouldn't see a significant dime until and unless all creditors were paid.
Other possibilities include a quick settlement between Frank and Jamie, followed by a quick sale to someone ready to put cash on the table. While the former proposition is possible, we should all know by now that Baseball doesn't move especially quickly. Perhaps if the McCourts were able to produce a buyer, Baseball would finance the club's operations during the league's vetting process, on the condition that it will seize the club if the sale falls through. And, of course, there is still the matter of actually producing a viable owner. Dennis Gilbert seems like a possibility, but these deals don't get put together overnight.
And we can't ignore the possibility that Frank McCourt finds some more change in the couch and makes the June 30 payroll after all. We've been to the brink before, and while this one sure seems like the direst situation Frank's faced yet, he's got a lifetime of unlikely successes under his belt.
After each of these flirtations with complete failure, however, the fan unrest grows louder and louder. If Dodgers diehards wake up the morning of July 1 with the club ten games out of first place and the saga that has chewed up the last two years no closer to resolution, I suspect the already-toxic relationship between the club's owner and its fans to reach new depths. I get the sense that, above all else, fans just want this to be over. Yes, the recovery process is going to be long, painful, and fraught with uncertainty. But the healing can't begin until the bleeding stops.
---
For months now, speculation has run wild that embattled Dodgers owner--or co-owner, as Jamie McCourt would like you to know--Frank McCourt has flirted with insolvency. He has seemingly tapped just about every potential source of cash available to him. In the past, he's pledged revenue from future ticket sales to secure massive loans, a significant part of the proceeds of which was lopped off the top and given directly to the McCourts. Later, following last Fall's trial, news broke that Frank had taken advances from Fox, attempted to pledge the club's future television rights as collateral, attempted to outrightly sell those same rights, and (most recently) took advances from corporate sponsors in order to meet payroll.
That last step, which I have been told by several knowledgeable people to have been previously unheard-of in the baseball world, will allow Frank to meet tomorrow's payroll obligation. However, only yesterday, it was reported by two stalwarts of the saga's coverage that the next looming payroll date, June 30, posed even greater problems than such days have in the past. The reason: over $8 million is due former Dodger Manny Ramirez as part of his agreement to defer salary.
If, as Bill Shaikin's sources suggest, the Dodgers truly have "no chance" to meet their June 30 obligations, it would be somewhat fitting that the last straw is the coming-due of a deferred debt; indeed, the McCourt Era in Los Angeles may be best-remembered for an unsustainable pattern of debt-incursion and a cascading series of small crises seeming nearly certain to lead to an imminent failure of the club as a going concern.
Of course, Frank McCourt doesn't believe such doom to be as inevitable as most folks think. Frank is still insistent that, if Major League Baseball would simply approve a massive television deal he has ready to sign with Fox, then both the Dodgers' immediate and long-term liquidity issues would be rendered moot. And, assuming Jamie would approve of such a deal--all indications are she would not--Frank would not be wrong, per se.
But it's widely and reasonably believed that Major League Baseball has determined that McCourt ownership is no longer viable, and it will not hurry its investigation and face the prospect of actually having to rule on Frank's proposed TV deal. For months now, Frank has been playing chicken with MLB; he's doing his best to establish his position in future litigation that Major League Baseball caused the coming failure of the Dodgers, and that its refusal to (a) finish its investigation--which Frank will call a sham--and (b) approve the TV deal should render it liable to Frank.
You didn't think we'd get out of this without more law suits, did you? Still, it seems obvious that, should Frank be unable to make the end-of-the-month payroll, Baseball will immediately seize complete control of the Dodgers and McCourt ownership will be almost certainly at an end. Yes, Frank might extract some blood from Baseball further down the line, but it is nearly impossible to imagine a scenario in which he is restored to the owner's box.
After that, I see two scenarios as more likely than the others. First, Baseball might assume all the club's assets and liabilities, paying the club's marital estate the net worth of the franchise. Then, Baseball would run the club as a ward of the state, taking its time to find an appropriate long-term buyer for the team. Frank--and perhaps Jamie--would litigate every aspect of this: the seizure, the valuation, the amount and manner of compensation, and every other conceivable point.
The second possible scenario is one we've discussed in this space before: bankruptcy. In such a scenario, Baseball might itself or through an ally finance the Dodgers during the pendency of the bankruptcy proceedings; upon a showing that jumping ahead of the majority of the franchise's creditors is the only way the Dodgers can obtain financing during the bankruptcy, Baseball could assume a super-priority status. In English: Baseball would get paid back before nearly all of the club's other creditors. The club would eventually be sold at auction, and Frank (and Jamie) wouldn't see a significant dime until and unless all creditors were paid.
