Dodgers Owner Files For Bankruptcy and Gets a Loan
Written by Bob Whalon, Monday June 27 2011
Only in America.
Los Angeles Dodgers owner Frank McCourt not only filed for Chapter 11 bankruptcy protection in a Delaware court on Monday, but he also quickly got a $150 million loan that will enable him to meet his payroll obligations for the month of June.
The Chapter 11 financing allows the Dodgers to use $150 million for daily operations, but McCourt didn't have that much money and wouldn't have been able to meet the payroll.
As a result, the Wall street Journal reported on Monday that McCourt received a $150 million loan from a J.P. Morgan-affiliated hedge fund called Highbridge Principal Strategies. The loan will buy McCourt some time to try to prevent Major League Baseball from taking over the team for good.
Commissioner Bud Selig already took control of the franchise in April and assigned former Texas Rangers President Tom Schieffer to oversee the team on behalf of MLB. If McCourt was unable to meet his June payroll, MLB would have stepped in to pay the players.
McCourt had hoped that Selig would approve his $3 billion television deal with Fox Sports, but Selig felt that it was a bad deal for MLB. "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 statement regarding Selig.
McCourt has been embroiled in a messy divorce from his wife Jamie McCourt, who was the former CEO of the Dodgers. The former couple took out more than $100 million in loans from Dodger-related businesses to support their lavish lifestyle, according to court records.
The loan will enable McCourt to meet payroll on June 30, but the bankruptcy filing also disclosed that he had taken out a $67 million loan against the parking lots at Dodgers Stadium that was also set to mature on June 30.
The reason McCourt was able to get a loan after filing for bankruptcy is that the lender now moves to the front of the line for payment. Unfortunately for McCourt, Highbridge was the only company willing to give him a loan and the terms were not very favorable. The interest rate is 10% higher than your average debtor-in-possession financing and McCourt had to pay the lender a $4.5 million fee on top of it all. McCourt had to put a lien on Dodger Stadium and offer personal guarantees in order to secure the loan.
"He's clearly running very low on options right now," said David Carter, executive director of USC Sports Business Institute. "What seems to be the case is a high-stakes chess game between Frank McCourt and MLB, and he's running out of pieces. This is one of the uglier weeks in Dodger history."
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