29 Apr 2011
- Written by Jack Humphreville
DODGER FINANCES ON THE ROCKS - Frank McCourt, affectionately known as The Boston Parking Lot Attendant on a good day, will eventually be spending a considerable amount of time in bankruptcy court.
We all know that Frank is a riverboat gambler, loves deals, and has the stomach for living with heart wrenching amounts of debt that would not allow a corporate raider to sleep at night.
No one knows this better than Jamie McCourt, his ex wife and former business partner, whose desire for financial security was one of the major issues that prompted their tabloid divorce war.
But this time Frank went too far when he violated Bud Selig’s trust by obtaining a personal loan for $30 million to meet the Dodgers’ operating expenses without consulting with the Commissioner’s office in advance. As a result, the Commissioner has appointed Tom Schieffer, the former President of the Texas Rangers (1991-1998), to be the Monitor of the Los Angeles Dodgers to “oversee the day to day operations, business, and finances of the Dodgers and all of the franchise’s related entities.”
Schieffer’s first action will be to control the check book of the Dodgers and franchise related assets, including Frank’s parking lot revenues. This means that the Dodgers are no longer Frank’s personal piggy bank. And without the Dodgers cash, Frank will not have the resources to meet his many financial obligations, both personal and corporate.
While the extent of Frank’s personal and corporate obligations are not known, we know that he is strapped for cash and has few assets that are not mortgaged. The only collateral for the $30 million personal loan from Fox Sports is the net proceeds from the potential litigation against Bingham McCutchen, the law firm that bungled the ownership agreement between Frank and Jamie. But that will be a long time in coming, if at all, since Bingham preempted Frank and filed a law suit in its hometown of Boston.
So how is The Boston Parking Lot Attendant going to pay his alimony? Or the taxes, mortgage payments, and upkeep on his $100 million of residential real estate? Or service the $30 million personal loan from Fox Sports?
Frank also has obligations on other ventures, such as the Los Angeles Marathon that he purchased in September 2008.
We also know that the Dodgers are in default on their loans to the banks. And this no doubt includes Frank since more than likely he cosigned the notes.
In addition, there will be considerable pressure on McCourt to service the defaulted loans on the Dodgers “related assets” such as Dodger Stadium and the Chavez Ravine real estate that is not owned by the Dodgers, but by McCourt in separate entities.
And how will Frank pay his many high priced lawyers? His and her divorce lawyers will continue to cost a fortune as will lawyers to fight the Commissioner and the Bingham McCutchen law firm. Plus, he is on the hook to pay the lawyers of his lenders as they try to remedy his defaulted loans.
Compounding the massive amounts of debt and his total lack of liquidity and financial flexibility is a very complicated corporate structure with multiple guarantees and the cross collateralization of assets. And more than likely, there will be some nasty surprises that will further alienate the lenders and the Commissioner.
At the same time, the Dodgers may lose money this year because attendance is in the tank, off 25% over the last eight games.
Frank is a fighter. But in this case, the deck is stacked against him. The Dodgers are in default on their loans and may lose money this year. The team is having trouble making payroll. He is in default on numerous loans that are collateralized by the franchise, the stadium, and the land. And fighting the Commissioner has not been successful in the past.
The only viable alternative for Frank to protect the value of his assets is bankruptcy court where he and his creditors can restructure of his debts and assets in an orderly manner, including his ownership interest in the Dodgers, the franchise related assets, and the multiyear contract with Fox Sports.
About the only good news is that the Commissioner of Baseball has appointed a well respected baseball executive with an excellent record of public service to protect the Dodgers from McCourt and its lenders.
Hopefully, we will have a new, well capitalized owner that will provide a safe environment for a winning team. And maybe if we let our fantasies run wild, we might have the same problem that the Texas Rangers had last year when they were under the supervision of the Commissioner: a trip to the World Series.
Other commentaries on the MLB takeover of the LA Dodgers
● D J Waldie- “Take Them Out of the Ballgame”
● Glenn Rothner- “Do We Want Another Rich Man’s Plaything or a Community Asset?”
Vol 9 Issue 34
Pub: Apr 29, 2011