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SBD/June 28, 2011/FranchisesPrint All
MLB plans to tell a Delaware federal bankruptcy court today it is prepared to provide alternative financing to the Dodgers, sources said. The Dodgers and four related entities filed for Chapter 11 bankruptcy protection yesterday, and asked the court to approve a high interest rate $150M loan from a hedge fund in order to allow the team to meet payroll Thursday. But MLB, which the Dodgers accuse of forcing the bankruptcy move by turning down a team deal with Fox last week, is planning to offer its own emergency, or debtor in possession (DIP), financing, the sources said. The move is not unprecedented. Last year MLB provided DIP financing for the Rangers during their bankruptcy, though the amount, $21.5M, is far less than what the Dodgers have arranged through HighBridge Capital, a unit of JPMorgan Chase. The HighBridge loan would charge at least 10% and includes a $4.5M commitment fee. By contrast, MLB charged the Rangers 1.5%, though that was down from 5.75% the league originally offered before lowering the rate in response to a competing DIP offer from the club’s lenders. The Dodgers need nearly $40M by the end of the week to meet payroll and fund a deferred compensation reserve. It is possible MLB would offer less than HighBridge, arguing not as much is needed and the league can offer it at significantly lower rates. Meanwhile, Jamie McCourt, whose divorce from Dodgers Owner Frank McCourt triggered the team’s financial situation, will have a legal representative in the courtroom today, her spokesperson said. Her lawyer, David Boies, issued a statement yesterday blasting the bankruptcy filing. Jamie had agreed to terms of a divorce that anticipated MLB approving the Fox deal. When MLB turned down that deal, arguing it was undervalued and too much money directly flowed to Frank, the divorce deal disappeared as well. She would like to see the team sold, something her husband has fiercely resisted (Daniel Kaplan, SportsBusiness Journal).
UNCERTAINTY REIGNS: In L.A., Bill Shaikin notes the bankruptcy proceedings mean the Dodgers "could end a third consecutive season with no resolution to an ownership issue clouded by" the McCourt's divorce. The "specter of additional months -- or years -- of court proceedings comes as the Dodgers have sunk toward the bottom of the standings, playing many nights in front of a half-empty stadium," while McCourt fights with MLB Commissioner Bud Selig "over what the future of what was once the marquee franchise in the National League." But the statement in which McCourt announced the filing indicated bankruptcy protection will cause "no disruption to the Dodgers' day-to-day business, the baseball team or to the Dodger fans." Meanwhile, Shaikin notes MLB's constitution "authorizes Selig to revoke the franchise rights of an owner who files for bankruptcy, a step he hasn't taken but has not ruled out within the near future." The "foundation of McCourt's case rests upon whether the league can set its own rules -- for debt guidelines, for the approval of television contracts, or anything else -- without being subject to court oversight." The filing indicated that the Dodgers "intend to hold a 'competitive sale process' to secure a new cable television contract within 180 days." The Dodger's current contract with Fox "extends through 2013 and forbids the team to negotiate with any other entity before Nov. 30, 2012," but the team has "asked the bankruptcy court to consider an auction." Shaikin notes Time Warner Cable's "new Lakers channel would be a likely bidder, which could force Fox to choose between joining MLB in opposing an auction and risking the loss of a valuable television property" (L.A. TIMES, 6/28). USA TODAY's Bob Nightengale cites three sources as saying that Fox's proposed deal for Dodgers rights -- "worth $3 billion according to McCourt and about $2 billion according to MLB -- is no longer on the table." Fox "does not want to interfere while legal proceedings are pending" (USA TODAY, 6/28).
