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Bankruptcy judge orders Frank McCourt to negotiate with MLB for loan

July 22, 2011 | 12:17 pm

 Photo: Frank McCourt. Credit: Nick Ut / Associated Press.   Frank McCourt now has to negotiate with Major League Baseball for a loan after U.S. Bankruptcy Judge Kevin Gross decided that the MLB loan was "not a vehicle for Baseball to control" the Dodgers.

The judge ruled Friday that McCourt could not use the loan he had arranged to fund the team through the bankruptcy process, even though McCourt and his attorneys had argued he should not have to accept financing from a league allegedly intent on ousting him -- so much so that the proposed MLB loan included terms aimed at triggering that ouster.

DOCUMENT: Bankruptcy judge’s ruling against Frank McCourt

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.

That "clearly compromised McCourt's judgment," Gross wrote, opening the door for him to compare the proposed loans on purely financial terms. The lone witness in Wednesday's hearing, Dodgers assistant treasurer Jeffrey Ingram, conceded that the lower interest rate and absence of fees in the proposed MLB loan made its financial terms superior to that of the loan arranged by McCourt.

Gross said he would defer consideration of "the issues surrounding the underlying feud between the Commissioner and ... Frank McCourt," but he slammed the Dodgers for refusing even to negotiate with MLB for a loan that could save the Dodgers money.

"It is unclear to the Court how Debtors think they can successfully operate a team within the framework of Baseball if they are unwilling to sit with Baseball to consider and negotiate even more favorable terms while under the Court's protection," Gross wrote.

We'll have more later at latimes.com/sports.

MORE:

Photos: The Dodgers and the McCourts

Interactive timeline: The McCourts and the Dodgers

Dodgers bankruptcy: What is Wednesday's hearing all about?

-- Bill Shaikin

 Photo: Frank McCourt. Credit: Nick Ut / Associated Press.

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