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SBD/July 19, 2011/Franchises
Dodgers Object To MLB's Document Production, Proposed Interim Financing
Published July 19, 2011
After a frenetic day yesterday of legal jockeying that saw Dodgers Owner Frank McCourt likening MLB Commissioner Bud Selig to "the devil," the club last night said MLB's deposition and document production on its proposed interim financing were "insufficient" and "not conducted in compliance" with prior discovery rulings in the ongoing bankruptcy case. In the club's latest filing in U.S. Bankruptcy Court for the District of Delaware, the Dodgers said testimony from MLB Exec VP/Administration & CIO John McHale Jr. was such that the club has not been able to fully vet the league's bid to fund the team during bankruptcy. As a result, the club has asked the court to preclude MLB from presenting evidence in support of its interim financing bid. "The failure of MLB to provide an adequate representative to testify to these issues … has resulted in significant prejudice to the [Dodgers] as they prepare for the contested hearing." The court tomorrow will hold a hearing in Wilmington to rule on rival interim financing bids from MLB and the Dodgers in consort with HighBridge Capital Management (Eric Fisher, SportsBusiness Journal). McCourt’s attorneys in the filings said that “the fine print of the proposed MLB financing includes terms tilted toward triggering defaults that would enable the league to take over the Dodgers.” The attorneys called MLB’s proposed loan “nothing but a pretext … for the commissioner’s ulterior motive of seizing control of the (Dodgers) and ousting Mr. McCourt.” One source said that the league “is willing to consider relaxing some of those terms.” Dodgers attorney Bruce Bennett said that Selig “should not be allowed to provide the interim financing because he is not a disinterested lender -- and, in fact, is only in the lending business now for the purpose of shoving out McCourt.” But MLB Exec VP/Labor Relations & HR Rob Manfred said that the Dodgers “have made no effort to work with the league to provide a better loan to the team.” Manfred: “We’re disappointed the Dodgers have not made an offer to get an agreement on financing that is clearly better” (L.A. TIMES, 7/19).
HEATING UP: Several motions and objections were filed yesterday in the ongoing Dodgers bankruptcy case, serving as a run-up to tomorrow's hearing in Wilmington. Most notably, McCourt angrily responded to MLB's objection last week of the Highbridge bid, saying that Selig is "hostile to both the interests of [me] and the Dodgers," and as a result is an unfit bidder. Selig has "an eye jaundiced by irrational animosity toward Mr. McCourt," the filing reads in part. McCourt in the filing continued, "It is well within a debtor's business judgment to decline such a 'deal with the devil.'" McCourt also challenged MLB's previously redacted claim that he had taken $180M out of the team for personal distributions, saying the number is less than "$30 million during the seven-plus year tenure as owner." In doing so, he said "most of the payments about which the Commissioner complains relate to the real property assets -- and not to the Dodgers and the club assets." And the filing called MLB's prior assertion that McCourt has a "substantial personal stake" in the Highbridge bid being approved "patently false.” The Dodgers, according to the filing, intend to exit bankruptcy by the end of ‘11, and want to use a scheduled Aug. 16 hearing in Wilmington to set new guidelines for the sale of the club's cable TV rights. Meanwhile, the committee representing unsecured creditors in the case yesterday filed a limited objection to McCourt's proposed interim financing plan. The panel, just formed last week and including the MLBPA and family of critically injured MLB Giants fan Bryan Stow, among others, said the rival interim financing bid from MLB is "economically superior." But it added "the committee understands [the Dodgers'] concerns with the proposed [MLB financing] given the tense relationship with the parties.” The panel requested several modifications be made to the Dodgers' interim financing bid from Highbridge, including the removal of $10M in fees it called "excessive" and the removal of team assets as collateral to secure the loan. MLB yesterday also filed a supplemental objection to McCourt's interim financing bid from Highbridge (Fisher).
WAITING IN THE WINGS: The HOLLYWOOD REPORTER’s Andy Lewis reports Fox Sports “stands to be the big collateral loser in the bitter divorce between Frank and Jamie McCourt, which morphed into a battle" between Frank and MLB over ownership of the Dodgers. Fox in April signed a “sweetheart deal for Dodgers TV rights until 2027," which Selig has since rejected. If the bankruptcy court judge forces the Dodgers to auction, the move “could be a windfall for the Dodgers but a big blow to Fox Sports’ lucrative dominance of the L.A. cable sports market.” Fox rivals “are hovering -- Time Warner in particular, having lured the Lakers from Fox by offering them joint ownership of two channels in a deal starting in 2012.” A competitive auction “is bad for Fox Sports." At best, Fox Sports "would be forced to pay higher rights fees to keep the Dodgers.” At worst, the network “could lose the rights.” That result would leave “a gaping hole in Prime Ticket’s summer lineup at the same time a formidable new challenger has been created, dramatically reducing the value of the company’s most valuable RSN” (HOLLYWOOD REPORTER, 7/22 issue).