Battle over Dodgers moves on in bankruptcy court

[June 29, 2011]  WILMINGTON, Del. (AP) -- Los Angeles Dodgers owner Frank McCourt may have won the first round in a bankruptcy court fight with Major League Baseball, however the two sides are gearing up for what could be a protracted battle for control of one of the most storied teams in baseball.

A Delaware judge on Tuesday gave interim approval to a $150 million bankruptcy financing arrangement sought by McCourt to keep the cash-strapped ballclub operating, but not before the league squeezed concessions on the loan terms and questioned whether McCourt should retain control during the Chapter 11 case.

While the Dodgers' blame their liquidity crisis on Commissioner Bud Selig's refusal to approve a broadcast rights agreement with Fox Sports, the league says the problems meeting payroll stem from McCourt's financial mismanagement, his use of team assets for his personal benefit, and "the resulting decline in attendance caused by the community's extraordinary unhappiness with the club's owner."

A person familiar with the league's plans told The Associated Press that MLB probably will file a motion to seize the Dodgers, who have been operating under the oversight of a monitor appointed by Selig in April. The person spoke on condition of anonymity because of the sensitive nature of the situation.

Baseball's constitution allows Selig to take control of a team that seeks Chapter 11 protection, but the league first must file a motion seeking termination of the franchise. The league argued in court papers that the commissioner could terminate the Dodgers' right to operate the club as a result of the bankruptcy filing upon a vote of 75 percent of league teams.

Attorneys representing Selig's office said threshold matters in the bankruptcy case include whether it was properly filed, whether McCourt should retain control, and whether a monitor appointed by Selig to oversee the team can continue to perform his duties.

For now, however, the two sides are content to keep the lights on, the players paid and the fans in the seats, pending a July 20 hearing on the financing.

"I recognize that there is a lot ahead of us," said Judge Kevin Gross, who asked MLB attorney Thomas Lauria for a copy of the league's constitution, noting that it "has an impact here."

Lauria disagreed with Dodgers attorney Bruce Bennett that the league and the team were adversaries, saying the league views the Dodgers as one of its "cherished crown jewels."

Lauria did suggest, however, that the league was at loggerheads with McCourt, whom he blamed for "today's sorry mess."

Gross granted the Dodgers' request for debtor-in-possession financing after attorneys for both sides huddled behind closed doors for more than an hour, emerging with an agreement to make two modifications to the proposed agreement with hedge fund Highbridge Capital.

One of the modifications reduces the exit fee that would be due to Highbridge from $4.5 million to $250,000. The other removes certain milestones in the financing agreement regarding the sale of the team's broadcast rights, including a July 29 deadline to agree on a sale process calling for bankruptcy court approval of a sale within six months of Monday's bankruptcy filing, and a closing within 45 days of the court order.

Earlier Tuesday, the league objected to the Highbridge financing proposal and offered its own, accusing McCourt of siphoning off more than $100 million in club revenue and driving the Dodgers into a liquidity crisis. It also cited his lavish lifestyle with his ex-wife, Jamie, who is battling McCourt for half of his ownership assets.

The league argued that its own financing offer was superior because it eliminated the $4.5 million exit fee, reduced the interest rate by 3 percent, did not require the team to encumber assets, and did not impose an artificial timeline for disposing of the broadcast rights.

The Dodgers countered that the league's objection to the team's financing proposal revealed Selig's "overarching desire" to exert a "stranglehold" on the team.

"The commissioner's financing proposal is nothing other than a thinly veiled effort to take total control over the debtors and these cases," team attorneys wrote, adding that it is no secret that Selig wants a change of ownership.

"The commissioner's efforts seem to be driven by a personal animosity towards Mr. McCourt that unbiased observers have recognized as being 'unprecedented,'" they added, citing media reports. "The debtors have no obligation to accept financing from such a determined adversary."

While agreeing to the interim financing, both sides reserved their rights to argue all issues surrounding the bankruptcy filing, including the possibility that the league might seek to have the case dismissed, and whether former Texas Rangers President Thomas Schieffer should remain as monitor of the Dodgers. Schieffer was appointed to monitor the team on Selig's behalf after the commissioner took the extraordinary step in April of assuming control of the troubled franchise, saying he was concerned about the team's finances and how the Dodgers were being run.

[Associated Press; By RANDALL CHASE]

AP Baseball Writer Ben Walker in New York contributed to this report.

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