WHO'S OWED WHAT: In N.Y., Katie Thomas cites court documents as indicating that the Dodgers' "largest creditor" is former MLBer Manny Ramirez, who played with the team from '08-10 and is owed "nearly $21 million." Yankees RF Andruw Jones, who played for the Dodgers in '08, is owed 11M, and Dodgers announcer Vin Scully is owed $153,000 (N.Y. TIMES, 6/28). ESPN's Bomani Jones said Scully is a "saint, a man among men, because I’m not coming to work every day if they owe me a $150,000.” Dallas Morning News columnist Tim Cowlishaw: “Vin Scully needs to get paid. That’s the Dodgers right there” (“Around The Horn,” ESPN, 6/27). In L.A., Hoffarth & Orlov note the Dodgers also owe the city of L.A. $240,563, and L.A. Controller Wendy Greuel said that she "will try to make sure the city takes action to ensure payment of the debt." Greuel: "As a lifelong Dodger fan, I've always wanted to be in the same company as Vin Scully. I just never thought it would be in a bankruptcy filing" (L.A. DAILY NEWS, 6/28). The following lists the Dodgers' 10 largest creditors (CNBC.com, 6/27).
CREDITORAMOUNT Former MLBer Manny Ramirez$20,992,086 Yankees RF Andruw Jones$11,075,000 Dodgers P Hiroki Kuroda$4,483,516 Dodgers SS Rafael Furcal$3,725,275 White Sox$3,500,000 Dodgers P Ted Lilly$3,423,077 Dodgers P Zach Lee$3,400,000 Former MLBer Kaz Ishii$3,300,000 Dodgers 3B Juan Uribe$3,241,758 Dodgers RF Matt Guerrier$3,090,659
REPRESENTATION FOR BOTH SIDES: MLB has hired one of the top bankruptcy firms in the country, White & Case, to represent the league in the Dodgers bankruptcy. MLB is very familiar with White & Case, which represented the winning bidders in the Rangers bankruptcy auction last year. The two lawyers who handled that case will also represent MLB, Tom Lauria and Glenn Kurtz. MLB also hired Proskauer Rose. Both forms notified the Delaware bankruptcy court this morning of their roles. MLB’s counsel in the Rangers process, the law firm Paul Weiss, thus far has not filed an appearance. The MLBPA also filed its intent to be represented in the Dodgers process, stating in the filing this morning it is a creditor. The American Federation of Television and Radio Artists also notified the court it would be represented in the process, saying it too is a creditor (Kaplan). Dewey & LeBoeuf LLP bankruptcy partner Bruce Bennett is "leading a team from the firm advising the Dodgers in their Chapter 11 case" (AMLAWDAILY.com, 6/27).
MLB KEEPS WATCHFUL EYE: YAHOO SPORTS' Tim Brown reported the Dodgers moments after filing for bankruptcy yesterday "notified Major League Baseball's in-house monitors -- Tom Schieffer and John Allen -- that they no longer had the authority to oversee the club's day-to-day business operations." Neither Schieffer nor Allen "reported to Dodger Stadium," as instead both "attended to Dodgers business from the offices of MLB's Los Angeles-based law firm" (SPORTS.YAHOO.com, 6/27). The GLOBE & MAIL's Jeff Blair writes there is a "sense of haste to resolving the Dodgers' matters" for MLB. Commissioner's office sources said that MLB is "concerned that once a new NFL collective agreement is reached, it will only be a few seasons before the NFL puts a team back in L.A., an already-crowded sports market." Additionally, next year marks the 50th anniversary of Dodger Stadium, which is "something of a faded gem." The ballpark, the "third-oldest facility in baseball," has "20,000 more in capacity than Fenway and 15,000 more than Wrigley -- and that's a bad combination for ownership unable to make improvements." Blair notes the McCourts "long ago shelved a planned $500-million renovation to the stadium" (GLOBE & MAIL, 6/28).
BY ANY MEANS NECESSARY: In L.A., Wharton, Dolan & Williams note McCourt's "gambit is practically unheard of in American sports history." While pro teams "have not exactly been strangers to Chapter 11 in recent years, owners have almost never sought relief against the wishes of their parent leagues." Loyola Law School professor Dan Schechter: "If you think you can fly in the face of the MLB, you'd better be sure you are right, because they have the only game in town." The Dodgers, as the debtor, "get first crack at drawing up a plan for reorganization," but experts said that MLB is "likely to argue that McCourt has mismanaged the organization and shouldn't be given bankruptcy protections" (L.A. TIMES, 6/28). An L.A. TIMES editorial states, "We're hardly in a position to deride bankruptcy protection ... but McCourt's use of it suggests his desperation in his increasingly shrill campaign to keep the team he bought in 2004." McCourt was "approaching a day of reckoning -- the end-of-the-month team payroll -- and Selig's refusal to approve a long-term television deal with Fox meant that money he'd counted on wasn't there." The editorial: "So McCourt threw a wrench in the machine. ... That may work, but it's a sad moment in the team's history" (L.A. TIMES, 6/28).
