McCourt Deal Gets Closer
The sale of the Dodgers to Boston real estate developer Frank McCourt moved closer to completion Wednesday when News Corp. agreed to retain a minority ownership position, putting McCourt closer to compliance with the industry’s debt service rule by reducing the amount of money he is borrowing in his highly leveraged, $430-million proposal.
The restructured arrangement -- which requires that McCourt find a Los Angeles-area investor to buy out News Corp.’s equity share within a period of 12 to 24 months -- moved closer to being finalized during another long meeting between McCourt and his wife, Jamie, and representatives of News Corp. and Major League Baseball in New York.
Multiple sources said they expected Commissioner Bud Selig to schedule a conference call vote of major league owners for early next week, which would be ahead of the Jan. 31 deadline in the initial contract between McCourt and News Corp.
Although McCourt needs three-fourths approval of the 30 clubs, it would be a surprise if the vote were anything but academic once the ownership committee gives its expected blessing to the revised proposal.
The committee probably will meet with Selig by phone Friday, sources said, after which a synopsis of the proposal and the committee’s recommendation will be sent to the owners.
While lawyers worked on final details of the new agreement between McCourt and News Corp. on Wednesday night, the involved parties were reluctant to comment.
However, a person close to McCourt said McCourt and his wife were “extremely pleased with the tremendous progress of the last two days, and we’re looking forward to the vote.”
Bob DuPuy, baseball’s chief operating officer, called it another constructive day and said the process would continue to move as rapidly as possible.
DuPuy refused to discuss specifics, but sources familiar with the situation said that the discussions leading to the new agreement between McCourt and News Corp. were not as amiable as portrayed.
Nevertheless, amid concern in and out of the industry regarding a proposal in which McCourt was borrowing almost all of the $430 million, baseball was determined to bring it more in line with the debt service rule.
Under the new agreement, as one source put it, “a modest but significant” portion of the $205 million News Corp. had agreed to loan McCourt to help complete the purchase would be converted to equity. The source put the portion at between 20% and 25% of the $205 million.
The agreement also gives McCourt from one to two years, the source said, to find a Los Angeles-area investor to buy out News Corp.
That, however, has not been an easy proposition for McCourt.
The Boston developer came up empty while trying to entice Los Angeles investors when he was initially formulating a financing plan.
Ultimately, he proposed buying the Dodgers on loans from News Corp. and Bank of America, and an equity partnership with Aramark, a concessionaire.
By now including a provision that forces McCourt to add Los Angeles financing, News Corp. and McCourt might be acknowledging the concern that has developed in Southern California over his ability to operate the Dodgers at a competitive level.
The Los Angeles City Council passed a motion Tuesday urging the Dodgers and baseball to find local ownership. Similar urging by Mayor James K. Hahn and former Dodger owner Peter O’Malley, among others, prompted Los Angeles developer and billionaire philanthropist Eli Broad to inform News Corp. last week that he is willing to buy the Dodgers for $430 million, mostly in cash, if the McCourt deal falls through.
Although Broad would seem to be an attractive alternative for baseball given the concern over McCourt’s financing, it now appears that his offer has come too late.
DuPuy said again Wednesday that it is the function of the seller to provide baseball with an application for processing, and News Corp., in this instance, has never deviated from pushing the McCourt application.
In addition, another high-ranking official suggested that Broad’s late arrival was nothing more than grandstanding and tended to produce a sour reaction in baseball.
“If he was truly serious,” the official said, “why go public? I’ve never seen a deal made that way. If he was truly serious, he knows what he would have had to do, and going public wasn’t it.”
Broad, in fairness, has refused to comment on his offer, which became public only when The Times obtained a copy of his letter to News Corp. and reported on it in Saturday’s editions.
He stressed in the letter that he was not trying to interfere, and now it appears there is nothing with which to interfere because McCourt could be approved within a week.
Would Broad consider joining him as the required L.A. investor?
That seems doubtful.
McCourt failed to lure Broad during several previous meetings, of which a person close to Broad said, “Eli concluded he wouldn’t invest in anything McCourt controlled.”
Among those attending the New York meetings and shaping the new provisions in addition to DuPuy and the McCourts were McCourt point man Corey Busch and News Corp. point man Gary Ehrlich.
Also participating: baseball lawyers Jonathan Mariner and Tom Ostertag; Atlanta Brave executive Bill Bartholomay, the ownership committee chairman; Chicago White Sox chairman Jerry Reinsdorf, representing the executive council; and Boston lawyer Larry Silverstein, representing McCourt.