Other possibilities include a quick settlement between Frank and Jamie, followed by a quick sale to someone ready to put cash on the table. While the former proposition is possible, we should all know by now that Baseball doesn't move especially quickly. Perhaps if the McCourts were able to produce a buyer, Baseball would finance the club's operations during the league's vetting process, on the condition that it will seize the club if the sale falls through. And, of course, there is still the matter of actually producing a viable owner. Dennis Gilbert seems like a possibility, but these deals don't get put together overnight.
And we can't ignore the possibility that Frank McCourt finds some more change in the couch and makes the June 30 payroll after all. We've been to the brink before, and while this one sure seems like the direst situation Frank's faced yet, he's got a lifetime of unlikely successes under his belt.
After each of these flirtations with complete failure, however, the fan unrest grows louder and louder. If Dodgers diehards wake up the morning of July 1 with the club ten games out of first place and the saga that has chewed up the last two years no closer to resolution, I suspect the already-toxic relationship between the club's owner and its fans to reach new depths. I get the sense that, above all else, fans just want this to be over. Yes, the recovery process is going to be long, painful, and fraught with uncertainty. But the healing can't begin until the bleeding stops.
---
Tuesday, May 10, 2011
Could Frank McCourt file bankruptcy?
---
Bill Shaikin has an interesting, informative piece in the Times today. The topic: Frank McCourt's motives and methods for potentially putting the Dodgers into bankruptcy. Some key notes from a loaded article:
I spent much of my day talking to experts in corporate and bankruptcy law, because this situation raises issues above my pay grade. I approached the topic by asking questions both to myself, to guide my own research and explore what I already know, and to those with decades of experience in the field. Here are some of the main questions raised by the possibility of a bankruptcy in this matter.
1. Why file bankruptcy?
The immediate benefit of filing bankruptcy is an automatic stay barring all creditor attempts--active or passive--to coerce the debtor into paying debts. If Frank runs out of cash and can't pay a bank that loaned him money, for instance, the stay would prevent that bank from seizing the collateral Frank put up to secure the loan.
As Bill notes, filing for bankruptcy might also be Frank's best method to force baseball to accept his proposed Fox TV deal. In a Chapter 11 bankruptcy, Frank would essentially propose a plan to reorganize Dodgers operations primarily by using the massive Fox pact to get back on solid ground. The creditors would be put into groups and asked to vote on the deal. If enough creditors voted to approve the deal--and that, in itself, isn't a simple process--the bankruptcy court might have the authority to approve the deal despite baseball's objection.
Now, there are all sorts of problems with that. Baseball might immediately seize all Dodgers operations the moment Frank files. Baseball might itself be a creditor of the club, and use that status to block the plan's approval. Baseball might lean on the Dodgers' various creditors to reject the plan. And baseball would certainly argue that, under its rules, it has the power to keep Frank from selling the club's TV rights. These would all be fights, and there would be more. For now, I'm just trying to get information out there.
2. What would a bankruptcy mean for Jamie?
From my vantage point, nothing good. In a bankruptcy commenced after the filing of a divorce but before the division of the marital estate's assets, all community property of the marriage is part of either party's potential bankruptcy estate. Put in English: even if Jamie, as most expect, wins a determination that the Dodgers are indeed community property, creditors of the Dodgers--and possibly Frank--would get paid before Jamie sees a dime from the division of community property.
This means the team could be sold and none of the proceeds would be due Jamie until each and every creditor has had its fill. Remember, Judge Gordon has not even conclusively ruled the Dodgers to be community property yet; all he's really done is invalidate the MPA. And Jamie would not become a creditor of Frank or the Dodgers until entry of a judgment declaring she's entitled to half the value of the assets. Basically, Jamie's options are to either prevent Frank from filing for bankruptcy or to have a filing dismissed quickly.
Jamie, according to one of Shaikin's sources, might approve a bankruptcy plan that contemplated a quick sale at auction to the highest bidder. However, Frank's motivations in pursuing bankruptcy protection would be, according to another of Shaikin's sources, focused on the fight to keep control of the Dodgers through the execution of a long-term TV rights deal. Frank has not expressed a willingness to sell the club unless no other options remain. And he's shown no qualms about scorching the earth in pursuit of his goals.
3. Would Jamie be able to stop it if she tried?
One key consideration is the actual identity of the person or entity filing for bankruptcy. There is very little Jamie could do to prevent Frank from filing bankruptcy in his personal capacity. That's unlikely, though, as it would trigger all sorts of bad things for him, both from creditors and baseball. It's far more reasonable to expect that if there is a bankruptcy in this situation, it will be filed by one or more of the entities making up the Dodgers Enterprise.
