Monday, June 27, 2011
Los Angeles Dodgers File for Bankruptcy
The Los Angeles Dodgers have recently filed bankruptcy. This announcement came less than a week after Major League Baseball Commissioner Bud Selig prevented the Dodgers from pushing through a new TV deal with Fox Sports that would have provided the team with $3 billion. According to Dodgers owner Frank McCourt, that money was crucial to his ability to meet the team’s payroll for the rest of the season. Selig blocked the deal because he believed the money would have been used to attend to McCourt’s personal affairs rather than the team’s needs.
Since the team filed for Chapter 11 bankruptcy, they will be able to continue with normal operations during their financial reorganization. However, it is almost certain that McCourt will have to sell the team in the near future.
This bankruptcy filing has enabled the Dodgers to secure $150 million in debtor-in-possession financing which will be used to pay for the team’s operating expenses while they get back on their feet financially. Prior to filing bankruptcy, the team was unable to convince any lenders to loan them money. However, the debtor-in-possession status enables these lenders to receive a favorable position in the long line of creditors waiting to receive their money.
Many current and former Dodgers players are listed as creditors on the bankruptcy filing. Former all star outfielder Manny Ramirez, who is owed approximately $21 million, is listed as the team’s largest creditor. Due to collective bargaining agreements between the league and players’ union, most players should expect to be paid the full value of their contracts.
Teams filing for bankruptcy have been able to move on to achieve great things in a relatively short amount of time. Last year, the Texas Rangers were sold out of bankruptcy, and they went on to reach the World Series for the first time in the team’s history.