Dodgers File For Chapter 11 Protection Following MLB's Strikeout Of Fox's Proposed $3 Billion Rights Pact

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Embattled Los Angeles Dodgers owner Frank McCourt has filed for Chapter 11 bankruptcy protection for the storied ball club, which faces millions in payroll and other obligations by month's end.
In his filing in a Delaware Court Monday for the Dodgers and four related entities, McCourt is also asking the court to allow the club to auction off its cable rights within 180 days and give the okay to $150 million in financing from J.P. Morgan Chase hedge fund Highbridge Capital, which would help the club meet its payroll of nearly $40 million by June 30.
The move comes a week after MLB Commissioner Bug Selig denied McCourt a new 17-year contract with Fox Sports to keep the Dodgers on its Prime Ticket regional sports network. The pact, valued at some $3 billion, would have provided McCourt with an upfront payment of $385 million, with $173.5 million going to the team owner and his wife Jamie as part of their divorce proceedings. Selig struck out that notion, which would have also given McCourt a 35% stake in Prime Ticket on June 20, maintaining that more of the funds should have been earmarked to the ballclub.
MLB issued the following statement on Monday afternoon:
"The Commissioner's Office has spent the better part of one year working with Mr. McCourt and his representatives on the financial situation of the Los Angeles Dodgers, which was caused by Mr. McCourt's excessive debt and his diversion of club assets for his own personal needs. We have consistently communicated to Mr. McCourt that any potential solution to his problems that contemplates mortgaging the future of the Dodgers franchise to the long-term detriment of the club, its loyal fans and the game of Baseball would not be acceptable.
"My goal from the outset has been to ensure that the Dodgers are being operated properly now and will be guided appropriately in the future for their millions of fans," the statment continued. "To date, the ideas and proposals that I have been asked to consider have not been consistent with the best interests of Baseball. The action taken today by Mr. McCourt does nothing but inflict further harm to this historic franchise."
Fox declined comment on the matter. Sources familiar with the situation indicate that Fox -- with the contract it had on the table having been rejected by Selig -- will now likely continue to sit on the sidelines in the short term as the Dodgers-MLB drama plays out in court.
Prime Ticket's deal with the Dodgers runs through the end of the 2013 season and, according to the filing, no other entity can negotiate with the team until Nov. 30, 2012. The proposed pact would have superceded the remaining years on the current deal and been in place through the 2027 MLB campaign.
It has been widely thought that Time Warner Cable, which wrested away rights to the Los Angeles Lakers from RSN Fox Sports West earlier this year, would be interested in bidding for Dodgers rights. Such a gambit would afford a summer programming complement to the pair of dedicated RSNs, including a Spanish-language service, the cable operator will tip off before the 2012-13 NBA season. The MSO reportedly was ready to lend McCourt $30 million, which prompted Fox to extend him that amount to help fund club operations earlier this season.

Officials at Time Warner Cable couldn't be reached by press time.

According to the filing, "[the Los Angeles Dodgers] LAD will propose and, to the extent authorized by this Court, implement procedures that are designed to promote a competitive sale process with respect to those exclusive television rights, one that results in the highest and best offer being acceptable to all parties. In fashioning procedures, LAD will give due consideration to Fox Group and the provisions of the Existing Fox Agreement. LAD expects, and the terms of the recently negotiated Fox transaction demonstrate, that a sale or license of exclusive cable rights will fully resolve all of LAD's financial challenges as well as generate value for the holders of the equity interests in LAD."

The bankruptcy, according to published reports, could enable the commissioner, under MLB's constitution, to seize control of the team and end McCourt's ownership. However, the Los Angeles Times reports that the "bankruptcy court proceedings generally override MLB rules."
McCourt has asked for court rulings on June 28.
MLB has inserted a trustee to monitor financial operations of the club in April.

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