Bill Shaikin explains:
Dodgers owner Frank McCourt can use the financing he obtained this week to pay the team’s immediate bills, attorneys for the Dodgers and Major League Baseball agreed Tuesday.
The U.S. bankruptcy court scheduled a July 20 hearing at which MLB can ask to replace McCourt’s financing with money furnished by the league.
When the Dodgers filed for bankruptcy on Monday, McCourt said he had obtained a $150-million loan to cover the team’s expenses during the proceedings and remain in control of the team for now. That loan carried an interest rate of at least 10% and a $4.5-million fee.
On Tuesday, MLB proposed its own financing, with an interest rate of 7% and no fee.
The parties agreed to postpone consideration of the MLB financing until July 20. If the MLB financing is approved, the $4.5-million fee tied to McCourt’s financing would be cut to $250,000. In the meantime, McCourt can use his financing to pay the Dodgers’ bills.
The parties also agreed to permanently delete language in McCourt’s financing agreement stipulating the auction of the Dodgers’ cable television rights by a certain date. However, McCourt’s long-term plan for recapitalizing the Dodgers still depends upon the bankruptcy court approving a rights deal over MLB objections.
This may not be the analysis you’re coming here looking for, but I readily admit that I have no idea what this means in the big picture. (For the record, neither does Dan Kaplan of the SportsBusinessJournal, which makes me feel a little better.) Short term, it means that the fun speculation over whether McCourt would make payroll on June 30 is no longer an issue, now that both sides have agreed to let McCourt take the $150m loan – you know, the one that Hardball Talk’s Craig Calcaterra referred to as ”a crappy loan” with “bad terms”.
This is good news because… well, that’s the part I’m unclear about. It keeps McCourt in power for at least another several weeks or more, which is bad. It allows him to take yet another loan that trades long-term health for short-term gain (pending, of course, MLB’s July 20th application to replace it with their own loan), which is definitely bad. It buys him time to continue trying to secure long-term financing, which is extremely bad.
I suppose if there’s a benefit for MLB here, it’s that the money supposedly can only be used for Dodger finances, not personal expenses, and it avoids, for now, the further lawsuits which would certainly occur if they had to step in and actively take control due to a missed payroll. Perhaps not standing in the way of this loan allows them some leverage for the next time McCourt accuses them of having a pre-determined agenda to push him out of power, and that may come in handy when McCourt attempts to get the court to overturn MLB’s rejection and approve the Fox deal.
So the takeaway here, at least from my completely non-expert view… is that we’re all on ice for another three weeks, at the very least. McCourt will make payroll, both sides will dig in against each other, and we’ll be in the middle again, cringing daily with each veiled (or not-so-veiled) legal threat from a highly-paid attorney.
I think Gary at 7thinningsketch has the right idea…
Update: Tim Brown at Yahoo, in a series of tweets, provides some more detail…
MLB will move within days to have its monitors — Schieffer and Allen — re-installed at Dodger Stadium. Also, will request a trustee…
Sources: MLB very happy with events today in Delaware. Most important thing to delete media rights auction. Figure out rest in 3 weeks.
Short term, McCourt gets $60 million to run franchise thru July 20. MLB not unhappy that’s not its money.
Now I understand this better. McCourt can’t auction off the TV rights, which was a big possibility for him, and is therefore dependent on the court to rule in his favor. Who knew that in order to be a baseball writer I’d need to forget about the OPS and focus on the JD?