If you scroll down this page (or click here), you'll see the Dodgers organization flow chart. Everything under TMBLP, including the companies that own the Dodgers and Dodger Stadium, is a single-member limited liability entity. The process for each of those entities to file bankruptcy protection depends on the way it was set up, but it is extraordinarily likely that Frank McCourt has himself the power, on paper, to send any of those entities into bankruptcy.
Jamie has spent the last 18 months, and will perhaps spend the next 18, contending that she is a half-owner of the Dodgers Enterprise, and she would argue here that Frank does not have the unilateral authority to file bankruptcy on behalf of, say, the Dodgers. However, to block such a filing or prevent it from moving forward, she would either need to convince the state court to issue an emergency declaration that she has decision-making power, or the bankruptcy court to dismiss the filing as made in bad faith or so prejudicial to her potential rights as to be inequitable. None of these are easy.
Long story short: Frank has, on paper, the authority to file bankruptcy on the Dodgers' behalf. The long-term effect of a Dodgers bankruptcy seems unfavorable to Jamie. And her avenues to prevent that harm from coming to pass are not especially promising.
4. Can you wrap this up?
Working on it. Tough crowd.
Presuming he is unable to make the May 31 payroll, as has been reported, Frank McCourt may look to seek bankruptcy protection. This might enable him to maintain control of the Dodgers through a sale of the club's TV rights to Fox for nearly two decades and receiving cash and a stake in Prime Ticket in return. If he is unsuccesful in passing that deal through a bankruptcy, Frank would still be in a position to feed the Dodgers Enterprise's creditors before forking over half the couple's net worth to Jamie.
There's a certain symmetry to that: Frank contended all along that Jamie drove the creation of the MPA because she wanted protection from creditors in case the Dodgers failed. Well, here we are, and the Dodgers sure seem to be failing. The club now faces a severe liquidity crisis at least in part because Frank and Jamie McCourt diverted over $100 million to themselves instead of paying down debt or freeing up capital for revenue-generating projects. Having spent the better part of two years breaking up, they might now be in the uncomfortable position of working their way through the club's bankruptcy together.
---
Bill Shaikin has an interesting, informative piece in the Times today. The topic: Frank McCourt's motives and methods for potentially putting the Dodgers into bankruptcy. Some key notes from a loaded article:
Bankruptcy could provide McCourt with the authority and funding to remain in control of the Dodgers, at least in the short term, experts said.
[...]
Alan Gover, an attorney with White and Case, the firm that represented the incoming owners of the Texas Rangers through that club's bankruptcy process last year, said, "Behind any bankruptcy filing by Mr. McCourt would be a strategy to maintain control of the club."
Bankruptcy courts need not yield to MLB rules. One high-ranking major league executive, speaking on condition of anonymity because of the potential for litigation, expressed surprise McCourt did not file for protection as soon as Selig announced his intervention.
McCourt's argument to a bankruptcy judge would be the same one he has made to MLB executives and in media interviews: The Dodgers' financial problems would be resolved with the approval of a long-term broadcast contract with Fox.
That contract has been with Selig for five weeks, even with the Dodgers in danger of missing payroll. If McCourt were able to convince the bankruptcy judge that he could repay his creditors if the Fox contract were approved, the judge could grant approval over Selig's objections.
I spent much of my day talking to experts in corporate and bankruptcy law, because this situation raises issues above my pay grade. I approached the topic by asking questions both to myself, to guide my own research and explore what I already know, and to those with decades of experience in the field. Here are some of the main questions raised by the possibility of a bankruptcy in this matter.
1. Why file bankruptcy?
The immediate benefit of filing bankruptcy is an automatic stay barring all creditor attempts--active or passive--to coerce the debtor into paying debts. If Frank runs out of cash and can't pay a bank that loaned him money, for instance, the stay would prevent that bank from seizing the collateral Frank put up to secure the loan.
As Bill notes, filing for bankruptcy might also be Frank's best method to force baseball to accept his proposed Fox TV deal. In a Chapter 11 bankruptcy, Frank would essentially propose a plan to reorganize Dodgers operations primarily by using the massive Fox pact to get back on solid ground. The creditors would be put into groups and asked to vote on the deal. If enough creditors voted to approve the deal--and that, in itself, isn't a simple process--the bankruptcy court might have the authority to approve the deal despite baseball's objection.
