Friday, July 22, 2011
McCourt Must Use MLB DIP Financing, But MLB Can't Take Over Dodgers
McCourt and his attorneys had argued that, as the debtors, the Dodgers were entitled to use their business judgment to pick the loan they preferred. That is a standard under bankruptcy law, but Gross ruled that McCourt forfeited that priority by failing to disclose he would have personally owed his lender $5.25 million by not seeking court approval of the loan.The full letter from the commissioner to McCourt denying the Fox TV deal is a hammer blow, Bud Selig swinging for the fences, and frequently connecting. It contains some doozies:
- Pages 3,4: "... the $385 million that would be accelerated as part of the Proposed Transaction far exceeds any up-front payment previously received by any other club. No other owner has sacrificed so much of his team's future for an immediate payoff. ... '[H]amstringing the business' is exactly what you are proposing...."
- Repeatedly, there was no Fox TV deal to approve, because Jamie refused to allow it.
- "I cannot approve a transaction that would allow you to extract millions upon millions more from this storied franchise."
- Frank's business projections don't include revenue sharing, the late decline in ticket sales, and diversions of funds for personal purposes.
- Frank is being audited for tax years 2006 through 2008 (footnote, page 10).
Update: Here's the judge's ruling from today's hearing. Round 2 will be about Bud v. Frank, which will be, in my estimation, the main event.
Update 2: As expected, McCourt's camp is publicly upbeat since they weren't thrown to the curb or laughed out of court, and most importantly, MLB can't reinstall a monitor in Frank's scheming.
Update 3: Josh Fisher at ESPN:
Under the terms of the existing television deal, the Dodgers cannot begin negotiating with anyone other than Fox until late 2012. That has led baseball to express concerns about the desirability of extensions of the Fox deal thus far proposed by McCourt. However, because of the club's bankruptcy, it may have the option to walk away from the Fox contract and sell the Dodgers' television rights competitively.
MLB will likely oppose such treatment of an important strategic partner. While today's ruling signals Gross' willingness to curtail baseball's policies to the extent necessary to achieve bankruptcy's purposes, he may not be as willing to entertain a move with potential negative impact across the game. Make no mistake, the fight over the Dodgers' ability to sell their TV rights will be as bitter and acrimonious as any thus far. The outcome will determine how much longer the Dodgers remain under McCourt ownership.
I think back to the early days when McCourt took over, those very first days and you suspected this guy more then anyone. I'm not sure if anyone on DT or elsewhere remembers, but you knew it first. (I think)