Judge Denies Frank McCourt's Bankruptcy Loan, As Major League Baseball Tightens Its Grip On Dodgers | The Informer | Los Angeles | Los Angeles News and Events | LA Weekly
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Judge Denies Frank McCourt's Bankruptcy Loan, As Major League Baseball Tightens Its Grip On Dodgers

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Fri, Jul 22, 2011 at 1:08 PM

click to enlarge Frank McCourt
  • Frank McCourt
Updated with judge's ruling, McCourt's lawyer's statement.

Continuing Frank McCourt's unbroken streak of losing court decisions, a Delaware judge today rejected his costly bankruptcy loan, opting instead for cheaper terms offered by Major League Baseball.

Despite what everybody will say about how this does not give MLB control over the Dodgers, it does move McCourt one step closer to being forced out.

"That's pretty close to putting MLB in the driver's seat," says Robert Rasmussen, dean of the USC Gould School of Law. The decision "is going to have the effect of starting the transfer of control from McCourt to Major League Baseball."

McCourt's proposed loan, through Highbridge Principal Strategies, would have cost the Dodgers about $25 million in interest and fees. Though this was later reduced to about $23 million, it was still much more expensive than the loan offered by Major League Baseball.

Though it was more expensive, it was clearly a better deal for Frank McCourt. First, he would not have to answer to MLB -- which he rightly fears will be looking for any excuse to declare a default. And second, the Dodgers would pick up the $5.25 million fee that has already been paid to Highbridge. Without the Highbridge loan, that money now has to come out of Frank McCourt's pocket.

But the key thing about Gross's ruling is that it draws a clear distinction between Frank McCourt's best interests and the best interests of the Dodgers. Frank has been saying all along that the two are one and the same. The ruling shows that Gross disagrees. That -- more than the $5.25 million he just lost* -- is the hardest blow to McCourt.

(*Saturday update: According to @BillShaikin, Frank's attorneys say he'll be able to get this money back from the Dodgers after all.)

Does this mean McCourt is out? No, not yet. The next battle will be a fight over the Dodgers' TV rights. But by already declaring -- very early on -- that McCourt's interests are different from the Dodgers' interests, Gross has put himself squarely on MLB's side of the argument. That's bad news for Frank.

Potentially the most ominous line in the ruling for McCourt comes in this footnote:

It is unclear to the Court how Debtors think they can successfully operate a team within the framework of Baseball if they are unwilling to sit with Baseball to consider and negotiate even more favorable loan terms while under the Court's protection.
If we know one thing about Frank McCourt by now, it's that he doesn't play well with others. Every single partnership he's ever had of any significance -- including his marriage -- has ended in acrimonious litigation. His strategy is total, unconditional legal victory. He does not negotiate.

And now a judge is already telling him -- just three weeks into the bankruptcy -- that he's being obstinate and he should negotiate. Doesn't bode well.

As they always do, McCourt's lawyers are trying to spin this as something other than a defeat. Judge for yourself.
The ruling is on page 2. McCourt's lawyer's statement is on page 3.

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