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Documents Show McCourt Has Taken The Dodgers Into Deep Debt
Published September 2, 2010
|Accountants Says McCourts Would Only Get
10 Cents On The Dollar If Dodgers Sold Today
Since buying the Dodgers for $430M in '04, Frank McCourt has "so heavily leveraged the team -- $433 million in debt as of last year -- that he has struggled to find additional financing," according to Shaikin & Reckard of the L.A. TIMES. The debt load has "limited how the Dodgers can pay their players and could affect the team's ability to sign talent." Documents filed in his ongoing divorce case with his estranged wife, Jamie, reveal that Frank was "turned down at least three times -- by Citibank, by a Chinese investment group and by a Southern California infomercial king -- in trying to secure additional financing last year." The documents also show that under McCourt ownership, the Dodgers' revenue has "nearly doubled -- from $156 million in 2003 to $286 million last year." Raman Sain, a Principal at accounting firm Holthouse Carlin & Van Trigt, calculated that the Dodgers had $29M in "free cash before debt service last year and said virtually all of it went toward interest payments, hampering the team's ability to acquire players." In response, McCourt spokesperson Steve Sugerman said in a statement, "There's a commitment to winning, and that continues." HCVT concluded after its analysis that if the Dodgers "were sold today and the McCourts were to split the proceeds, the debt and tax burdens would be so great that each of the McCourts might walk away with about 10 cents on the dollar." If Frank McCourt retains control, however, the Dodgers "could get an immediate cash infusion from Fox Sports." The Dodgers' TV deal with Fox Sports expires in '13, but sources indicated that McCourt has "discussed a long-term extension with Fox, in which he would abandon the plan for a Dodgers channel in exchange for a front-loaded deal that could significantly increase the Dodgers' annual revenue from television rights" (L.A. TIMES, 9/2).
BLUE MAN GROUP: The L.A. TIMES' Shaikin & Reckard report in his search for additional investment, Frank McCourt offered to Guthy-Renker co-Founder Bill Guthy an "array of enticements: game tickets, preferred parking, employee discounts on team merchandise, invitations to news conferences" and a Championship Ring if the team wins the World Series. McCourt proposed a deal in which he "would receive $25 million right away," and then would have "five years to either pay the money back, with interest, or convert the loan into a tiny share of team ownership." Guthy "rejected McCourt's overtures." McCourt in a court deposition said Guthy told him he would prefer "less risky investments" (L.A. TIMES, 9/2).
ON THE STAND: In L.A., Hall & Shaikin report Frank McCourt took the stand again yesterday, revealing that he "planned to substantially cut the Dodgers' player payroll during his first two years of ownership in order to help restore the team's profitability." Frank also testified that he was "willing in 2008 to consider a new legal agreement that would have made Jamie a co-owner of the team." David Boies, one of Jamie McCourt's attorneys, presented additional evidence that "Frank considered Jamie a partner in the Dodgers, including two bank loan applications listing her as an owner." Regarding the couple's purchase of the Dodgers, Boies asked Frank if Jamie was a "key member of the acquisition team." Frank said, "Yes, sir, she was." Hall & Shaikin note during his testimony, Frank "spoke in a voice so soft he could sometimes barely be heard." He was "polite and unflinching under hours of questioning." But he "treated most every question on the issue of the marital property agreement like a hot potato that he couldn't bear to bite" (L.A. TIMES, 9/2). Also in L.A., T.J. Simers writes, "The media, who haven't spent a lot of time being put off by McCourt, think he appears nervous. But I'm not sure McCourt has ever appeared comfortable, his blinking eyes, stiff demeanor and jaw flexing exercises appearing when all he has to say is 'hi'" (L.A. TIMES, 9/2).
COURT OF PUBLIC OPINION: L.A. Times columnist Bill Plaschke said "fans are starting to stay away from the stadium in droves," and they are "absolutely upset and sick of the McCourts." Plaschke: "People, frankly, wouldn't even give a darn except because of all the money the McCourts are spending on their lavish lifestyle, which in turn leads to these lavish lawyers and all this divorce stuff, they haven't been able to buy a relief (or starting) pitcher. … The fans are really down on the McCourts." ESPN's Buster Olney added, "Baseball wants the McCourts to sell this team. I had one high-ranking executive say to me the Dodgers right now are our biggest embarrassment and we're hoping this changes very quickly." Fox Sports' Ken Rosenthal: "This whole situation is extremely embarrassing to the sport" ("Outside The Lines," ESPN, 9/1).