Now, there are all sorts of problems with that. Baseball might immediately seize all Dodgers operations the moment Frank files. Baseball might itself be a creditor of the club, and use that status to block the plan's approval. Baseball might lean on the Dodgers' various creditors to reject the plan. And baseball would certainly argue that, under its rules, it has the power to keep Frank from selling the club's TV rights. These would all be fights, and there would be more. For now, I'm just trying to get information out there.
2. What would a bankruptcy mean for Jamie?
From my vantage point, nothing good. In a bankruptcy commenced after the filing of a divorce but before the division of the marital estate's assets, all community property of the marriage is part of either party's potential bankruptcy estate. Put in English: even if Jamie, as most expect, wins a determination that the Dodgers are indeed community property, creditors of the Dodgers--and possibly Frank--would get paid before Jamie sees a dime from the division of community property.
This means the team could be sold and none of the proceeds would be due Jamie until each and every creditor has had its fill. Remember, Judge Gordon has not even conclusively ruled the Dodgers to be community property yet; all he's really done is invalidate the MPA. And Jamie would not become a creditor of Frank or the Dodgers until entry of a judgment declaring she's entitled to half the value of the assets. Basically, Jamie's options are to either prevent Frank from filing for bankruptcy or to have a filing dismissed quickly.
Jamie, according to one of Shaikin's sources, might approve a bankruptcy plan that contemplated a quick sale at auction to the highest bidder. However, Frank's motivations in pursuing bankruptcy protection would be, according to another of Shaikin's sources, focused on the fight to keep control of the Dodgers through the execution of a long-term TV rights deal. Frank has not expressed a willingness to sell the club unless no other options remain. And he's shown no qualms about scorching the earth in pursuit of his goals.
3. Would Jamie be able to stop it if she tried?
One key consideration is the actual identity of the person or entity filing for bankruptcy. There is very little Jamie could do to prevent Frank from filing bankruptcy in his personal capacity. That's unlikely, though, as it would trigger all sorts of bad things for him, both from creditors and baseball. It's far more reasonable to expect that if there is a bankruptcy in this situation, it will be filed by one or more of the entities making up the Dodgers Enterprise.
If you scroll down this page (or click here), you'll see the Dodgers organization flow chart. Everything under TMBLP, including the companies that own the Dodgers and Dodger Stadium, is a single-member limited liability entity. The process for each of those entities to file bankruptcy protection depends on the way it was set up, but it is extraordinarily likely that Frank McCourt has himself the power, on paper, to send any of those entities into bankruptcy.
Jamie has spent the last 18 months, and will perhaps spend the next 18, contending that she is a half-owner of the Dodgers Enterprise, and she would argue here that Frank does not have the unilateral authority to file bankruptcy on behalf of, say, the Dodgers. However, to block such a filing or prevent it from moving forward, she would either need to convince the state court to issue an emergency declaration that she has decision-making power, or the bankruptcy court to dismiss the filing as made in bad faith or so prejudicial to her potential rights as to be inequitable. None of these are easy.
Long story short: Frank has, on paper, the authority to file bankruptcy on the Dodgers' behalf. The long-term effect of a Dodgers bankruptcy seems unfavorable to Jamie. And her avenues to prevent that harm from coming to pass are not especially promising.
4. Can you wrap this up?
Working on it. Tough crowd.
Presuming he is unable to make the May 31 payroll, as has been reported, Frank McCourt may look to seek bankruptcy protection. This might enable him to maintain control of the Dodgers through a sale of the club's TV rights to Fox for nearly two decades and receiving cash and a stake in Prime Ticket in return. If he is unsuccesful in passing that deal through a bankruptcy, Frank would still be in a position to feed the Dodgers Enterprise's creditors before forking over half the couple's net worth to Jamie.
There's a certain symmetry to that: Frank contended all along that Jamie drove the creation of the MPA because she wanted protection from creditors in case the Dodgers failed. Well, here we are, and the Dodgers sure seem to be failing. The club now faces a severe liquidity crisis at least in part because Frank and Jamie McCourt diverted over $100 million to themselves instead of paying down debt or freeing up capital for revenue-generating projects. Having spent the better part of two years breaking up, they might now be in the uncomfortable position of working their way through the club's bankruptcy together.
---
Wednesday, May 4, 2011
Schieffer's role with the Dodgers.
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Working on something for over here that will run today or tomorrow (probably tomorrow at this point). For now, I offered my thoughts on Tom Schieffer's tasks during these first few weeks with the club over at ESPNLosAngeles.com.
Why there, you ask? Because Molly stole the show here yesterday, and I had to at least attempt to respond in kind. Consider yourself warned, Knight.
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Working on something for over here that will run today or tomorrow (probably tomorrow at this point). For now, I offered my thoughts on Tom Schieffer's tasks during these first few weeks with the club over at ESPNLosAngeles.com.
