Several media outlets broke the news of the Los Angeles Dodgers bankruptcy filing on June 27, and of their recently obtained loan in the amount of $150 million for interim financing.
F. M., the owner of the Dodgers, believes that the filing will insure the team's financial future. If the loan is approved in bankruptcy court payroll can be met and F.M. can maintain ownership.
F.M.'s alleged intention is to control the baseball club during the bankruptcy and see it through a television rights deal that would pay all of the creditors in full.
The television deal is expected to be made within 180 days but Major League Baseball (MLB) will most likely challenge F.M.'s move.
MLB's constitution allows the commissioner to strip ownership when the act of bankruptcy is filed, although bankruptcy court usually can override the MLB rules.
The creditors, mostly Dodgers in the current roster, also include a Hall of Fame broadcaster, the city of Los Angeles, and two players that have yet to play.
The largest creditor is owed $21 million while the others range from $11 million down to almost $500,000. The total amount of money owed in salaries, per the filing, is $40 million for the week of the filing, $20 million in current and deferred salaries, and $18.7 million to fund their future deferred payments.
The bankruptcy filing states that they will have a "competitive sale process" to get the best cable television contract - within a 180-day window.
The filing also states that their current television contract goes through 2013 with Fox. The contract also forbids them from any negotiations with other entities until after November 30, 2012.
Bud Selig, the MLB commissioner, allegedly rejected a new contract with Fox last week. His refusal, per F.B., led the Dodgers to ask the bankruptcy court for an auction.
The new Lakers channel on Time Warner Cable is expected to bid.
If they do, Fox will have to choose whether to join forces with MLB to oppose the auction with the risk of loosing their television property.
F.B. is asking the bankruptcy court to overrule MLB from approving rights of their television contracts.
Highbridge Principal Strategies of New York, a JP Morgan and Chase affiliate, made the $150 interim financing loan. The Dodgers have agreed to pay at least a 10 percent interest and a deferred fee of $4.5 million.
F.B.'s statement partially read that the bankruptcy was filed "in order to protect the franchise financially and provide a path that will enable the club to consummate a media transaction and capitalize the team."
F.B. continued by stating that it was Selig's refusal to approve a contract with Fox television that forced the filing.
F.B. said, "He's turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today. I simply cannot allow the commissioner to knowingly and intentionally be in a position to expose the Dodgers to financial risk any longer. It is my hope that the
Chapter 11 process will create a fair and constructive environment to get done what we couldn't achieve with the commissioner directly."
The statement concludes that people can expect "no disruption to the Dodgers' day-to-day business, the baseball team or to the Dodger fans."
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