MLB announced it will take over the business and day-to-day operations of the Dodgers, stripping owner Frank McCourt of financial control of the team and representing by far the league's boldest step to date addressing an ugly divorce and debt-fueled saga with the club that has extended for nearly two years. MLB intends to appoint a designated day-to-day representative for the club in the next few days and continue its investigation of the finances of the Dodgers and McCourt, who recently took out a $30M loan from Fox to meet his initial payroll obligations to players for the '11 season. "I have taken this action because of my deep concerns regarding the finances and operations of the Dodgers and to protect the interests of the club, its great fans and all of Major League Baseball," said MLB Commissioner Bud Selig. "We owe it to their legion of loyal fans to ensure that this club is operated properly now and will be guided appropriately in the future." MLB sees its takeover of the Dodgers as far larger than its prior, more distant oversight of the Rangers during their financial woes under former owner Tom Hicks that included a bankruptcy filing. And unlike prior MLB involvements in Texas, Montreal, or even its participation in the A's ballpark pursuit, the Dodgers move involves one of the sport's marquee franchises and a highly prominent global brand. The Dodgers are more than $430M in debt, and while McCourt's recent loan from Fox overtly signaled continued financial distress for the team, that was not necessarily the individual trigger that prompted Selig to act. "It was more an accumulation of all the mismanagement that's occurred," said a senior baseball exec. "This is, in effect, a real indictment of the overall finances and operations of the Dodgers." McCourt and his ex-wife Jamie took more than $100M in personal distributions from the Dodgers, according to court documents, much of it to furnish a lavish lifestyle (Eric Fisher, SportsBusiness Journal).
CAN'T BUY ME LOVE: In L.A., Wharton & Shaikin in a front-page piece cite a league source as saying that the move was "prompted by a number of issues surrounding the Dodgers," including McCourt's recent loan from Fox and the "parking-lot attack at Dodger Stadium on March 31" that left a Giants fan in a coma. MLB now will have "approval rights over every significant expenditure by the team, including a trade or contract extension" (L.A. TIMES, 4/21). Sources indicated that Selig also "made such a dramatic move because he feared that McCourt soon would not have enough capital available to keep the team afloat" (Long Beach PRESS-TELEGRAM, 4/21). The WALL STREET JOURNAL's Matthew Futterman cites a source as saying that Selig's takeover decision "resulted directly from the accumulating embarrassments and worries about Mr. McCourt's ability to fund the club's payroll." The source said that Selig "questions whether Mr. McCourt is fit to own the team for the long term, a determination he will make after he conducts an investigation in coming months" (WALL STREET JOURNAL, 4/21). FOXSPORTS.com's Ken Rosenthal notes it is "not clear whether baseball will cite the Dodgers for violating the debt-service rule, which ties the amount of debt that a team is allowed to carry to its cash flow" (FOXSPORTS.com, 4/21).
MCCOURT NOT GIVING UP: In N.Y., Bill Madden reports McCourt last night enlisted N.Y.-based law firm Sullivan & Cromwell "to sue MLB and Selig." A veteran sports attorney speculated that McCourt "will base his case on the fact that he never asked MLB for a loan," unlike Hicks and Mets Owner Fred Wilpon. MLB "did not move to take over the Mets or Rangers when they came into similar financial distress" (N.Y. DAILY NEWS, 4/21). Two sources indicated that Selig "has anticipated the possibility of a legal challenge by McCourt, which could delay any ownership change." In addition, the McCourts' divorce case "has yet to be settled." Jamie McCourt "has asserted her claim of 50% ownership of the Dodgers, based on California community-property law," and those claims could "take some time to resolve as well" (L.A. TIMES, 4/21). Frank McCourt in a statement issued last night "appeared to signal his intent to challenge Selig's decision." McCourt said, "Major League Baseball sets strict financial guidelines which all 30 teams must follow. The Dodgers are in compliance with these guidelines. On this basis, it is hard to understand the Commissioner’s action" (AP, 4/20). However, a rival MLB exec “has doubts” about whether McCourt will “take legal steps” against Selig and MLB. The exec said, “Why would he want to do that? He's not going to win -- these guys (MLB) are going to go after him -- and all it would do is cost him a lot of money and aggravation” (ESPN.com, 4/21).