Why there, you ask? Because Molly stole the show here yesterday, and I had to at least attempt to respond in kind. Consider yourself warned, Knight.
---
Tuesday, May 3, 2011
05.03.11 Live Chat
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Join Molly Knight and I (and perhaps more guests to come) for a live chat during Frank McCourt's 3:00 p.m. Pacific appearance on ESPN 710 out of Los Angeles. We'll be getting started a little before 3:00.
Join Molly Knight and I (and perhaps more guests to come) for a live chat during Frank McCourt's 3:00 p.m. Pacific appearance on ESPN 710 out of Los Angeles. We'll be getting started a little before 3:00.
Friday, April 29, 2011
Jamie McCourt moves to block Frank's Fox financing.
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Frank McCourt has been very vocal in recent days, blasting the Commissioner's office for failing to approve a massive extension of the club's TV deal with Fox that would also include an equity position in Prime Ticket. Saying the deal would provide both immediate cash in the neighborhood of $300 million and long-term stability, Frank has expressed frustration that Selig won't green-light a deal, saying yesterday, "I'm ready to sign it. Fox is ready to sign it."
Frank did not say next, "Jamie is ready to sign it." And therein may lie the rub. Shaikin:
We've talked some about Jamie's potential involvement in Dodgers' decisions. In late January, we discussed the automatic restraining orders which take force upon filing for divorce and whether those might cover some or all of the interrelated entities that make up the McCourt Enterprise. At the beginning of March, we hit on the topic again after Jamie reacted strongly to Frank's attempt to pledge the club's future television rights as collateral for a loan from Fox.
So, long story short: there have been abundant signs that Jamie McCourt seemed likely to seek a more active role in protecting the value of the Dodger-related assets. After all, unless Frank can score a court victory, they're half hers. And here she is, apparently unwilling to approve Frank's life-preserver Fox extension. That makes some sense, as the Fox deal both (a) comes with Frank's promise not to use any of the up-front cash to settle the divorce and (b) forecloses on the potential for the Dodgers to start their own TV network.
I doubt that Jamie anticipates actually starting and profiting from such a network. But she's certainly right in thinking that prospective bidders will value the Dodgers very differently depending on the status of the TV rights. Like the acreage around Dodger Stadium, uncommitted TV rights are a very significant value add to the franchise, and encumbering them in any way--either pledging them as security for a loan or selling them long term--could have a negative impact on the value of the Dodgers.
Though this dispute comes in Frank's dealings with the Commissioner's office, the parties' attorneys are set to argue about Jamie's right to financial information in court on May 11. If Jamie is successful, Judge Gordon will order Frank to supply Jamie with enhanced information about the Dodgers' dealings. Should she find something untoward, she would likely seek further judicial intervention, although MLB's installation of Tom Schieffer might obviate the need for any further protection.
Where it gets interesting is the extent to which she may allege improprieties on Frank's part. Over a year ago, in the context of arguing for a higher spousal support award than Frank suggested, Jamie's lawyers told the court:
---
Frank McCourt has been very vocal in recent days, blasting the Commissioner's office for failing to approve a massive extension of the club's TV deal with Fox that would also include an equity position in Prime Ticket. Saying the deal would provide both immediate cash in the neighborhood of $300 million and long-term stability, Frank has expressed frustration that Selig won't green-light a deal, saying yesterday, "I'm ready to sign it. Fox is ready to sign it."
Frank did not say next, "Jamie is ready to sign it." And therein may lie the rub. Shaikin:
One reason Commissioner Bud Selig has not approved a television contract with Fox that would serve as a financial lifeline for Dodgers owner Frank McCourt is that McCourt's ex-wife, Jamie, has not approved the deal, according to two people familiar with the matter.
In correspondence with the commissioner's office, Jamie McCourt asserted her right to a say in the Dodgers' television deals by virtue of her half-ownership of the team, according to a person familiar with the communication.
We've talked some about Jamie's potential involvement in Dodgers' decisions. In late January, we discussed the automatic restraining orders which take force upon filing for divorce and whether those might cover some or all of the interrelated entities that make up the McCourt Enterprise. At the beginning of March, we hit on the topic again after Jamie reacted strongly to Frank's attempt to pledge the club's future television rights as collateral for a loan from Fox.
So, long story short: there have been abundant signs that Jamie McCourt seemed likely to seek a more active role in protecting the value of the Dodger-related assets. After all, unless Frank can score a court victory, they're half hers. And here she is, apparently unwilling to approve Frank's life-preserver Fox extension. That makes some sense, as the Fox deal both (a) comes with Frank's promise not to use any of the up-front cash to settle the divorce and (b) forecloses on the potential for the Dodgers to start their own TV network.