The end of Frank McCourt's tenure as Dodgers owner is not as near "as it was before" he filed for bankruptcy yesterday, as a "lot of people thought Thursday was going to be the end game" if reports were accurate that he would be unable to make the team's payroll, according to MLB Network's Tom Verducci. MLB was "expecting he would do something like this." Verducci: "But the thinking was that if he didn’t get money before Thursday, then that was it and baseball would go in and seize. Obviously now that’s been postponed, you’re probably looking at a much longer court case, or now in the hands of lawyers for quite some time, rather than getting an end on Thursday” ("MLB Tonight," MLB Network, 6/27). CNBC's Darren Rovell said, "If it goes into bankruptcy, as it has, (MLB) doesn’t have the same amount of control as they had before” (“Street Signs,” CNBC, 6/27). ESPN's Jim Rome said McCourt is "not backing down." Rome: "Never mind that nobody here wants him around, never mind that this whole town is freaking out right now over what he’s done to that team.” Boston Globe columnist Dan Shaughnessy: "He’s going to try to tie Bud (Selig) up so they can’t force him to sell the team. This is going to be a big war over whether Bud can make them sell the team" (“Jim Rome Is Burning,” ESPN, 6/27). CSNBayArea.com’s Ray Ratto said McCourt is “turning the Dodgers into a poison pill so that it’s going to be extraordinarily difficult to get him out." Ratto: "This is him basically tightening as many screws as he can to get as much money out of it as he can before he’s thrown out, because you know he’s going to get thrown out” ("Chronicle Live," Comcast SportsNet Bay Area, 6/27).
NOT ACCEPTING BLAME HIMSELF: SPORTING NEWS' Anthony Witrado notes McCourt blames Selig "for this latest and most hideous blemish," but among "several things wrong with that statement is that McCourt assumes absolutely zero responsibility for the team's rapid decline." McCourt "conveniently ignores the hand he had in this debacle, a hand that helped purchase posh homes, paid for thousands upon thousands of dollars worth of haircuts and extended a six-figure salary for a spiritual healer to send 'positive energy' to the team through his TV set as he watched games." For the Dodgers, yesterday's bankruptcy filing was the "most embarrassing moment in a season loaded with them." Witrado: "A change in ownership is clearly necessary. There's no way around that. ... No matter who gets control of the Dodgers, it would be almost impossible for them to be any worse than McCourt" (SPORTING NEWS TODAY, 6/28). ESPN L.A.'s Ramona Shelburne wrote, "The Dodgers aren't bankrupt; Frank McCourt is. The Dodgers are a profitable franchise." More importantly, the Dodgers "are bigger than Frank McCourt." They are a "brand built by decades of great players, managers, executives and owners," a team "with a storied history, having created memories a judge can never divide up." Shelburne: "I've never been able to figure out whether McCourt just doesn't get that or whether he does and simply doesn't care" (ESPNLA.com, 6/27). In L.A., Bill Plaschke writes, "The Dodgers are not broke. The Dodgers are bigger than broke" (L.A. TIMES, 6/28).
