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Dodgers, Major League Baseball Swap Accusations Over Loan in Court Hearing

The Los Angeles Dodgers and Major League Baseball attacked each other in court over competing $150 million loan proposals, with baseball Commissioner Bud Selig accusing team owner Frank McCourt of trying to break the rules that keep the league together.

The team wants U.S. Bankruptcy Judge Kevin Gross to approve the loan even though it would cost about $6.5 million more in interest and fees than a proposal by baseball, Dodgers lawyer Bruce Bennett said in court.

McCourt has rejected baseball’s proposal, saying Selig’s hostility to him and the Dodgers makes it inappropriate for MLB to provide the loan. The MLB loan would prevent the team from holding an auction of the right to show games on cable television, Bennett told Gross.

“We are trying to avoid a deal with the devil that is attractive on the front end and has all kinds of problems on the back end,” Bennett said today in U.S. Bankruptcy Court in Wilmington, Delaware. The Dodgers’ preferred lender is JPMorgan Chase & Co.’s Highbridge Capital Management LLC.

The Dodgers filed for bankruptcy after Selig rejected a proposed cable-TV rights deal McCourt negotiated with News Corp. (NWSA)’s Fox Sports. The team intends to try to sell those rights while in bankruptcy and will propose rules for marketing them next month, Bennett said.

Tom Lauria, a lawyer for Major League Baseball, asked Gross to reject the Highbridge loan, saying it violates MLB’s rules and is inferior to its proposal.

‘Mark the End’

The attorney said McCourt shirked his responsibilities as an owner by putting the Dodgers into bankruptcy and is trying to avoid following any baseball rules he doesn’t like.

“He seeks to have and enjoy rights to which no other owner is entitled,” Lauria told the judge. Ending the baseball bylaws that McCourt is trying to ignore, “would mark the end of Major League Baseball as we know it,” he said.

Lauria was responding to comments earlier in the hearing in which Bennett held out the possibility that McCourt will refuse to obey some MLB rules.

“We can no longer be subject to the arbitrary and capricious treatment” of Selig, Bennett said.

Interest Rate

Highbridge agreed to lower the interest rate from a minimum of 10 percent to a minimum of 9 percent, Gary Kaplan, a Highbridge attorney, said. While the loan may appear to cost $6.5 million more than the MLB proposal, that estimate doesn’t take into account the cost of resolving any court fights over how to implement or interpret the financing, Bennett said.

The Dodgers also oppose MLB’s financing because it includes many legal controls that would create conflict between the team and baseball, Bennett said.

While searching for the best deal for a bankruptcy loan, the Dodgers contacted at least seven lenders other than Highbridge, Dodgers Assistant Treasurer Jeffrey Ingram said while testifying about the Highbridge loan. Those lenders included Goldman Sachs Group, Inc., Time Warner Cable Inc., Bank of America Corp., Colony Capital LLC and General Electric Capital Corp. and a financing company associated with the family of Disney Co. founder Walt Disney called Shamrock, Ingram said.

The Dodgers ultimately picked Highbridge as the lender, Ingram said.

Under cross examination by baseball attorney Glenn Kurtz, Ingram said that many of the terms in the proposed baseball loan were “better” than the Highbridge loan.

The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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