I doubt that Jamie anticipates actually starting and profiting from such a network. But she's certainly right in thinking that prospective bidders will value the Dodgers very differently depending on the status of the TV rights. Like the acreage around Dodger Stadium, uncommitted TV rights are a very significant value add to the franchise, and encumbering them in any way--either pledging them as security for a loan or selling them long term--could have a negative impact on the value of the Dodgers.
Though this dispute comes in Frank's dealings with the Commissioner's office, the parties' attorneys are set to argue about Jamie's right to financial information in court on May 11. If Jamie is successful, Judge Gordon will order Frank to supply Jamie with enhanced information about the Dodgers' dealings. Should she find something untoward, she would likely seek further judicial intervention, although MLB's installation of Tom Schieffer might obviate the need for any further protection.
Where it gets interesting is the extent to which she may allege improprieties on Frank's part. Over a year ago, in the context of arguing for a higher spousal support award than Frank suggested, Jamie's lawyers told the court:
Frank, with the assistance of his top financial advisors, has engaged in creating an elaborate subterfuge, designed to attempt to deceive this Court into believing that his wealth and his actual and potential cash flow . . . have dramatically decreased.The emphasis was in the document itself. If Jamie went down that rabbit hole in the support context, is there any doubt she'll have folks ready to take an eagle-eyed look at the flow of cash in, out, and among the various Dodgers entities when it comes time to divvy up assets? Not in this little corner of the internet, there's not.
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Thursday, April 28, 2011
The heart of the matter.
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The biggest news always seems to break on my busiest days. As you've doubtless seen, Frank McCourt made his most public move yesterday since the divorce trial, decrying Bud Selig's actions as "un-American." There's excellent coverage all over the place: Shaikin's doing his thing, and Craig is too. Gene Maddaus is on the case. You can't avoid Frank McCourt right now if you try.
To sum up, all in the course of the last couple weeks, Frank sought a $30 million personal loan from Fox to cover Dodgers payroll, among other expenses. Selig, apparently ticked off at McCourt's backdoor financing, announced that a trustee would be appointed to oversee Dodgers operations. That turned out to be Tom Schieffer, a former president of the Texas Rangers. Frank McCourt then went on the offensive, traveling to New York City to meet with MLB officials about a shovel-ready TV deal with Fox that would reportedly provide $300 million in cash up front. When baseball didn't accede to McCourt's requests, the embattled (half?) owner of the Dodgers took to the microphone, lashing out at baseball for coming between he and his business.
Last night, in an interview for a piece in the Minneapolis Star Tribune to be run Sunday, I told the paper's Joe Christensen something along these lines: the fans I hear from don't see the Dodgers the way Frank McCourt does, as a business, but as something more personally meaningful. Well, what do I discover this morning other than ESPNLosAngeles.com's Ramona Shelburne nailing it. Talking about Frank's public comments, Shelburne writes:
And that's the entire dilemma in a nutshell. But is that fair?
***
First of all, I will tell you that I know Frank McCourt just a very little bit, in the strange way you get to know someone who is fully aware that you have personally benefited from chronicling the most trying saga of his life. I think Frank McCourt loves baseball. Catch him in the right mood and he'll talk announcers and ballparks, relievers and utility players. He has a sense of history and also a sense of the moment; I think the charge to the playoffs in 2008 might have been the most viscerally enjoyable time of his professional life.
I think Frank McCourt is also a touch more savvy than he is often portrayed to be. He might not be a PR whiz--he, in fact, is not a PR whiz--but he does some little things right. I've seen him recall the names of and ask about the relatives of people he's met only briefly. That's a veteran move.
And I think Frank McCourt is more hurt by this whole drama than he's ever let on. He's got the look of someone who achieved his dreams for only the briefest moment, and then watched the story of his life's collapse on TMZ. It's E!'s True Hollywood Story in real-time. He probably shouldn't own the Dodgers very much longer--both for the team's sake and his own--and he has obviously made some very poor decisions along the way. But if you want Frank McCourt to suffer as he has...I respect your opinion. I just don't share it.
***
Ramona Shelburne is exactly right. There is a very real disconnect between Frank McCourt and Dodgers fans, and it's a gap that just can't be closed. Not now, after everything everyone's been through over the last 18 months. The fight of Frank McCourt's life is to keep his asset, his property, and nothing can be done to alter the perception that the Dodgers, to him, are a business first and an emotional investment second. It might be argued that Frank is emotionally invested in the Dodgers because they are his business, but that will fall on deaf ears.
