June 29 (Bloomberg) -- The Los Angeles Dodgers can use as much as $60 million of a bankruptcy loan after Major League Baseball dropped its opposition following changes in the loan’s terms, a judge ruled.
A requirement that the Dodgers sell television rights within six months was deleted and a potential fee for the lender, JPMorgan Chase & Co.’s Highbridge Capital Management LLC, was cut to $250,000 from $4.5 million, lawyers for the Dodgers said yesterday at a hearing in U.S. Bankruptcy Court in Wilmington, Delaware.
MLB’s goal yesterday was to stop the Dodgers from trying to auction the broadcast rights, MLB lawyer Tom Lauria said. Baseball Commissioner Bud Selig last week rejected a proposed deal with News Corp.’s Fox Sports, leaving the Dodgers unable to make payroll, the team said. Dodgers owner Frank McCourt said the 17-year agreement, valued by him at about $3 billion, would have assured the team’s financial stability.
“My client came here to fight the process being put in place to start an auction,” Lauria said in an interview. “So it’s MLB, one, McCourt, zero.”
Bruce Bennett, an attorney for the Dodgers, said the team filed for bankruptcy to gain time to auction the television rights. Although the deadline has been removed from the loan terms, the team still has the right to propose an auction while under court protection, he said.
Lawyers for both sides agreed to the loan changes after meeting for more than an hour during a break in yesterday’s hearing. MLB said in a court filing earlier that McCourt lacked authority to put the baseball team into bankruptcy and asked to replace the proposed rescue loan with a cheaper one.
The Dodgers were required to first obtain the consent of a monitor appointed by Major League Baseball to oversee the team before filing for bankruptcy, MLB said in the filing. MLB reserves the right to request a trustee and to ask a judge to dismiss the case, Lauria said yesterday in court.
“These cases were commenced in an attempt by Mr. McCourt to circumvent the club’s obligations under its constituent, governing documents, and to have this court approve additional debt financing and sale of key assets in violation of those documents,” the filing said.
U.S. Bankruptcy Judge Kevin Gross gave the team interim approval to borrow $60 million after approving motions to pay Dodger employees and two critical vendors, to honor union contracts and to make revenue-sharing payments to other baseball clubs. The team must return to court next month to borrow more under a proposed $150 million facility.
The Dodgers would command a record $1 billion in a sale, said sports bankers including Gordon Saint-Denis, president of Katonah, New York-based Major League Sports Consulting LLC. Forbes magazine values the team at $800 million, third-highest in baseball after the New York Yankees and Boston Red Sox.
The Dodgers, which filed for bankruptcy June 27 in what the baseball team called “a perfect storm,” were offered a $150 million loan by Highbridge to support operations while in bankruptcy. The Highbridge loan carries a 10 percent interest rate, 3 percentage points more than the one proposed by MLB.
The Dodgers need the money to make payroll in two days. The team “is now on the verge of running out of cash, the result of a perfect storm of events,” the Dodgers said in court papers filed June 27. McCourt said the bankruptcy was triggered by Selig’s refusal to approve the deal with Fox.
‘Turned His Back’
“He’s turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today,” McCourt said in a June 27 statement.
Selig said the bankruptcy “does nothing but inflict further harm to this historic franchise.”
“We have consistently communicated to Mr. McCourt that any potential solution to his problems that contemplates mortgaging the future of the Dodgers franchise to the long-term detriment of the club, its loyal fans and the game of baseball would not be acceptable,” Selig said in a statement.
McCourt is also fighting with his ex-wife Jamie McCourt for ownership of the team in a court in Los Angeles. Laura Davis Jones, a lawyer for Jamie McCourt, told Gross yesterday that the Chapter 11 filing “ was sprung on all of us.” Both Jones and Lauria, the MLB lawyer, said their clients weren’t notified that the Dodgers intended to file for bankruptcy.
The Dodgers will pursue a sale of the TV rights while in bankruptcy, the team said in court papers. The Fox Sports agreement included a $385 million loan, of which $211.5 million was to go toward the team’s operations and working capital, according to court papers.
Lou D’Ermilio, a spokesman for Fox Sports in New York, declined to comment.
William Snyder, who acted as chief restructuring officer during the bankruptcy of the Texas Rangers last year, predicted McCourt will be successful in selling the TV rights. The Rangers were sold at auction to a group that included Hall of Fame pitcher Nolan Ryan.
“He is taking a good approach in auctioning the rights so no one can point a finger,” Snyder said.
In April, Selig said he was appointing a representative to oversee the team’s business and day-to-day operations because of “deep concerns regarding the finances and operations of the Dodgers.” He later named Thomas Schieffer, former president of the Texas Rangers, as the team’s monitor.
Baseball said it was withholding approval until completing an investigation into the club and its finances. On June 20, Selig said he was rejecting the transaction, saying in a statement that it “would have the effect of mortgaging the future of the franchise to the long-term detriment of the club and its fans.”
The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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