KIND OF BLUE: The bankruptcy filing has drawn plenty of reaction throughout the sports world and beyond. Shaughnessy wrote for SI.com under the header, "McCourt's Ownership Of Dodgers Was A Disaster From The Start." In his seven years owning the team, McCourt "turned the Dodgers into a major league joke" (SI.com, 6/27). In L.A., Tom Hoffarth writes, "In a moment that ranks among the most embarrassing in the history of Major League Baseball, the destitute, defaulting, defrauded Dodgers have gone into disaster mode" (L.A. DAILY NEWS, 6/28). ESPN.com's Jayson Stark wrote, "The thought of this team ... in bankruptcy court was once an unthinkable embarrassment. But we're long past that stage. Now this twist in the plot line fits right into the pitiful descent of the franchise in the Frank McCourt era" (ESPN.com, 6/27). The WALL STREET JOURNAL's Matthew Futterman writes, "The Chapter 11 filing is a dark moment for one of baseball's most important franchises" (WALL STREET JOURNAL, 6/28). In N.Y., Mark DeCambre: "The Chapter 11 move tarnishes the image of one of the most valuable sports franchises" (N.Y. POST, 6/28). CBS News' Scott Pelley said, "This was a humiliating day for one of the proudest franchises in sports” ("Evening News," CBS, 6/27). NBC News' Brian Williams said the bankruptcy filing is a “sad note in the world of sports” and is “just the latest awful chapter for the Dodgers” (“Nightly News,” NBC, 6/27). CNBC’s Sue Herera: “It was a dark day for one of baseball’s most storied franchises” (“Closing Bell With Maria Bartiromo,” CNBC, 6/27). ESPN MLB analyst and former Dodgers P Orel Hershiser said, "It's very hard to watch, not only for Dodgers fans but also for all of Major League Baseball. When you see MLB have to go in and help them out and kind of steer the organization, that's something you never would have thought of seeing when, say, the O'Malleys owned the team. Or when Fox owned the team. It's sad, that's for sure" (SPORTS.YAHOO.com, 6/27).
Chicago businessman Matthew Hulsizer has “pulled his bid and no longer wants to buy” the Coyotes, according Mike Sunnucks of the PHOENIX BUSINESS JOURNAL. Sources late last week said that the City of Glendale was “talking to Hulsizer and two other potential owners: Chicago Bulls and White Sox owner Jerry Reinsdorf and another unnamed group.” Glendale approved a $197M bond and arena management deal last year “to help Hulsizer buy the team,” but that deal “never came to fruition because legal opposition to the bonds from the Goldwater Institute scared [away] bond investors.” There were “efforts from the Hulsizer group and others to reconstitute a Coyotes sale with options including lower bond amounts, but that effort could not move forward fast enough.” A source said that Hulsizer is “still interested in buying” another NHL franchise (BIZJOURNALS.com, 6/27). Glendale Mayor Elaine Scruggs said that Hulsizer “called council members early last week to emphasize his commitment and tell them he would abandon his deal if negotiations were opened to others.” A source said that Hulsizer “pulled out later in the week as the city invited other buyers to the negotiating table.” NHL Deputy Commissioner Bill Daly said Glendale will pursue another deal "with one or more other potential purchasers" (ARIZONA REPUBLIC, 6/28). Daly in an e-mail said, “We do not view this as a step backwards in the process. The situation has been moving in this direction for quite some time now” (AP, 6/27).
POTENTIAL SUITORS: ESPN.com’s Scott Burnside cited a source as saying that Hulsizer’s withdrawal “doesn't necessarily jeopardize the Coyotes' prospects and that there remains optimism a new owner will be in place by the end of August.” Still, multiple sources said that they “don't believe Reinsdorf will be interested in buying the team without significant givebacks from the City of Glendale” (ESPN.com, 6/27). A source said that if Reinsdorf is “back in the picture, it is unlikely he will be willing to put up any more of his own money than Hulsizer was” (GLOBE & MAIL, 6/28). The GLOBE & MAIL’s Brian Miller noted the NHL is “left with the prospect of operating the franchise and sharing its losses among the other owners for a lot longer than hockey’s brain trust had planned.” If they “hurry and call Jim Balsillie before RIM’s stock price falls any further, he may still be able to scrape up enough cash to buy the moribund team and move it to an actual hockey market” (GLOBESPORTS.com, 6/27).