So is it fair to expect a businessman to see the Dodgers the way we do? Of course it's not. But it's also not fair for one person to own a baseball team and millions of others to struggle to put food on their families' tables. Nothing about this is fair. And nothing about this is simple.
What do we want from the owner of the Los Angeles Dodgers? I think we want money first, and then enough sense to leave baseball to the baseball people. Then we want someone just bursting with giddiness about the remarkable fortune of owning the Los Angeles Dodgers. Both ideally and realistically, that's probably someone from the community. And then I think we want someone who can pull off the impossible trick of coming off as one of us while living a truly different existence.
Frank, of course, couldn't pull off that trick. He couldn't conceal that his vision of the Dodgers is simply not our own. That his existence is nothing like ours. That he has interests and concerns we can't imagine, and also that we know joys and pains of fanhood--and life--that he's never encountered. Frank McCourt became a Dodger fan because he bought the team. We became Dodger fans because we bought tickets. You can't fix facts, and facts trump fairness.
Frank McCourt is doing what the book says he should do: fight to preserve his legal rights in a dogged effort to keep his business. I won't crucify him for it. But I'll again ask: Is the effort worth it?
---
The biggest news always seems to break on my busiest days. As you've doubtless seen, Frank McCourt made his most public move yesterday since the divorce trial, decrying Bud Selig's actions as "un-American." There's excellent coverage all over the place: Shaikin's doing his thing, and Craig is too. Gene Maddaus is on the case. You can't avoid Frank McCourt right now if you try.
To sum up, all in the course of the last couple weeks, Frank sought a $30 million personal loan from Fox to cover Dodgers payroll, among other expenses. Selig, apparently ticked off at McCourt's backdoor financing, announced that a trustee would be appointed to oversee Dodgers operations. That turned out to be Tom Schieffer, a former president of the Texas Rangers. Frank McCourt then went on the offensive, traveling to New York City to meet with MLB officials about a shovel-ready TV deal with Fox that would reportedly provide $300 million in cash up front. When baseball didn't accede to McCourt's requests, the embattled (half?) owner of the Dodgers took to the microphone, lashing out at baseball for coming between he and his business.
Last night, in an interview for a piece in the Minneapolis Star Tribune to be run Sunday, I told the paper's Joe Christensen something along these lines: the fans I hear from don't see the Dodgers the way Frank McCourt does, as a business, but as something more personally meaningful. Well, what do I discover this morning other than ESPNLosAngeles.com's Ramona Shelburne nailing it. Talking about Frank's public comments, Shelburne writes:
For 45 minutes, he spoke with the honesty and passion Dodgers fans have waited seven years to hear. From the heart, without talking points or crisis management consultants, and revealing, after all these years, how he truly sees the Dodgers.
As his business.
His asset.
His property.
He is both entirely right -- from a legal and business perspective -- and entirely wrong, in every way that matters to Dodgers fans and the game of baseball.
And that's the entire dilemma in a nutshell. But is that fair?
***
First of all, I will tell you that I know Frank McCourt just a very little bit, in the strange way you get to know someone who is fully aware that you have personally benefited from chronicling the most trying saga of his life. I think Frank McCourt loves baseball. Catch him in the right mood and he'll talk announcers and ballparks, relievers and utility players. He has a sense of history and also a sense of the moment; I think the charge to the playoffs in 2008 might have been the most viscerally enjoyable time of his professional life.
I think Frank McCourt is also a touch more savvy than he is often portrayed to be. He might not be a PR whiz--he, in fact, is not a PR whiz--but he does some little things right. I've seen him recall the names of and ask about the relatives of people he's met only briefly. That's a veteran move.
And I think Frank McCourt is more hurt by this whole drama than he's ever let on. He's got the look of someone who achieved his dreams for only the briefest moment, and then watched the story of his life's collapse on TMZ. It's E!'s True Hollywood Story in real-time. He probably shouldn't own the Dodgers very much longer--both for the team's sake and his own--and he has obviously made some very poor decisions along the way. But if you want Frank McCourt to suffer as he has...I respect your opinion. I just don't share it.
***
Ramona Shelburne is exactly right. There is a very real disconnect between Frank McCourt and Dodgers fans, and it's a gap that just can't be closed. Not now, after everything everyone's been through over the last 18 months. The fight of Frank McCourt's life is to keep his asset, his property, and nothing can be done to alter the perception that the Dodgers, to him, are a business first and an emotional investment second. It might be argued that Frank is emotionally invested in the Dodgers because they are his business, but that will fall on deaf ears.
