LA Dodgers file for bankruptcy protection
LOS ANGELES, CA
The Los Angeles Dodgers filed for bankruptcy protection in a
Delaware court Monday, blaming Major League Baseball for refusing
to approve a multibillion-dollar TV deal that owner Frank McCourt
was counting on to keep the troubled franchise afloat.
McCourt, upset that baseball Commissioner Bud Selig rejected the
proposed TV deal last week, hopes a federal judge will approve $150
million in financing to be used for daily operations, which would
give him more time to seek a more favorable media contract. A
hearing is set for Tuesday.
"The action taken today by Mr. McCourt does nothing but inflict
further harm to this historic franchise," Selig said in a
statement.
The team is bleeding red ink instead of Dodger blue, with former
players filing millions in claims against the team. Even beloved
Hall of Fame announcer Vin Scully is owed more than $150,000 as
part of his contract, court documents show.
The filing by a cash-starved McCourt comes just days before he
was expected to miss a team payroll on Thursday and possibly be
confronted with an MLB takeover.
Legal observers expect MLB to contest McCourt's request for
filing bankruptcy, arguing the dispute should remain within the
confines of baseball and that the league's constitution allows
Selig to take control of a team that seeks Chapter 11 protection.
The main issue is whether "the bankruptcy court maintains
control of the proceedings or acquiesce to baseball," said Edward
Ristaino, who chairs the sports practice at the law firm Akerman
Senterfitt.
"For somebody who grew up as a Dodger fan since he was 6 in
Brooklyn, this makes me very, very sad," said Bob Daley, the
Dodgers' managing partner when Rupert Murdoch's Fox Corp. sold the
team to McCourt in 2004.
The Boston-accented real estate developer bought the team in a
highly leveraged $430 million deal that was the second-highest for
a baseball team at the time.
He became just the fourth owner in franchise history, and the
sale marked the return of the team to family ownership, although
the McCourt clan has been nothing like the O'Malleys.
The O'Malleys owned the Dodgers or a stake in them for more than
50 years, an old-fashioned tenure of stability and tradition. Any
problems were kept in-house, and employees were treated like
family.
The O'Malley family's business was baseball. The McCourt
family's business has become everybody's business.
Two years ago, McCourt and his wife and former team CEO Jamie
McCourt decided to divorce, prompting a tawdry fight over who owns
the team.
Their court filings revealed a lifestyle of excess, extreme even
by the standards of LA's super-rich: multiple lavish homes, private
security, country club memberships, even a six-figure hair stylist
on call for the couple.
Daley rues the day the team was sold to McCourt.
"Fox, myself, and MLB made a horrible mistake in not doing the
proper due diligence on Frank McCourt," he said. "I helped get
him approved and for my piece, I feel very bad about it."
In court documents, team Vice Chairman Jeff Ingram cited a
significant drop in attendance, contributing about 10 percent of
Dodger revenues to the league's sharing program last year, and
paying about $22 million in deferred compensation as reasons for
filing bankruptcy.
"To date, LAD has remained current in its obligations," Ingram
wrote. "However, LAD is now on the verge of running out of cash,
the results of a perfect storm of events."
McCourt has taken out loans to stay afloat this season but his
mounting financial problems were expected to balloon this week,
when he owed tens of millions of dollars to meet payroll and other
obligations.
About $20 million is slated for current and deferred
compensation by Thursday, while more than $18 million is required
as a reserve to prefund money to be paid to players in 2012 under
terms of the collective bargaining agreement, court documents show.
The bankruptcy filing also noted a $67 million loan taken out
against the parking lots at Dodger Stadium was set to mature
Thursday. It was expected McCourt was going to refinance the loan.
"He's clearly running very low on options right now," said
David Carter, executive director of USC Sports Business Institute.
"What seems to be the case is a high-stakes chess game between
Frank McCourt and MLB, and he's running out of pieces. This is one
of the uglier weeks in Dodger history."
That's quite a contrast from the days of the O'Malleys.
Peter O'Malley's father, Walter, was the team's lawyer when he
gained a controlling interest in the Brooklyn Dodgers in 1950, the
same year Scully joined the organization.
The team, a fabled fixture of New York's borough of Brooklyn
since the 19th century, broke baseball's color barrier when it
signed Jackie Robinson as the first black major league player in
1947.
The Dodgers delighted their New York fans by winning their first
World Series in 1955, then broke their hearts three years later by
moving to Los Angeles, an act never entirely forgiven.
In Los Angeles, the winning ways continued, with World Series
championships in 1959, '63, '65, '81 and '88, and memorable
performances by Hall of Famers Don Drysdale and Sandy Koufax, who
dominated hitters like few pitchers have before or since.
The O'Malley family sold the Dodgers in 1998, when News Corp.
bought the team, signaling the beginning of changing times for the
franchise.
Since then, employees have churned through the club as quickly
as wins and losses piled up.
In April, MLB took the extraordinary step of assuming control of
the troubled franchise. Former Texas Rangers President Tom
Schieffer was appointed to monitor the team on behalf of Selig, who
said he took the action because he was concerned about the team's
finances and how the Dodgers are being run.
Among the 40 largest unsecured claims, totaling about $75
million, are former Dodgers slugger Manny Ramirez at nearly $21
million; Andruw Jones at $11 million; pitcher Hiroki Kuroda at $4.4
million; and the Chicago White Sox, which share a spring training
facility with the Dodgers in Arizona, at $3.5 million.
McCourt has defended his stewardship, saying he had made it
profitable and successful. He also said the Dodgers have tried for
almost a year to get Selig to approve the Fox transaction, which
would have provided McCourt with $385 million up front and was
vital to a binding settlement reached this month by him and Jamie
McCourt.
"He's turned his back on the Dodgers, treated us differently,
and forced us to the point we find ourselves in today," McCourt's
statement said. He was not made available for further comment
Monday.
"He's been an embarrassment to this franchise," Daley said.
"The sooner he gets the hell out of town, the better off we'll all
be as Dodger fans."