The Los Angeles Dodgers filed for bankruptcy protection Monday in Frank McCourt’s latest effort to preserve his franchise ownership, which remains highly dependent on the baseball team’s future cable television deal.
McCourt was facing a Thursday deadline to make his latest team payroll, a hurdle that he could no longer pass once Major League Baseball commissioner Bud Selig on June 20 rejected McCourt’s proposed 17-year contract extension with Fox Sports that would have advanced him $385 million immediately on a deal set to run from 2014 to 2030.
With his bankruptcy filing, McCourt obtained $150 million in financing from JP Morgan Chase-affiliated Highbridge Principal Strategies. The financing, McCourt hopes, buys time for him to get a favorable ruling from the bankruptcy court on a new TV extension.
According to the Dodgers’ current cable TV agreement, which runs through 2013, the team is not allowed to negotiate with anyone but Fox for an extension until December 2012. However, the Dodgers are asking the court to authorize what essentially would be an auction for those future TV rights.
The proposed bidding would be at least a partial response to complaints that McCourt is harming the franchise by undervaluing the rights in the long term to shore up his short-term finances.”To the extent authorized by this court, (the Dodgers will) implement procedures that are designed to promote a competitive sale process with respect to those exclusive cable television rights, one that results in the highest and best offer being acceptable to all parties,” the bankruptcy filing states. “In fashioning procedures, (the Dodgers) will give due consideration to Fox Group and the provisions of the existing Fox agreement.”
Any open bidding on the Dodgers’ cable TV rights would presumably include Time Warner Cable, which earlier this year made a deal to launch English- and Spanish-language networks in 2012 dedicated to the Los Angeles Lakers (ending a Fox cable run that dates back to the 1980s). The Dodgers could be a heady complement for the new Time Warner outlets, despite the baseball team’s current turmoil. Said Selig in a statement: “We have consistently communicated to Mr. McCourt that any potential solution to his problems that contemplates mortgaging the future of the Dodgers franchise to the long-term detriment of the club, its loyal fans and the game of baseball would not be acceptable. … The action taken today by Mr. McCourt does nothing but inflict further harm to this historic franchise.”
The MLB constitution that McCourt signed onto when he bought the Dodgers in 2004 allows baseball to seize the franchise upon a bankruptcy filing, but several observers have speculated that the court could overrule MLB on this point.
Last week, the Los Angeles Times reported that Fox would not support McCourt if he filed for bankruptcy and asked a judge to push through the TV deal. Fox has reason to be torn on this matter: As a national TV partner of baseball, there’s a limit to how willing it would be to antagonize MLB leadership, but at the same time, a real reluctance to allow the Dodgers to escape months after the Lakers’ impending departure was announced.