Baseball Takes Over Control Of The Los Angeles Dodgers [News Report]

by Avinash Saxena

Frank McCourt’s over-leveraging of his baseball team has finally caught up with him. Today Major League Baseballannounced 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 Iwrote about the financial troubles of the team and McCourt last month.

The Los Angeles Times’ Bill Shaikin was the first to report the news.

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.

But now, Selig’s hand has been apparently forced.

Forbes values the Dodgers at $800 million. My colleague , Mike Ozanian, says MLB should have no problem selling the team if forced to do so. The reason: its cable television rights, currently owned by Fox, which pays them over $30 million a year, are due to expire in 2013. The NBA’s Los Angeles Lakers recently landed a reported 20-year, $3 billion agreement with Time Warner Cable. The Dodgers could expect at least that much in a similar deal.

McCourt’s ownership run has been financially troubled from the start. In 1977 he founded the McCourt Co., a Boston-based commercial real estate firm that specialized in parking lots. Two years later he married his college sweetheart, Jamie Luskin. As McCourt’s business thrived, he hungered for a Major League Baseball team. In 2002 McCourt made an unsuccessful bid for the Boston Red Sox. A year later he looked over the Los Angeles Angels of Anaheim. Finally in 2004, when Rupert Murdoch’s Fox Entertainment Group wanted to get rid of the Los Angeles Dodgers, McCourt realized his dream.

He didn’t have to spend much of his own money to do it. The sale price for the ball club and its stadium in Chavez Ravine was $430 million. McCourt borrowed all but $9 million of the purchase price, an unusually large amount of financing. That sum included a $196 million loan from Fox, which used one of McCourt’s South Boston parking lots as collateral. (Fox later sold the lot for $205 million.)

Major League Baseball approved the deal, apparently believing McCourt would eventually work his way out from under the load. And under McCourt the Dodgers have had healthy returns. Last year revenues were an estimated $246 million (net of revenue sharing) and operating income was $32.8 million. FORBES estimates that the Dodgers’ value has nearly doubled to a current $800 million under his ownership. But the debt increased, too, and now stands at 13 times Ebitda, a problem that came to light in late 2009 when Jamie McCourt filed for divorce.

The central issue in the divorce is the Dodgers. Frank contends that the team is solely his. Jamie believes they are a shared asset. The trial is currently on break, and there is no new court date scheduled. It may not be taken up again until early next year, and how it will end is anyone’s guess. But what’s clear from the court documents is that Frank McCourt used the team as collateral to rack up $459 million in debt from 2004 to 2009.

Over that period McCourt took $108 million of the money in personal distributions and funneled it into the couple’s real estate purchases. It also “supported the couple’s very expensive lifestyle,” says David Boies, the superlawyer representing Jamie. The McCourts bought eight houses across the country, including a $28 million Malibu mansion. (A house in Cabo San Lucas was sold last year.) In 2006 McCourt turned two of the stadium’s parking lots into a separate company, then took a $60 million loan against it. He used $12 million of that on the team and took the rest of the money, court documents say. According to Raman Sain, a principal at accounting firm Holthouse Carlin & Van Trigt, who studied the McCourt’s legal documents on behalf of the Los Angeles Times, Frank McCourt borrowed $23 million against the team in 2008 and $8.5 million in 2009.

According to Sain, in 2009 every dollar in free cash the Dodgers earned “was used to make payments on the interest on the debt,” not the principal. (The Dodgers dispute this.) It doesn’t help that many of the Dodgers’ deferred player salaries, like the $20 million still owed to former outfielder Manny Ramirez, are coming due. The McCourts’ financial statements since 2009 have not been publicly available. Boies says the team has added “tens of millions of dollars” in debt since then, but not, apparently, as much as Frank McCourt would have liked. Though the Dodgers say they have paid back all debt accrued since 2009, in the last two years the team has been turned down for loans from Citibank and the founder of the TV infomercial company Guthy-Renker. A possible business venture with Chinese investors, which would have added some cash to the larder, fell through. Last year the Dodgers took an undisclosed cash advance from cable partner Fox. And in February the Dodgers requested a $200 million loan from Fox—using the team’s next four years of cable rights as collateral. Selig did not approve it.

Advertisements
Tags: ,

3 Responses to “Baseball Takes Over Control Of The Los Angeles Dodgers [News Report]”

  1. laylasinu.cwahi.net is a leading provider of payday loans online nationwide. Through our assistance, you will get the amount of money you need and a professional service you need. The application process is simple. Once the form has become submitted, we immediately review your information and inform you of your approval.
    At dempjackgurgkel.cwahi.net , you may get approved regardless with the financial history your sincerity meet the following necessities:

    -Currently have a job (or receive normal income)
    -Make no less than $1000 per month
    -18 years of age or older and a good U. S. citizen
    -Have valid checking or savings account with direct deposit

    With the payday loans, you will take advantage of the money you need, when you need it.

    There is simply no easier supply of fast cash for pressing expenses. And, our via the internet transactions are incredible acquire. Once your loan is normally approved, your money will arrive safely in your bank account with 24 hours. Apply now and practical experience our convenient and user-friendly our payday loan program.

    Keywords:payday loan no direct deposit needed payday loan houston projectpayday scam net cash loan
    Resourse:payday board game payday loans bad credit no faxing ppayday loans.txt 396

  2. inralisi.cwahi.net is a leading provider of online payday advance nationwide. Through our offerings, you will get the cash you need and your professional service you require. The application process is simple. Once the form is actually submitted, we immediately review your information and inform you of your approval.
    At obininnon.cwahi.net , you can actually get approved regardless to your financial history truthfulness meet the following necessities:

    -Currently have a career (or receive usual income)
    -Make at least $1000 per month
    -18 years or older and your U. S. citizen
    -Have valid checking or piggy bank with direct deposit

    With our payday loans, you will have the money you need, when you need it.

    There is simply no easier way to obtain fast cash for vital expenses. And, our internet transactions are incredible safeguarded. Once your loan is usually approved, your money will arrive safely in your money with 24 hours. Apply now and experience our convenient and user-friendly our payday loan program.

    Keywords:payday loan collection faxless payday loans with no credit check or teletrack payday loans fax free payday loan canada no faxing
    Resourse:cash jiffy loan payday arkansas payday loan laws northwest payday loans

Trackbacks

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: