Dodgers bankruptcy: McCourt offers slightly better loan
The creditors that had objected to a loan arranged by Dodgers owner Frank McCourt withdrew their objection Wednesday, when the lender agreed to lower the minimum interest rate from 10% to 9%.
That did not satisfy Major League Baseball, which is offering a 7% loan to fund the Dodgers during the bankruptcy process. Whether McCourt gets to use his loan or must take the one offered by MLB is the subject of a hearing before U.S. Bankruptcy Court Judge Kevin Gross.
Although the league said in previous court filings the difference between the two loans amounted to $15 million, Dodgers attorney Bruce Bennett said the figure is closer to $6.5 million, and those savings could disappear entirely depending on later fees and litigation.
"It is not the case that the MLB loan is necessarily cheaper," Bennett said.
Thomas Lauria, the attorney for MLB, said there is "no chicanery" in the language of the proposed loan. He said the league is willing to revise any provisions that McCourt believes could set up a default and de facto ownership change.
"We're not here to trip anybody up," Lauria said.
Lauria also said the MLB loan was "materially superior in every respect" and said the league was not antagonistic to the Dodgers.
"We're not here to harm the Dodgers," Lauria said. "The Dodgers are part of the league -- although, from some of the papers that have been filed, I'm not sure the Dodgers really understand that."
Bennett said the Dodgers reserved their right to reject their current contract with Fox, as permitted under bankruptcy law. That would enable the Dodgers to hold an auction for their cable television rights, if a new deal with Fox cannot be reached before then. The court would have to approve an auction, which would be opposed by MLB and Fox.
An auction or other sale of the Dodgers' cable rights -- thus circumventing the right of Commissioner Bud Selig to approve television contracts -- is the key to McCourt's plan to emerge from bankruptcy court as the Dodgers' owner.
Jeff Ingram, the assistant treasurer of the Dodgers and executive vice president of the McCourt Group, testified extensively about actions the Dodgers' attorneys hope will convince the court that MLB is far too hostile to the team to provide a fair loan.
In his testimony, Ingram said McCourt planned on launching a Dodgers' cable channel -- dubbed DTV: Dodger Television in divorce court filings -- in 2014, after the expiration of the current Fox contract. He said the Dodgers shifted course in 2010, after "negative publicity" from McCourt's divorce trial "chilled the market" and made it impossible to obtain financing that would have carried the team through 2013. Instead, he said, the Dodgers negotiated a renewal with Fox, only to find Selig blocking every proposal even after league executives had endorsed the team's financial plan just last year.
In testifying how the loan McCourt arranged was the only one available on short notice, Ingram said the Dodgers could not obtain a competing proposal from other possible lenders, including Bank of America, Goldman Sachs and Time Warner. In April, Fox angered Selig by providing McCourt with a $30-million personal loan so he could meet the season's first payrolls, a move Fox made because the company had heard that McCourt had approached Time Warner. Whenever the Dodgers' cable rights become available, Fox is expected to compete with Time Warner and its new Lakers' channel.
Ingram said that Blue Land Co. -- one of the McCourt entities that did not file for bankruptcy -- had to pay a higher interest rate and more fees this month to renew a loan with Sovereign Bank. Bennett said Dodger Tickets LLC, another McCourt entity that did not file for bankruptcy, is in default "today."
Bennett also referenced his "deal with the devil" line in a filing that argued why the Dodgers should not take money from Selig.
"It's a literary allusion," Bennett said.
The hearing continues Wednesday afternoon.
-- Bill Shaikin in Wilmington, Del.
Photo: Frank McCourt. Credit: Spencer Weiner / Los Angeles Times