Dodgers File Chapter 11 Bankruptcy

The Los Angeles Dodgers, one of the most storied franchises in baseball, had to file Chapter 11 bankruptcy today. It will be interesting to see what happens now. Most of the time, these types of bankruptcies are to quickly structure a sale of the franchise, but it doesn’t look like the McCourts want to sell the Dodgers. But, it seems, everyone else does want them to sell the Dodgers.

McCourt tried to put together a sale of television rights that was worth $3 billion over 17 years, with a cash advance of $385 million, that would have resolved his family court problems and the team’s liquidity issues. But Major Leage Baseball shot it down, saying that McCourt would essentially be using a substantial portion of the $385 million for his personal reasons, thus sucking more value out of the franchise, and that the broadcast rights are worth much more than the contract provided. One theory is that McCourt was use the bankruptcy court to force MLB to accept the TV deal. However, Fox (the company offering the TV deal) now says that they do not want the deal forced on MLB, so where does that leave McCourt?

The franchise agreement that all owners have to sign with MLB is incredibly restrictive. Owners essentially give MLB the right to come in and do whatever they want “if it is in the best interests” of MLB. And relying on that clause, MLB stepped in and essentially placed the Dodgers into something akin to a receivership. So, it will be interesting to see if the bankruptcy court gives McCourt any leverage in the discussion as to how much of that franchise agreement is enforceable by MLB.

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