The Dodgers and four related entities filed for Chapter 11 bankruptcy protection this morning in Delaware federal bankruptcy court. Beyond asking the court to approve a $150M financing from hedge fund Highbridge Capital in order to meet payroll later this week, the team also asked the court to relaunch a sale of their cable rights, already turned down by MLB. The Dodgers have been in turmoil for well over a year, and the filings are the latest step by Owner Frank McCourt to keep control of the club. He is asking the court not just to approve the hedge fund as a lender, sure to raise MLB's hackles after the league's battle last year in the Rangers bankruptcy with another hedge fund, but to allow the club to sell its cable rights after MLB just days ago halted that process. MLB Commissioner Bud Selig last week turned down an up to $3B sale of the team's cable rights for 17 years to Fox Sports, arguing the sale should occur after the current rights expire next year and because some proceeds flowed directly to McCourt. Setting up what is surely to be a major test of the commissioner's authorities versus the power of a bankruptcy court, Dodgers Assistant Treasurer Jeffrey Ingram in an affidavit to the court asked it to allow "procedures that are designed to promote a competitive sales process with respect to those exclusive television rights." Last year, it appeared as if Selig's authority to turn down buyers of teams could run afoul of the Rangers sale in bankruptcy. However, Selig's preferred buyer, Nolan Ryan, emerged victorious. The Dodgers in the filing today said they are unable to meet $20M of payroll due Thursday, and another $18.7M commitment due the next day. Highbridge is willing to lend the money immediately, Ingram's affidavit said. No other potential lender, he said, was willing to lend $40M. The case has been assigned to Judge Kevin Gross, who will have the first hearing tomorrow at 1:30pm ET. The Dodgers entities filing are Los Angeles Dodgers LLC, Los Angeles Dodgers Holding Co., LA Real Estate Holding Co., LA Holdco and LA Real Estate (Daniel Kaplan, SportsBusiness Journal).
TAKING IT TO THE COURTS: In L.A., Bill Shaikin notes the bankruptcy filing "could extend the battle for ownership of the Dodgers well beyond this season." If the bankruptcy court approves the $150M in interim financing tomorrow, McCourt "would meet Thursday's payroll deadline and could remain in control of the club throughout the bankruptcy proceedings, with the intention of negotiating a television rights deal that would satisfy the court by paying off all creditors in full." Under the MLB constitution, the act of filing for bankruptcy "enables the commissioner to strip McCourt of ownership." But Shaikin notes "bankruptcy court proceedings generally override MLB rules" (LATIMES.com, 6/27). The WALL STREET JOURNAL's Matthew Futterman notes the filing sets up a "showdown" between Selig and McCourt, who is making a "last ditch effort to save his team from being seized" by MLB. Two sources said that Fox is unlikely to "keep its offer on the table during the bankruptcy standoff" (WSJ.com, 6/27). NBCSPORTS.com's Craig Calcaterra notes MLB officials could "make a strong case that the Fox deal is not the best deal" the Dodgers could make (NBCSPORTS.com, 6/27).
STEPPING ASIDE: The L.A. TIMES' Shaikin reported Steve Soboroff announced his resignation as Dodgers Vice Chair on Saturday. Sources said that neither McCourt nor Selig "solicited Soboroff's resignation," which comes just two months after he joined the Dodgers. Soboroff in his resignation letter to McCourt wrote, "The present environment is not conducive to getting the results I was brought on to achieve for the Dodger organization or for Los Angeles." With McCourt needing about $30M to meet payroll Thursday, he and his attorneys "reached out to MLB in recent days, trying to come to an agreement that could provide the Dodgers owner with interim funding this week and keep him in control beyond then." A source indicated that McCourt "was told the league would not assist with any funding unless he agreed to sell the Dodgers." Robert Sacks, an attorney for McCourt, said that his client "would consider selling a minority share of the Dodgers." MLB, however, "has all but rebuffed McCourt's late interest in selling a minority share, citing an approval process for potential investors that would extend well beyond this week's payroll deadline" (L.A. TIMES, 6/26). A source said that "after months of saying he would not consider selling a piece of the Dodgers, McCourt has received numerous inquiries from parties willing to buy in" (SPORTS.YAHOO.com, 6/25). Meanwhile, U.S. Rep. Charles Gonzalez (D-Texas) on Friday said that the Congressional Hispanic Caucus has "declined a request to intervene on behalf" of McCourt "in his showdown" with MLB. Gonzalez, Chair of the CHC, "met Friday with MLB lobbyists." He said that he "had requested a meeting with Commissioner Bud Selig to discuss issues of concern to the Latino community but said the CHC would not stand with McCourt in his battle against Selig" (L.A. TIMES, 6/25).
LIFESTYLES OF THE RICH & FAMOUS: The FINANCIAL TIMES' Gelles & Thomas wrote as "sports team values have risen over the past decade, they have become assets that only the wealthy can afford." While the circumstances "surrounding each team sale are unique, advisers say the recent flurry of dealmaking has its roots in the financial crisis, with many wealthy owners looking to liquidate assets, as new owners look to diversify." Advisers noted that with "some local owners faltering, the leagues are becoming more receptive to interest from a wider ranger of potential buyers." Among the four major U.S. leagues, the NBA "is the most receptive to international buyers, having last year" allowed Russian billionaire Mikhail Prokhorov to buy the Nets (FINANCIAL TIMES, 6/25).