The Tigers "figure to win a 2011 attendance race they were consigned to lose in the early laps,” according to Lynn Henning of the DETROIT NEWS. A rainy spring “left the Tigers playing catch-up at the box office, where they are down an average of 1,289 per game from 2010." However, the club has sold “more than 2 million tickets, a 5.5 percent increase from 2010 with the same number of home games remaining, 42.” The team is now “sixth in the American League in attendance.” Last weekend’s series against the D’Backs “drew more than 120,000” fans, and the Tigers “are expected to match or exceed their 28,322 average attendance figure for 2011 during this week’s remaining home games against the Mets and Giants.” Henning notes warm weather and a first-place team “have combined during June to spin turnstiles at Comerica Park and put the club in shape to beat last year’s season attendance of 2.46 million.” Mid-June’s “30,000-plus crowds for the Indians-Tigers series were all but confirmation of how weather and a playoff contender tend to push customers to Comerica.” Tigers President, CEO & GM Dave Dombrowski said, “It was an unfortunate couple of months, weather wise. … When you wake up in the morning and it’s freezing cold, or raining, people don’t generally buy tickets. On days where we’ve had nice weather, people wake up and decide they’re going to a ball game.” The Tigers are “pegged to be in the thick of a playoff chase until the regular season’s final days.” Henning writes in such a scenario, “September’s crowds likely would remain heavy at a point they typically wane, which would please a Tigers business office aching to compensate for the team’s April-May headaches.” In addition to attendance figures, Tigers’ TV ratings “have improved in June.” The club has a “7.1 Nielsen rating during June and a 6.1 rating overall compared with a 6.0 rating at the same time in 2010” (DETROIT NEWS, 6/28).
UP BY THE BAY: In San Jose, Daniel Brown notes even after “three consecutive sellouts against the Giants, the A’s rank 27th in the majors in home attendance” with an average of 19,794 per game. Still, the team's attendance is “up 12 percent from last year.” A’s VP/Marketing & Sales Jim Leahey said that the club “has gained momentum with a more practical approach: bargain tickets.” Seats are “available for as low as $2 every Wednesday as part of a promotion sponsored” by Bay Area Rapid Transit. Additionally, fans can get “upper-deck seats for $12 every game, a ticket that comes with a $6 voucher for food or merchandise.” Leahey: “We’re emphasizing value” (SAN JOSE MERCURY NEWS, 6/28).
NBA.com’s David Aldridge reported the sale of the Hawks is “close to being completed, though it won't be finalized in time” for a vote by the NBA BOG at its meeting today in Dallas. The sale price is “in the neighborhood of $300 million, including debt on the team.” A source said that there is “a single, and up to now, anonymous buyer.” The source added that the Atlanta Spirit is “expected to remain on in a minority ownership capacity.” A source said that another group “led by the founders of the Outback Steakhouse chain in Florida also put in a bid on the team," but it is “unclear how much they put up or if they were ever seriously considered” (NBA.com, 6/27).
STAR SEARCH: In Dallas, Mike Heika reported prospective Stars Owner Tom Gaglardi has “had his exclusive negotiating window extended beyond 30 days and he could actually be beyond 60 days right now in the negotiating process.” Sources said that “things are moving forward, but that it is a tough negotiation.” Once Gaglardi's offer is approved by the team’s lenders and the NHL, a “hearing in bankruptcy court can be scheduled.” Heika noted there “could be a new owner in place before the start of the next season” (DALLASNEWS.com, 6/27).
RUBIO REPERCUSSIONS: In St. Paul, Charley Walters notes the T’Wolves signing of G Ricky Rubio and his subsequent appearance at Target Center last week “resulted in sales of almost 200 replica No. 9 Wolves jerseys at $65 each.” The team said that it has “sold about 540 full season tickets” since signing Rubio, bringing its “total full season-ticket equivalent to about 7,100.” Many of the new season-ticket purchases “were part of a $9-per-game upper-level-seat promotion that runs through Friday” (ST. PAUL PIONEER PRESS, 6/28).
FLYING HIGH: True North Sports & Entertainment Owner Mark Chipman on Friday during the NHL Entry Draft revealed that Winnipeg's NHL franchise will be named the Jets, and a Winnipeg Free Press editorial notes Chipman “showed the city that he is not just a successful Winnipeg businessman, but that he is a true Winnipegger as well, someone with a sense of the city’s history and identity and, perhaps most importantly, its people.” The editorial: “There was no question that the team would be welcome here no matter what it was called … but the frenzy Friday night at the MTS Centre and the gossip and good-feelings across Winnipeg on the weekend was a kind of fairy-tale ending to a dream that Winnipeggers have hung on to for 15 years, that the Jets would come back” (WINNIPEG FREE PRESS, 6/28).