National League: MLB Seizes Control of Dodgers

[Party]

Frank McCourt’s over-leveraging of his baseball team has finally caught up with him. Today Major League Baseball announced it has taken control of the financial operations of the Los Angeles Dodgers, one of the premier sports franchises in the world, from McCourt. My colleague, Nathan Vardi, and I wrote about the financial troubles of the team and McCourt last month.

McCourt and his wife, Jamie–who are currently embroiled in a nasty divorce case–repeatedly used the Dodgers as collateral for lavish real estate spending. McCourt bought the team in 2004 for $430 million, borrowing all but $9 million of the purchase price. Court documents revealed that McCourt accumulated $459 million in debt from 2004-2009.

The spending continued, but the lending dried up. Despite two recent loans from cable partner Fox, McCourt still appeared to be in dire financial straits. Selig recently turned down a proposed $200 million to McCourt loan from Fox.

Taking over the Dodgers–something the NBA recently did with the New Orleans Hornets–was a move MLB resisted, especially in the wake of the bankruptcy of the Texas Rangers and the financial troubles of the New York Mets.

http://blogs.forbes.com/monteburke/2...geles-dodgers/

“Pursuant to my authority as Commissioner, I informed Los Angeles Dodgers owner Frank McCourt today that I will appoint a representative to oversee all aspects of the business and the day-to-day operations of the Club. I have taken this action because of my deep concerns regarding the finances and operations of the Dodgers and to protect the best interests of the Club, its great fans and all of Major League Baseball. My office will continue its thorough investigation into the operations and finances of the Dodgers and related entities during the period of Mr. McCourt's ownership. I will announce the name of my representative in the next several days.

“The Dodgers have been one of the most prestigious franchises in all of sports, and we owe it to their legion of loyal fans to ensure that this club is being operated properly now and will be guided appropriately in the future.”

This is big news.

[Ramp]

next up, the Mets!

[Omar]

Big fan of this move by Selig

[Party]

Yes, he will be forced to sell the club.

[emkayseven]

Big fan of this move by Selig

I'm not at all. Yeah, there's a shitty situation going on there, but when the league steps in it sets a nasty precedent. Like, why choose the Dodgers over the Mets, who have borrowed more money and spent NO money this offseason (while the Dodgers did)? Where is the line that got crossed for MLB to do this? Those are important questions that have to be answered for the future, because this issue will no doubt come up again. The Rangers had to borrow money but MLB didn't take over the team (Hicks did have to sell but it wasn't MLB who forced him to, it was the court). In the future if, say, Robert Nutting dies and there's a fight for control of the team after his passing, and during this time the team needs a loan to make payroll, is that enough for MLB to intervene? If not, why? Because they think a court will force the team to sell it? Because it's the first issue they're having? Because it's the Pirates?

It just sets a terrible precedent that, I think, makes no sense, especially in light of what's going on with the Mets. In that case you've got an owner who refuses to sell despite the obvious fact he's got no money and is being sued for billions of dollars, the team sucks, and hasn't been able to sign any players. In the Dodgers case you've got a claim to a team by two parties that will, inevitably, be settled in court (likely they'll have to sell) but is still operating by signing players (Juan Uribe, Ted Lilly, Jon Garland) and making extensions (Billingsley). The difference? The Mets' owner is friends with Bud.

Besides the precedent, you have the logistical issues: if the Dodgers are in it, can they make a trade? If they're out of it, can they trade players away without being too suspect?

Once again this is a mistake CAUSED by Bud that now he has to scramble and fix so his legacy isn't tarnished.

[Todd]

The MLB's then management of the Rangers made it fairly impossible to sign Matt Purke out of the draft 2 years ago, so I would assume moves would be affected.

[Swifty]

I'm not at all. Yeah, there's a shitty situation going on there, but when the league steps in it sets a nasty precedent. Like, why choose the Dodgers over the Mets, who have borrowed more money and spent NO money this offseason (while the Dodgers did)? Where is the line that got crossed for MLB to do this? Those are important questions that have to be answered for the future, because this issue will no doubt come up again. The Rangers had to borrow money but MLB didn't take over the team (Hicks did have to sell but it wasn't MLB who forced him to, it was the court). In the future if, say, Robert Nutting dies and there's a fight for control of the team after his passing, and during this time the team needs a loan to make payroll, is that enough for MLB to intervene? If not, why? Because they think a court will force the team to sell it? Because it's the first issue they're having? Because it's the Pirates?

It just sets a terrible precedent that, I think, makes no sense, especially in light of what's going on with the Mets. In that case you've got an owner who refuses to sell despite the obvious fact he's got no money and is being sued for billions of dollars, the team sucks, and hasn't been able to sign any players. In the Dodgers case you've got a claim to a team by two parties that will, inevitably, be settled in court (likely they'll have to sell) but is still operating by signing players (Juan Uribe, Ted Lilly, Jon Garland) and making extensions (Billingsley). The difference? The Mets' owner is friends with Bud.

Besides the precedent, you have the logistical issues: if the Dodgers are in it, can they make a trade? If they're out of it, can they trade players away without being too suspect?

Once again this is a mistake CAUSED by Bud that now he has to scramble and fix so his legacy isn't tarnished.

Well, not really, the big difference is the McCourt's heavily borrowed against their ownership interest in the Dodgers to a percentage not even approached by the Wilpons.

If McCourt had been given the $200 million loan, he would have borrowed close to $800 million against the team in the 7 years he's owned them. That's catastrophic.