So is it fair to expect a businessman to see the Dodgers the way we do? Of course it's not. But it's also not fair for one person to own a baseball team and millions of others to struggle to put food on their families' tables. Nothing about this is fair. And nothing about this is simple.
What do we want from the owner of the Los Angeles Dodgers? I think we want money first, and then enough sense to leave baseball to the baseball people. Then we want someone just bursting with giddiness about the remarkable fortune of owning the Los Angeles Dodgers. Both ideally and realistically, that's probably someone from the community. And then I think we want someone who can pull off the impossible trick of coming off as one of us while living a truly different existence.
Frank, of course, couldn't pull off that trick. He couldn't conceal that his vision of the Dodgers is simply not our own. That his existence is nothing like ours. That he has interests and concerns we can't imagine, and also that we know joys and pains of fanhood--and life--that he's never encountered. Frank McCourt became a Dodger fan because he bought the team. We became Dodger fans because we bought tickets. You can't fix facts, and facts trump fairness.
Frank McCourt is doing what the book says he should do: fight to preserve his legal rights in a dogged effort to keep his business. I won't crucify him for it. But I'll again ask: Is the effort worth it?
---
Monday, April 25, 2011
Tom Schieffer, Dodgers Monitor.
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Today, Major League Baseball announced that it has appointed J. Thomas Schieffer to oversee Dodgers operations during this period of tense relations between baseball and Frank McCourt. Schieffer, a former President of the Texas Rangers, has a great deal of political experience as well, having served as an ambassador to both Australia and Japan under President George W. Bush. From the Commissioner:
Why does that matter? Well, to say one owned the Dodgers used to mean one owned the franchise, the Stadium, the surrounding acreage, et cetera. Under McCourt ownership, however, ownership has been splintered into a small galaxy of interrelated companies. You might recall this chart:
As you can see, things are a touch complicated. The significance of this array is that it's going to be awfully difficult and time-consuming to trace the dealings of and relationships between all these entities. That Schieffer's role extends to monitoring all aspects of Dodgers-related operations suggests the Commissioner's Office wants to keep very close tabs on how cash flows through the McCourt Enterprise.
For weeks, the speculation was that Bud Selig possessed a willingness to allow McCourt ownership to die on the vine. His passive approach apparently discarded once Frank McCourt took a $30 million personal loan to cover payroll, however, the Commissioner now appears intent on having a much better seat for the potential unraveling of the McCourt era in Los Angeles.
Last season was mostly swallowed by the circus surrounding the divorce of Frank and Jamie McCourt. The 2011 season, not even a month old, is itself in grave danger of being eclipsed once again by drama in the owner's box. This time, however, it appears to be Frank McCourt and the Dodgers headed for a breakup. That is, if Commissioner Selig has anything to say about it.
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Today, Major League Baseball announced that it has appointed J. Thomas Schieffer to oversee Dodgers operations during this period of tense relations between baseball and Frank McCourt. Schieffer, a former President of the Texas Rangers, has a great deal of political experience as well, having served as an ambassador to both Australia and Japan under President George W. Bush. From the Commissioner:
We are very fortunate to have someone of Tom Schieffer's stature monitor the operations of the Los Angeles Dodgers on behalf of Major League Baseball. Tom is a distinguished public servant who has represented the nation with excellence and has demonstrated extraordinary leadership throughout his career. The many years that he spent managing the operations of a successful franchise will benefit the Dodgers and Major League Baseball as a whole. I am grateful for Tom's acceptance of this role.Importantly, Schieffer's role will be one of oversight, not control. The whole "takeover" thing? So last week. Bill Shaikin notes that the Commissioner was careful to comment that Schieffer's powers extend to "all of the franchise's related entities," not just the operation of the team itself.
Why does that matter? Well, to say one owned the Dodgers used to mean one owned the franchise, the Stadium, the surrounding acreage, et cetera. Under McCourt ownership, however, ownership has been splintered into a small galaxy of interrelated companies. You might recall this chart:
For weeks, the speculation was that Bud Selig possessed a willingness to allow McCourt ownership to die on the vine. His passive approach apparently discarded once Frank McCourt took a $30 million personal loan to cover payroll, however, the Commissioner now appears intent on having a much better seat for the potential unraveling of the McCourt era in Los Angeles.
Last season was mostly swallowed by the circus surrounding the divorce of Frank and Jamie McCourt. The 2011 season, not even a month old, is itself in grave danger of being eclipsed once again by drama in the owner's box. This time, however, it appears to be Frank McCourt and the Dodgers headed for a breakup. That is, if Commissioner Selig has anything to say about it.
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