LA Dodgers File for Bankruptcy to Prevent MLB Takeover
The Los Angeles Dodgers baseball organization filed Chapter 11 bankruptcy in Delaware this morning in an attempt to protect the financially fledgling franchise from being completely seized by Major League Baseball and its commissioner, Bud Selig.
Selig and Dodgers owner Frank McCourt have been playing a very public match of tug-of-war over the team since the organization first approached the MLB to approve a media rights deal over a year ago. According to The Wall Street Journal, the 17-year, nearly $3 billion deal with News Corp.'s Fox Sports, was rejected by the MLB commissioner on June 20, apparently because McCourt planned to use over $150 million in the deal to pay off his debts and settle his divorce from his wife, Jamie.
The Dodgers organization's assets still outweigh its liabilities, with assets totaling as much as $1 billion and debts totaling as much as half that, according to Reuters, but a lack of liquid cash could have potentially left them unable to completely pay the organization’s June 30 payroll. The organization will receive $150 million dollars in Debtor-in-Possession (DIP) financing so that they can continue operating as normal while in bankruptcy, as reported by the team's news release which appeared on the Los Angeles Times website.
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McCourt believes the deal with Fox can take care of their immediate cash crisis and set them up for future financial success. Bruce Bennett, a bankruptcy lawyer from Dewey and LeBoeuf, said, “The team is entering the bankruptcy case with enough committed financing to meet all of its short term expenses and to successful reorganize. The media rights will, one way or another, generate enough value to facilitate a reorganization.”
The Dodgers organization says that in the meantime nothing will change for players, other employees, fans, or vendors. Employees will continue to be paid, and fans shouldn't worry about ticket prices going up.
The Wall Street Journal reports that McCourt will ask the bankruptcy court to approve a new media rights deal, which he hopes will save his team from its lack of liquid cash.
“The Dodgers have delivered time and again since I became owner,” McCourt reportedly said in today's news release. Despite their clear financial struggles, he cited the organization's previous financial successes under his leadership and the team's performance over the last few years as some reasons why his franchise deserves better treatment from the MLB. Selig, he said, “turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today.”
On June 20, after refusing to approve the media deal, Selig released a statement saying that it was not in the best interest of the organization and the fans. “We owe it to the legion of loyal Dodger fans to ensure that this club is being operated properly now and will be guided appropriately in the future. This transaction would not accomplish those goals,” he said, as reported by ESPNLosAngeles.com.
Major League Baseball has been in control of day-to-day operations of the Dodgers since April. McCourt hopes that this move will help him prevent the league from seizing his team.
