Saturday, July 23, 2011

McCourt's Highbridge Gambit Turns Out To Be A $5.5M Kick To the Nuts

When you play at the big boy tables, there's a chance that you're gonna get pummeled. Which apparently happened to Frank McCourt Friday after Judge Kevin Gross ruled that McCourt's Highbridge Capital Partners-funded loan was inferior and could not be selected. Not only did McCourt lose that decision, theoretically forcing him to work with MLB instead, but McCourt is also out another $5.25M in fees for his failed gambit:

Dodgers owner Frank McCourt must negotiate with Major League Baseball for a loan to fund the team in bankruptcy, a judge ruled Friday.

U.S. Bankruptcy Judge Kevin Gross denied McCourt's bid to use the loan he had arranged, over McCourt's objections that the league could leverage its standing as a lender to oust him from ownership. Gross said he would ensure Commissioner Bud Selig would not abuse that power and criticized McCourt for refusing even to consider an MLB loan that would save the Dodgers millions of dollars.

The decision doesn't mean McCourt will lose ownership of the Dodgers during the bankruptcy proceedings, but it was a rebuke to the way he has handled the team's business with MLB.

"It is unclear to the court how [the Dodgers] think they can successfully operate a team within the framework of baseball," Gross wrote in his ruling, "if they are unwilling to sit with baseball to consider and negotiate even more favorable terms while under the court's protection."

McCourt and his attorneys had argued that, as the debtors, the Dodgers were entitled to pick the loan they preferred. That is standard under bankruptcy law, but Gross ruled that McCourt forfeited that priority by failing to disclose he would have personally owed his lender $5.25 million if the court did not approve the loan.

That "clearly compromised McCourt's judgment," Gross wrote.

The lone witness in Wednesday's hearing, Dodgers assistant treasurer Jeffrey Ingram, conceded that the league was not hostile to the Dodgers, and that the lower interest rate and absence of fees in the proposed MLB loan made its financial terms superior to that of the loan arranged by McCourt. [...]

The biggest winner in Friday's developments might have been Highbridge Capital Partners, the New York hedge fund that would have provided McCourt with a $150-million loan. That money is no longer owed and thus not at risk, and Highbridge still made $5.5 million in fees from McCourt.

All in all, a pretty costly gamble even for someone used to leverage and debt. That $5.5M could have gone toward at least a half a year's worth of spousal payments, Frank. Oh, well.


Fernie V said...

I thought the plan was to veto any loan and then wait til mcvalles (our friend who never has money) couldn't make payroll. Then MLB takes over and put the club for sale. Enter the Sons of Steve Garvey Investment Group and revolutionize baseball with player development.

Josh S. said...

He's gonna need another loan to cover that $5.5 mil.

"The decision doesn't mean McCourt will lose ownership of the Dodgers during the bankruptcy proceedings..."

What the hell is it gonna take?!!

Fernie V said...

No one paid attention to the Rangers when this happen to them. How about comparing a Texas Ranger time line with a Dodger timeline, Sax.