DEFENDING HIS NEW BOSS: New Dodgers Vice Chair Steve Soboroff “blasted Commissioner Bud Selig’s decision to take over the Dodgers as ‘irresponsible’ and dismissed concerns that McCourt is too financially strapped to operate the team.” Soboroff said, “He can pay the piper. … The money is in the bank. The Fox deal is done. These actions are not allowing him to access money. That's a lot different than saying he's got financial problems.” Soboroff acknowledged that McCourt “has made mistakes during his seven years running the Dodgers.” However, he said that McCourt “should be given the chance to learn from his mistakes and follow through on his promise to redouble the Dodgers' involvement in the community” (LATIMES.com, 4/21).
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Colletti says that he does not know if
he is still in charge of team |
UNCERTAINTY REIGNS: MLB's takeover of the Dodgers is designed to return some normalcy to the club and "stop the bleeding," said a league source. Possible candidates to fill the club representative role, industry execs said, include MLB EVP/Administration and CIO John McHale Jr., and former Nationals President Stan Kasten (Fisher). Dodgers GM Ned Colletti, asked before last night's game against the Braves if he is in charge of the team, said, "I don't know." When asked who his boss is, Colletti said, "I don't know" (USA TODAY, 4/21). However, Colletti "downplayed concerns that the team would be financially paralyzed by pointing to the Texas Rangers, who were monitored by a league executive while owner Tom Hicks dealt with creditors over large debts" (L.A. TIMES, 4/21). Meanwhile, In L.A., T.J. Simers writes the "timing of this quickie announcement suggests there is more here than McCourt running low on cash." If that were the case, MLB "should have taken over seven years ago," so then "why wasn't MLB prepared to introduce McCourt's interim replacement immediately?" Simers: "Why were the Dodgers left in limbo, with no one understanding what MLB control means beyond the giddy feeling of knowing there will be no more Frank McCourt?" (L.A. TIMES, 4/21).
WAITING ON DECK: SI.com's Jon Heyman wrote there is "reason to believe there'd be a strong lineup of potential buyers for the Dodgers." A "few names of prospective buyers have surfaced, but a prominent one" is said to be Jason Reese, Chair of California-based investment banking firm Imperial Capital. Reese's name "has been connected to the Mets, but he isn't one of a select few willing to come to the Mets as a minority partner" (SI.com, 4/20). ESPN.com's Buster Olney reports MLB team execs “fully expect that Selig will pick the next Dodgers owner carefully,” assuming that McCourt’s “ejection is permanent.” The next owner will be someone who “has much more money than McCourt,” and someone who is “very well known within baseball circles -- someone whose actions are predictable, someone safe.” Olney: “No matter who the next owner is, he could not ask for better circumstances, because anything he (or she) does will be weighed and measured against McCourt's disastrous stewardship. The next owner will step into his office like Franklin Roosevelt replacing Herbert Hoover in the midst of the Great Depression” (ESPN.com, 4/21). Olney on Twitter wrote, "Some of the SPECULATION re: next owners for the LAD down the road -- Dennis Gilbert; Brewers owner Mark Attanasio; Tom Werner; Lew Wolff" (TWITTER.com, 4/20).
TV RIGHTS DEAL AWAITING APPROVAL: DAILY VARIETY's Cynthia Littleton notes Fox Sports is "awaiting MLB approval of a new long-term TV rights pact" with the Dodgers. Approval of the deal "is expected, but MLB's takeover may delay the process as league officials get a better handle on the team's shaky finances." There is a "strong possibility that MLB will force" McCourt to sell the team, "which could mean that a new owner would seek to negotiate a new rights pact from scratch." Regardless, as the "Dodgers' longtime local partner, Fox Sports West undoubtedly will be well-positioned to land a deal" (DAILY VARIETY, 4/21). Meanwhile. Fox' motivation for giving McCourt a $30M loan was based on a belief that McCourt was close to accepting a deal from Time Warner Cable worth a similar amount. Sources say that Fox believed the TWC deal was a sponsorship deal that included some sort of naming rights component. It is especially important for Fox to keep the Dodgers' local TV rights on Prime Ticket, especially with TWC wresting the Lakers rights away from Fox and planning to launch two competing RSNs in the L.A. market (John Ourand, THE DAILY).
CITI IN LIGHTS: The N.Y. DAILY NEWS' Madden notes a "big issue" now is how Selig's actions with the Dodgers "affect the likewise financially distressed Mets." The "answer to that undoubtedly lies in the Mets owners' efforts to find an investor to pump some $200 million into the operation, which presumably will enable them to refinance and start paying down the estimated $300 million team debt, make their stadium bond payments and cover all their operating costs, most notably payroll" (N.Y. DAILY NEWS, 4/21). It remains to be seen "how long Selig will be supportive of Wilpon." MLB already has "told the club it will not extend it another significant loan" (N.Y. TIMES, 4/21).
