Was the last straw for MLB a Dodgers loan against nothing?
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That Frank McCourt needed a $30-million loan from Fox in order to meet payroll last week was concerning enough to Major League Baseball. That the loan was secured with funds that McCourt does not have and might never have was entirely disconcerting.
If McCourt could not repay Fox, he promised the company $30 million from any settlement with or judgment against Bingham McCutchen, the law firm that drafted the since-invalidated agreement that McCourt had relied upon to establish his ownership of the Dodgers. The arrangement was disclosed to The Times by two sources granted anonymity because they were not authorized to speak publicly about it.
Bingham has sued McCourt, seeking a judicial declaration that the law firm is not responsible should McCourt lose control of the Dodgers. Bingham has hired an all-star team of lawyers outside its firm for representation and has signaled it has no intention of surrendering to McCourt. There is no guarantee McCourt will get a penny from Bingham, but Fox accepted that promise to securitize the loan.
‘No accountant would even let you put that on your balance sheet,’ said Raman Sain, principal at Holthouse, Van Carlin & Trigt, a Southern California accounting firm that reviewed the Dodgers’ financial records for The Times last year.
Sain said the nature of the loan -- as opposed to McCourt getting a traditional bank loan or line of credit -- indicated the Dodgers’ financial situation was ‘pretty dire.’
For Fox, the short-term loan -- even if never repaid -- represented a reasonable risk toward the greater interest of trying to secure the Dodgers’ long-term broadcast rights. News Corp., the parent company of Fox, had $33 billion in annual revenue last year, according to the News Corp. website.
Fox was concerned that McCourt would turn for financing to Time Warner, the rival entertainment company that is about to launch a Southern California cable channel featuring the Lakers. Fox and McCourt already had agreed upon a 20-year extension of the Dodgers’ television rights, worth at least $3 billion, in part a preemptive strike against McCourt striking a long-term deal to move the Dodgers to Time Warner.
‘The Lakers deal with Time Warner changed the game in this market dramatically,’ said Bob Wagner, who negotiated sports broadcast contracts with Fox as a former top executive for the Angels and Ducks.
A Time Warner spokeswoman did not return a call for comment.
Commissioner Bud Selig still has the proposed Fox deal on his desk. Fox is believed to be willing to extend that deal to a new Dodgers owner, in the increasingly likely event of an ownership change.
Fox spokesman Chris Bellitti declined to comment beyond a prepared statement.
‘A long-term solution to the Dodgers’ current challenges is in the best interest of all parties, and we will work with both Major League Baseball and the Dodgers to be a part of that solution. The goal is to have a viable, financially stable and ultra-competitive Dodgers team in Los Angeles,’ the statement read.
-- Bill Shaikin