DOVER, Delaware — A Delaware judge on Friday rejected the Los Angeles Dodgers‘ proposed $150 million bankruptcy financing plan, directing the team to instead negotiate a loan deal with Major League Baseball.
Judge Kevin Gross said in an eight-page order that the team had failed to show the terms of its secured financing with hedge fund Highbridge Capital were fair, given the more favorable financial terms in MLB's unsecured loan offer.
The Dodgers previously rejected MLB's offer and had refused to negotiate with the league, arguing that its financing proposal was simply an attempt by baseball commissioner Bud Selig to take control of the team and force a sale.
While acknowledging an “underlying feud” between Selig and Dodgers owner Frank McCourt, Judge Gross said he was basing his decision on debtor-in-possession, or DIP, financing on the narrowest grounds possible and leaving arguments over the team’s management for later.
“The court finds that the Baseball loan is not a vehicle for Baseball to control debtors,” wrote Gross, who ordered the team to negotiate with MLB cooperatively and in good faith.
“Debtors and Baseball are entitled to the other’s full cooperation in finalizing and administering an unsecured loan facility,” he said.
Rob Manfred, MLB's executive vice president for labor relations and human resources, issued a statement praising the ruling.
“We are pleased that the court has agreed with our position with respect to providing the DIP financing and shares our long-standing view that the proposal put forth by Major League Baseball is the best option for the Los Angeles Dodgers franchise,” Manfred said. “Major League Baseball remains committed to serving the best long-term interests of the Dodgers and their fans.”
Bruce Bennett, attorney for the Dodgers, issued a statement saying a short form, unsecured credit agreement with MLB, combined with other revenue sources, should provide the team with ample liquidity to meet team payroll and other expenses.
The Dodgers filed for bankruptcy protection on June 27, blaming Major League Baseball for refusing a week earlier to approve a multibillion-dollar TV deal with Fox Sports that McCourt was counting on to keep the troubled franchise afloat and meet payroll deadlines at the end of June.
Selig’s rejection of the TV deal came after he took the extraordinary step in April of assuming control of the troubled franchise and appointing a monitor to oversee its day-to-day operations, saying he was concerned about the team’s finances and how the Dodgers were being run.
Bennett reiterated in his statement Friday that the Dodgers are moving forward with plans for a competitive auction of exclusive cable television rights, while giving due consideration to the team’s existing Fox contract.
“The Dodgers expect that a sale or license of exclusive cable television rights will fully resolve all of the Dodgers‘ financial challenges as well as generate value for holders of the equity interests in the debtors,” Bennett said.