When Frank McCourt took the Dodgers into bankruptcy last year, Plan A was to retain ownership of the team. Yet Plan B was just as important. If McCourt had to sell the Dodgers, the U.S. Bankruptcy Court would oversee the sale, not Major League Baseball.
John Moores might have liked court protection. Moores agreed three years ago to sell the San Diego Padres to a group led by Jeff Moorad, but major league owners subsequently balked at granting Moorad control of the team. Moorad essentially surrendered last week and Moores appears to have one choice: keep the Padres, or put them up for sale once again.
McCourt could agree to sell the Dodgers this week, with MLB owners on the sidelines as he conducts an auction among three bidders and picks a winner. The auction process, under court supervision, prevents MLB from steering the Dodgers to a favored bidder or rejecting McCourt's choice.
Questions and answers about the apparent end game in the Dodgers' ownership saga:
Who are the three finalists?
• Steven Cohen, a hedge-fund billionaire from Connecticut; and Patrick Soon-Shiong, a biotech billionaire from Los Angeles. Forbes estimates their combined net worth at $15.5 billion.
• Stan Kroenke, owner of the St. Louis Rams, Denver Nuggets, Colorado Avalanche and the Arsenal soccer club in the English Premier League. Forbes estimates the net worth of Kroenke at $3.2 billion and his wife, Ann — a Wal-Mart heir — at $3.9 billion.
• A group fronted by Magic Johnson and Stan Kasten, the former president of the Atlanta Braves and Washington Nationals. The funding comes primarily from Guggenheim Partners, a Chicago-based financial company that says it controls $125 billion in assets.
What happens this week?
MLB owners will vote on the three finalists, most likely Tuesday. Approval of all three is expected to be a formality.
McCourt and his advisers hold a modified auction, behind closed doors, most likely starting Wednesday. The goal is to pick a winner this week and close the transaction by April 30, the day he must pay his ex-wife $131 million in a divorce settlement.
McCourt and his advisers have projected a sale price of at least $1.5 billion. Is that going to happen?
That might depend on whether McCourt includes the Dodger Stadium parking lots in the sale. The bidders would like him to sell the lots. He is not required to do so, and he has said he intends to keep them.
If he does, the offers for the Dodgers could drop to the point in which McCourt might not make much more than $1.1 billion, the approximate amount he needs to pay off debts and taxes, according to multiple people familiar with the sale process. McCourt could bet on revenue from future development.
The parking lot options might not be limited to "sell" or "keep." A bidder could get an option to buy them a later date, for example, or offer McCourt a share of any development revenue.
Is McCourt legally obligated to take the high bid?
No, according to Thomas Salerno, co-chairman of the international bankruptcy practice at the Squire Sanders law firm.
The Dodgers' bankruptcy is unusual in that all creditors will be paid in full. The remaining proceeds go to McCourt.
"He has the right to leave money on the table," Salerno said.
McCourt would not leave much money on the table, to be sure.
But he could, for instance, decide that an offer from Cohen — all cash, no financing, plus assumption of the Dodgers' debts — makes it most likely the deal can close on time. McCourt could opt for perceived civic goodwill and select the Johnson group. Or McCourt could choose Kroenke, with the hope of playing a role in luring the NFL back to Los Angeles.
If Kroenke buys the Dodgers, would he move the Rams back to L.A.?
Not right away, and maybe not ever. The NFL controls the Los Angeles market, so Kroenke would be in violation of the league's cross-ownership rules as soon as he bought the Dodgers. The NFL let him transfer ownership of his two Denver teams to his son, but the league has declined to assure MLB that Kroenke could own the Dodgers and the Rams in separate markets, or that the Rams could move to L.A.
Kroenke would not need the Rams in L.A. to launch a regional sports network centered on the Dodgers. His Denver cable channel features the Nuggets and Avalanche.
The NFL has long coveted the Dodger Stadium parking lot as the site for a football stadium. However, the NFL would be reluctant to approve a stadium there if McCourt retained ownership of the property, according to a person familiar with the league's thinking.
If Cohen is a major player in hedge funds, how concerned is MLB about the ongoing federal investigation into insider trading in that industry?
Cohen was cleared in an MLB background check. Although four of his current or former employees have been accused of insider trading, neither Cohen nor his company has been charged or indicted.
Ron Geffner, a former federal prosecutor and securities investigator, said there can be no certainty about the results of an ongoing probe. However, he said, the investigation has gone on for several years, and the involvement of four of Cohen's hundreds of employees does not in itself make a case against Cohen.
"If the government had a strong case, they would salivate at the opportunity to bring an action against a high-profile person," said Geffner, a partner at the New York law firm Sadis and Goldberg.
Cohen can write a check to buy the Dodgers. So can Kroenke. Where is Johnson getting his money?
Johnson would buy a small share of the Dodgers, and so would other individuals, but a significant amount of the purchase price would come from out-of-state insurance companies controlled by Guggenheim Partners. Institutional funding is not unheard of in sports; a teachers' pension plan holds the majority share of the Toronto Maple Leafs and Toronto Raptors.
MLB has approved the financial structure of the bid.