A Delaware bankruptcy judge held that the Los Angeles Dodgers owner Frank McCourt must negotiate with MLB over the terms of a loan, citing the more favorable terms of the deal.
McCourt had arranged $150 million in Debtor-in-Possession (DIP) financing from a JP Morgan hedge fund, Highbridge Capital, under some pretty onerous terms — 10+% interest, etc. Major League Baseball, ostensibly to preserve the value of the franchise and to prevent McCourt from taking any more money out of it and Dodger Stadium, contested the arrangement, saying it will lend the Dodgers DIP financing at a much lower interest rate with more liberal repayment terms.
Judge Kevin Gross held that the Morgan loan was not a fair offer when a much better deal from MLB was on the table; he also held that MLB was not to use the loan as a tool for taking control of the Dodgers, something that McCourt’s lawyers raised as a distinct possibility.
“It is clear that Baseball needs and wants the Dodgers to succeed, and the debtors are best served by maintaining Baseball’s good will and contributing to the important and profitable franchise group under the commissioner’s leadership,” Gross wrote.
“We are pleased that the court has agreed with our position with respect to providing the DIP financing and shares our long-standing view that the proposal put forth by Major League Baseball is the best option for the Los Angeles Dodgers franchise,” MLB VP Rob Manfred told Associated Press. “Major League Baseball remains committed to serving the best long-term interests of the Dodgers and their fans.”
The ruling does not touch on a larger issue: whether McCourt should be free to sell broadcast rights as he sees fit. Commissioner Bud Selig rejected proposed sales rights three times, each time saying that cash paid up front now by Fox would mortgage the team’s future. There’s also plenty of other issues on the table as well.
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