Highbridge Principal Strategies, a hedge-fund unit of J.P. Morgan Chase & Co., is providing the $150 million loan, known as debtor-in-possession financing. But Major League Baseball has asked the U.S. Bankruptcy Court in Delaware to replace the Highbridge loan with a league-provided financing package that has a lower interest rate and no fee.
U.S. Bankruptcy Court Judge Kevin Gross has set a July 20 hearing on the matter.
A spokesman for Highbridge declined to comment on the fee.
Robert Siegfried, a spokesman for embattled Dodgers owner Frank McCourt, who filed a Chapter 11 petition for the team on Monday, said the payment was a customary commitment fee for securing financing. He declined to confirm the size of the fee, but two other people involved with the Dodgers bankruptcy case said it was about $5 million.
Mr. Siegfried said the Dodgers didn't disclose the amount of the fee because Judge Gross didn't ask for details of the team's financing deal with Highbridge.
MLB took control of the Dodgers' day-to-day operations in April amid concerns about the team's finances and security at Dodger Stadium, where a San Francisco Giants fan was beaten into a coma on Opening Day. Providing the DIP financing for the Dodgers would tighten the league's control over the team because the MLB would essentially become its lead creditor.
Mr. McCourt sought bankruptcy-court protection for the Dodgers in a last-ditch effort to keep the team. It didn't have enough money to cover its payroll and other financial obligations that were due this week. Missing those payments would have allowed MLB to move to seize the team.
Lawyers for the league filed an objection to the Dodgers financing with Highbridge Tuesday morning before an initial hearing in the case. They argued that the terms of the financing deal were too expensive and restrictive. The deal called for an interest rate of at least 10%, a $4.5 million fee once the Dodgers paid off the loan that is separate from the initial $5 million payment, and target dates for the team to secure a new media-rights deal.
Judge Gross approved an initial $60 million in short-term financing from Highbridge for the Dodgers to cover continuing operations.
During a recess in Tuesday's hearing, the parties agreed to eliminate the target dates for the media-rights deal and to reduce the $4.5 million termination fee to $250,000 if the Highbridge loan is replaced with MLB financing.The Los Angeles Dodgers had to pay a previously undisclosed fee of about $5 million to secure the financing package that will allow the team to continue operating through bankruptcy.
Of course, McCourt chicanery was at play. What did you expect?
6 comments:
WTF? And I mean that on the part of the judge. If I'm presiding over a bankruptcy case and there are competing DIP offers, SURELY a major part of the decision hinges on the financial terms (i.e. details) of the differing offers?
Also, this WSJ article is unclear on this $5MM fee. Is this the same $4.5MM fee (deferred) that has previously been disclosed or is this $5MM on top of the $4.5MM (which in MLB & McCourt in conjunction with Highbridge agreed to be reduced to $250K?)
I agree, it's unclear...but I assume, since the story broke today and this was "not revealed earlier", that this is an incremental $5M fee.
Which could have gone toward a bat or arm or anything, I might add.
Well, not really because McCourt had no money anyway. This is just McCourt spending more money he doesn't have.
(cries)
The overseer aka Schieffer was instructed to approve any transaction over X amount of dollars. +/- $5000? Does the DIP approved by the judge take away the right of Schieffer to approve? It's obvious that McCrook thinks so because he changed the locks. Just curious.
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