A Los Angeles Dodgers baseball cap.
Los Angeles Dodgers Holding Company LLC has filed Chapter 11. (Photo Credit: CC BY-SA/anthony shao/Flickr)

Employees of the Los Angeles Dodgers may not receive pay as normal on Thursday, June 30. The Los Angeles Dodgers Holding Company LLC has filed for Chapter 11 bankruptcy, reports NBC Sports. Three days before payroll comes due, team owner Frank McCourt has admitted that he cannot meet payroll for team staff or players.

Dodgers buy time to satisfy creditors

The Chapter 11 filing halts legal action against Los Angeles Dodgers Holding Company LLC, the bankruptcy estate. This shields the team from up to 49 creditors who are prepared to sue, according to paperwork filed. It may not prevent Major League Baseball Commissioner Bud Selig from wresting full control of the team away from McCourt, however. Whatever the case, legal experts are confident a major reorganization of the Dodgers’ is coming.

Fox Sports not in McCourt’s corner

Frank McCourt has been counting on a 17-year broadcasting rights deal between the Los Angeles Dodgers and Fox Sports, which according to Bloomberg is worth around $3 billion. Various sources indicate McCourt has even taken out cash advances on the deal to meet team expenses. Some sources indicate personal expenses were also involved, partially related to McCourt’s messy divorce.

All of this plus the Chapter 11 indicates Frank McCourt wasn’t operating with a financial back-up plan. The Wall Street Journal speculates McCourt will ask the bankruptcy court to compel Fox Sports to follow through with the remainder of the TV deal money, but whether his request will be granted is up in the air. Fox has taken a hands-off approach with Frank McCourt in recent months. Legal experts also point out the bankruptcy court’s primary interest is the Los Angeles Dodgers’ creditors, not the Dodgers or Frank McCourt.

MLB says McCourt’s cash-grab shortchanged team

According to NBC Sports, Selig and Major League Baseball are taking the position that Frank McCourt accepted less money from Fox Sports than he could have received for a broadcasting deal of that length. If the court determines that McCourt short-changed the Los Angeles Dodgers for quick cash, the end scenario might be a forced auction sale. In the meantime, MLB will no doubt be responsible for the Dodgers payroll until the matter is settled in court.

McCourt stressed the Dodgers will move forward:

“The Chapter 11 process provides the path on which to position the Los Angeles Dodgers for long-term success,” he said. “The process will allow us to focus on maximizing value in a manner that is transparent and driven by the best interests of the Los Angeles Dodgers and our fans.”

The Dodgers are a valuable franchise

In the bankruptcy filing, Los Angeles Dodgers Holding Company LLC lists between $500 million and $1 billion in assets, with under $50,000 in liabilities. Bankruptcy counsel Bruce Bennett of New York-based law firm Dewey & LeBoeuf emphasized the Dodgers will be able to meet financial obligations:

“The deal with Fox demonstrates that the Dodgers have enormous value which substantially exceeds the team’s current and future liabilities,” said Bennett. “The media rights will, one way or another, generate enough value to facilitate a reorganization.”

Frank McCourt took cash advances on Fox deal


Bloomberg: http://bloom.bg/jqcqsA

NBC Sports: http://hardballtalk.nbcsports.com/2011/06/27/the-dodgers-file-for-bankruptcy/

PRNewswire: http://prn.to/lvw7Ab

Wall Street Journal: http://online.wsj.com/public/resources/documents/dodgers.pdf

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