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A look ahead: Tuesday's Dodgers bankruptcy hearing

June 27, 2011 |  4:11 pm

Mccourt-office_325 In order for Frank McCourt to retain control of the Dodgers beyond Tuesday's bankruptcy filing, he has to show he has the money to pay the current bills. The bankruptcy court, in turn, could give him an exclusive window to secure the long-term financing necessary to pay off his creditors.

In his bankruptcy filing, McCourt showed he had a $150-million loan for interim financing. In order to obtain the loan, McCourt agreed to pay at least 10% interest and a $4.5-million fee.

In Tuesday's hearing, Major League Baseball is expected to offer alternative financing, on better terms. Those terms were not certain on Monday, but MLB previously had said it would not provide financing to McCourt unless he agreed to sell the Dodgers.

If the bankruptcy judge grants McCourt interim financing, the focus could turn to McCourt's long-term solution -- an auction of the Dodgers' cable television rights. The league claims it has approval rights for all television contracts, but McCourt is asking the bankruptcy judge to override MLB rules in the interest of fully repaying creditors. In response, the league is expected to say the value of the Dodgers' television rights is not in doubt and the creditors have no need to worry about not getting paid.

Ultimately, McCourt must persuade the bankruptcy judge to set aside the very MLB rules to which McCourt agreed, the ones granting commissioner Bud Selig the authority to act as he sees fit for the best interests of baseball.

"The commissioner has his rules, and certain powers," said Bruce Bennett, the attorney for McCourt. "However, he has exercised them in such a way as to create a cash-flow-insolvent position for the Dodgers. The only response the Dodgers really had to that was to reach some form of interim financing.

"There is nothing particularly innovative or new about using debtor-in-possession financing as a means of addressing a liquidity problem. It is not exactly out of the ordinary for the bankruptcy court to supervise the process of disposing a particular asset -- in this case, the media rights -- in a process that is fair and supervised by a federal judge."

Bennett acknowledged there is little precedent for when a bankruptcy court need -- or need not -- honor MLB rules. However, Bennett said that issue is "not fairly significant."

MLB is not the only party lining up to challenge the bankruptcy filing. An attorney for Jamie McCourt, the ex-wife of Frank McCourt, is expected to argue that the filing -- and the prolonged process for exiting bankruptcy court -- could devalue the Dodgers, by far the largest asset in a divorce that has yet to be settled.

"That's really a matter for the divorce court to deal with," Bennett said. "I don't expect that to be a matter the bankruptcy court has to deal with."


Bankruptcy Q&A: Dodgers closer to resolution

Frank McCourt and the Dodgers: A chronology

Dodgers file for bankruptcy -- and arrange for $150-million loan

-- Bill Shaikin

Photo: Dodgers owner Frank McCourt in his office at Dodger Stadium. Credit: Damian Dovarganes / Associated Press