Sunday, February 19, 2006
McCourt To Hand Over Land To Fox
Surrendering the land to News Corp.'s Fox Entertainment Group erases considerable debt from the Dodger ledger — leaving the franchise with about $250 million due to other lenders over the next 25 years — and severs one of McCourt's major business connections to his hometown.Damn, Arte Moreno's looking better and better as an owner all the time, and he doesn't even have to cut the price of beer at the stadium...
But it does not fully resolve a question that has swirled around the Dodgers since McCourt's name first surfaced as a buyer: Can he afford to field a competitive team over the long haul?
The transaction — expected to be announced as a sale, though Fox sources call it a foreclosure — also sheds new light on just how badly Fox wanted out of the baseball-ownership business after six years with the Dodgers.
"Desperately," said a top baseball official, speaking on condition of anonymity because of policies barring discussion of club finances.
"He's the king of leverage; he's brilliant with other people's money," said a Boston city hall veteran who has clashed with McCourt, acknowledging the businessman's financial acumen. "Now he owns a baseball team in Los Angeles and 300 acres of land in California. You have to respect that."That brilliance apparently extends to moving his debt as well. The deal includes the assumption of $58 million in debt that McCourt took on in part because of a $36M loan from the Sovereign Bank of Philadelphia, and a $22M agreement to purchase a nearby property from the state of Massachusetts.
Sources close to McCourt said neither the $145-million loan, as it is described in public documents, nor its pending settlement, have any bearing on the club's ability to sign talent or to maintain and improve Dodger Stadium.
"If his team bumbles again on the field and the Angels continue to do well, he'll continue to see a reduction in his fan base," said Andrew Zimbalist, a Smith College economist who later this month will publish "In the Best Interests of Baseball?" a book about the economics of the sport. "If he can put a decent team on the field and get over his credibility problems in L.A., he ought to be able to run the team in the black."
Fox, for its part, isn't hurting, Zimbalist added.
"They got the long-term media rights to the Dodgers, which is what [News Corp. Chairman] Rupert Murdoch really wanted," the economist said. "He got control over the regional sports market. … So News Corp. isn't worrying about whether McCourt underpaid by $40 million or $50 million."
This is why I think baseball debt rules are silly. As franchises go up in value, teams should be able to turn equity into debt to keep the teams operating and competitive.
The players' union has long worried that the Debt Service Rule is nothing more than collusion dressed up as a health-of-the-game measure. There is some justification to this, and the 2003/2004 offseason in which Selig interfered with the Dodgers contractual negotiations is plain evidence of this.