A hearing is scheduled for July 20 to determine whether Major League Baseball's alternative loan offer should be approved instead.
Earlier in the day, MLB filed an objection with the Delaware court handling the Chapter 11 bankruptcy, which was filed on Monday, stating that MLB opposed the $150 million of debtor-in-possession financing that the financially imperiled club seeks to get through this period. Instead, attorneys for MLB told a bankruptcy judge hearing the case in Delaware that MLB is willing to provide through its own banks the financing for McCourt at much better terms than McCourt is seeking from a J.P. Morgan hedge fund.
Prior to the 2 1/2-hour hearing, MLB blamed the bankruptcy on McCourt's siphoning of club funds for personal use and extreme leveraging.
MLB states in its legal documents that McCourt filed for bankruptcy on Monday without the permission of Commissioner Bud Selig or the monitors put in place to oversee the business operations of the organization."Mr. McCourt simply disregarded this requirement," the document states. MLB is also asking the court to examine these issues early on as the case progresses: Whether the case was properly filed; whether the Commissioner's monitor, Tom Schieffer, can continue to perform his duties as the case proceeds; and, most significantly, whether McCourt should be able to retain control of the team during the Chapter 11 process. None of those matters were resolved during the hearing, and MLB confirmed on Tuesday that Schieffer and his assistant, John Allen, are temporarily no longer working at the Dodger Stadium offices. Also, for the first time, MLB publicly stated its problem with the McCourt ownership, which came to light during divorce proceedings between McCourt and his ex-wife Jamie: that the McCourts "funneled much more than $100 million to him, his family and related non-debtors" in direct disregard to his debtors, the best interest of baseball in general and the Dodgers in particular. "In pursing his own financial interest at the expense of the Club, overleveraging it and draining millions of dollars it needed for capital investment and operations, Mr. McCourt has placed the Debtors in their current incredible position of not being able to make payroll less than halfway through the regular season," the filing stated. "While the Debtors falsely assert that it was because of the [Commissioner's] refusal to approve the FOX transaction that the Los Angeles Dodgers lack funds to meet payroll, the fact of the matter is that the Los Angeles Dodgers cannot meet payroll because of Mr. McCourt's financial mismanagement, extreme leveraging, personal distributions made for his own benefit at the Club's expense, and the resulting decline in attendance caused by the community's extraordinary unhappiness with the Club's owner." With about $40 million in payroll due later this week, including an $8 million deferred payment to retired left fielder Manny Ramirez, the Dodgers filed for Chapter 11 bankruptcy protection in a Delaware court on Monday. In doing so, they cited Selig's decision not to approve a $3 billion media contract that McCourt said would have given the Dodgers immediate and future financial stability. McCourt is not only asking the judge to approve the hedge fund loan, but to open bidding among competing media companies for the television contract. Selig chose to deny the FOX contract under his powers as Commissioner last week. "The [Commissioner] rejected the [TV] proposal because it was not in the best interest of the Dodgers or Baseball," the MLB filing said. "Mr. McCourt has now caused the club to enter Chapter 11 in an attempt to achieve the same result. ... The court should reject this proposal." McCourt has repeatedly said that he needs the up-front payment from the TV deal to pay his bills. He said in a release issued on Monday that MLB was made aware of his looming financial obligations over the past year, during which he negotiated the deal with FOX to provide needed liquidity, and has sought the Commissioner's approval "for months." But MLB said in its filing that McCourt had not sought debtor-in-possession financing from the Commissioner before leaping into Chapter 11 filing. The rejected FOX deal called for an up-front payment of $385 million, with $173.5 million going to the McCourts and their attorneys. Of the $385 million, $80 million would have repaid debt, $23.5 million would have repaid a personal loan from FOX used to meet last month's payroll, $10 million would be for legal fees, $10 million would have gone to the McCourts and $50 million could go toward a $100 million payment to Jamie McCourt if the club ultimately was ruled Frank McCourt's property through the divorce proceedings.
Ken Gurnick is a reporter for MLB.com. Barry M. Bloom is national reporter for MLB.com and writes an MLBlog, Boomskie on Baseball. Follow @boomskie on Twitter. This story was not subject to the approval of Major League Baseball or its clubs.