[emkayseven]

Yes, but again, it's Selig's fault from the beginning. It's been evident since the day the McCourts bought the team that they didn't have the resources and that the purchase was highly leveraged. It's been evident in his dealings throughout ownership. What makes today different from a year ago? Why did MLB decide to intervene now?

I still think the Wilpons are in a tougher situation. They have yet to admit that they're in trouble, and to me, that's the most jarring thing about their situation. They clearly have little to no money, have had to borrow from MLB to meet payroll, and all the while have said their finances are fine and they don't need to sell the team. They say they need a partner not to bail the team out, but to raise capital to pay for their other issues, despite saying their personal finances and the team's aren't intertwined. They've spent no money the last two years. It's widely known and acknowledged that Madoff himself was involved in the Mets' business plan. The owners are being sued for 1 billion dollars. Billion. With a B. That's way worse than anything McCourt has done. Within a year it's pretty obvious that the bankruptcy courts would have forced a sale of the Dodgers, but this Mets shit could go on forever.

[Swifty]

I don't think there's any thing for the Wilpons to worry about, other than the fact that they're no longer independently wealthy.

The Mets / Citi Field / SNY is a fine entity with no real cash flow issues. They're handcuffed short term, but they should be able to sustain a $110 million-ish payroll, they just can't afford to throw good money after bad right now. To me, that's not a bad thing for baseball at all.

[emkayseven]

I mean, they couldn't even make payroll and took a loan from MLB, not even an outside private entity. That's not good for baseball at all. They have over $400 million in debt on the team.

[Swifty]

$400 million in debt on a business entity worth around $1 billion.

[emkayseven]

if you include SNY which they own 68% of they have about $1 billion in debt.

According to Forbes their debt/value % was 60% preseason. For some comparisons:

The Yankees' is 4%.
The Marlins' is 40%.
The Dodgers' is 54%.

[Party]

MK, you are missing the larger picture. There is another layer with the Dodgers fiasco that could stretch this out for a very long time. The Mets have a ton of debt, but Wilpon is not in danger of losing 50% of the club to his ex-wife. The Mets situation will be resolved by the end of the season.

The Dodgers still have to go through divorce court and then the inevitable bankruptcy. We are talking about 1-2 years of a club being in limbo.
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Why is our debt so high?

Team had to contribute ~$130 million upfront to build the stadium.
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I mean, they couldn't even make payroll and took a loan from MLB, not even an outside private entity. That's not good for baseball at all. They have over $400 million in debt on the team.

MLB has a crazy low interest rate that outside firms cannot match. In the Dodgers case, they tried to get a private loan from FOX and the league decided that was too far.
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if you include SNY which they own 68% of they have about $1 billion in debt.

According to Forbes their debt/value % was 60% preseason. For some comparisons:

The Yankees' is 4%.
The Marlins' is 40%.
The Dodgers' is 54%.

Not pictured: How much income SNY generates, which I'm sure is absurd.

[emkayseven]

MK, you are missing the larger picture. There is another layer with the Dodgers fiasco that could stretch this out for a very long time. The Mets have a ton of debt, but Wilpon is not in danger of losing 50% of the club to his ex-wife. The Mets situation will be resolved by the end of the season.

The Dodgers still have to go through divorce court and then the inevitable bankruptcy. We are talking about 1-2 years of a club being in limbo.

How do you figure so certainly that the Mets situation will be sorted out by the end of the season? It's been carrying on for two years already.

And like I said, McCourt is not in danger of losing the club to Jamie, any person can see the court will force them to sell it. This is a move by MLB because Selig is embarrassed he allowed them to buy it in the first place and wants the inevitable new owners to think everything is running smoothly. It's absurd for MLB to pick and choose who to "bail out" - ESPECIALLY when all reports except for MLB's say that their financials are in line with the guidelines set forth by MLB. They're basically taking over because of fear of what might happen in the future.

[Namaste]

From DodgersBlues.com

April 20, 2011
This Bud's for you!

First of all, before I get into the situation at hand, let me say this to all those who've tweeted me today asking why I haven't updated the site yet: SUCK MY BALLS. It's Wednesday, and I think I've already worked about 45 hours this week. It's 10pm and I just had a bowl of cereal—the first fucking thing I've eaten since about 11am. It's fantastic that a lot of you spend your days facebooking with people who really don't give a shit about you, tweeting about your hemorrhoids, and researching the little league stats of Jerry Sands (who, until today, I thought was black), but unfortunately I'm not in the same position. I'm not writing this to say woe is me—I'm writing it to say fuck you.

Now that I got that off my chest, let's quickly talk business. It was seven years ago that Major League Baseball made a colossal mistake by allowing Frank McCourt and his lovely wife to purchase the Dodgers. On Wednesday, Bud Selig took a huge step to correct that mistake by taking McCourt's hands off the Dodgers' steering wheel. Must have been a real shocker to Frank considering that he just installed 25 new lights in the parking lot. I mean, what more can an owner do to show his committment to Major League Baseball?

You certainly have to applaud Selig's actions, even if it means even more legal action in the coming weeks and months. Things will get worse before they get better, but there's now no mistaking: things will get better. Let's face it, the Dodgers blow anyway, so big deal if this takeover fucks up the season. It's a complete embarrassment to Frank, and there's nothing that makes me happier to see him humiliated in front of the baseball world. His pants are down and he has a little weenie.