Dodgers' owners Frank and Jamie McCourt to separate, placing ownership in doubt

saeldway:

Ever since this story broke I've been thinking about what I'm about to say and am surprised I haven't read it elsewhere. Maybe somebody has brought it up but I haven't seen it. If I was a businessman with enough money in today's banking environment and wanted to own the Dodgers on the cheap, I would go around the carpetbagger and buy the paper directly from banks that hold the paper and foreclose on Frankie. There is no way of knowing exactly what the paper would sell for but if you are to believe CNBC, maybe 60 cents on the dollar. There is no way in he!! Frankie is in compliance with all of his covenants either. The most glaring to me would be a liquidity covenant. Here's the greatest part, somebody can only get a note that size with pretty much all cash meaning the extinguishment of all debt. It's really a very common practice. Billionaire corporate raider Carl Icahn is doing the EXACT same thing in Vegas with the failed Fountainblue property. Too bad I'm a few hundred million shy. Anybody want to front me? I'll be able to turn this thing around in before game 1.

Interesting points.

Franko has always played fast and loose with what the banks call collatertal, and after seemingly every transaction it comes out that his previously stated holdings value was significantly over-stated. It's like he has been buying assets with the minimum 10% down and then it later gets determined that what he used as his down payment had greatly inflated value, and he only put down like 4-5%.

He may have significant equity in the Dodgers only if the asset has greatly increased in value. If the club is only worth a little more than he paid for it he could have an insufficient equity stake. The divorce situation could be causing some bankers a great deal of concern with how the economy is right now, and the amount of revenues he is sucking out of the club could have adverse impact on the quality of team on the field - and it's ability to maintain the current revenue stream.

Corporate takeover over 101 .... since the Dodgers don't sell shares of stock, holding the note would be the highest leverage one could gain and by doing so use it to put pressure on Selig and McDivorceCourt to sell.

Correctomundo Bluefan, and by holding the paper you already have a tie-in with the organization. Much easier to slide right in and at the right price. Foreclosure pressure may just be the thing that tips this, and I would not be surprised at all if one of the more banking-savvy guys out there was already knee deep. My company is in commercial real estate doing the exact same thing. BC, 99% the reason Frankie might not be in default today is because the bank has not chosen to put him in default. With commercial paper it's not just about making the monthly nut, there are covenants that must be acid-tested all the time. A liquidity ratio was just the first of many that came to mind. No way he has $450Million in paper without covenants saying he's got to have at least $20 million in liquid assets at all times and I don't think Frankie has enough for his son's weekly blow habit.

saeldway:

Correctomundo Bluefan, and by holding the paper you already have a tie-in with the organization. Much easier to slide right in and at the right price. Foreclosure pressure may just be the thing that tips this, and I would not be surprised at all if one of the more banking-savvy guys out there was already knee deep. My company is in commercial real estate doing the exact same thing. BC, 99% the reason Frankie might not be in default today is because the bank has not chosen to put him in default. With commercial paper it's not just about making the monthly nut, there are covenants that must be acid-tested all the time. A liquidity ratio was just the first of many that came to mind. No way he has $450Million in paper without covenants saying he's got to have at least $20 million in liquid assets at all times and I don't think Frankie has enough for his son's weekly blow habit.

Nice observation saeldway. I never thought about it from that perspective.

Being an auditor, I have clients who I audit for purposes of renewing their lines of credits with banks, and there are, of course, loan covenants that have to be maintained by my clients in order for them to remain in good standing.

The McCheaps could very well be in default of covenants with various lenders that they have given the uncertain financial situation that the economy and their impending divorce is bringing.

There could conceivably be some backroom dealing b/w lenders that hold the paper on the McCheaps' loans and prospective buyers to effectively take over the ownership of the Dodgers after the lenders effectively give the McCheaps a Notice of Default on their loans due to violation of loan covenants.

Now, of course the McCheaps would probably have to be given the opportunity to raise funds from other sources to pay down debt to get compliant with the covenants that they are in default of, but chances are that there is NO WAY they could do that, especially considering they are at odds with each other and are probably fighting each other to try and abscond as much money out of their gravy train, known as the Dodgers, as they can.

The McCheaps could end up in a situation where its not their divorce, but their LENDERS, that cause them to lose the Dodgers.

That would probably bring us all much joy and happiness for 2010!

From the "Way to Catch Up" category - Tracy Ringolsby, the love child of Bill Plaschke and a lonely sheep, has finally figured out that the Dodgers have cut over $40 million in payroll through deferred money, players who have went FA and just plain siphoning of funds to supplement the lifestyles of the faux rich and incredibly corrupt. The fact that it only took Ringolsby three months to figure this out is flat out amazing.

What is shocking is that Bud Lite is playing this whole thing like it is business as usual. If Ringolsby can figure it out, then even someone with the moron grade IQ of Bud Lite should realize that something is rotten here. Or, could it be that Bud knows that when the manure hits the fan, he will be the one who will be in the gun sight? After all, he basically signed off on this underfunded ownership and allowed them to pay pretty much nothing out of pocket for the team.

I think it is a foregone conclusion that the McCourts will have to sell the Dodgers. That is a no brainer. The when is the only question. But, Bud Lite will have to be fast on his feet if the league has to maintain this team for any period of time. Hell, he may not make it to the end of his present contract. All it takes is someone with an axe to grind to make Bud Lite the story, rather than the joke ownership of the Dodgers.

Oh merciful gods of baseball and all that is good in this universe, don't tease me so....
Pretty please, with Splenda on top!!!!

kennerbuggy:

I still think there is a Santa Claus, and I still want a pony.

I do think Franko has been exposed as the Emporer with no clothes. We faithful must be patient. Franko won't give up the pretense until people start laughing at his insufficient member. Excessive debt plus exceessive greed plus a bad economy plus splits-ville may well be the perfect storm.

Yeah, obviously he has to deny any intent to sell the team until after the divorce proceedings, but it doesn't take a Mensa member to figure out that there's no way he can retain control of the team after some sort of settlement is reached.

I just found it very interesting that this story seemed to come from within the team.

kennerbuggy:

I still think there is a Santa Claus, and I still want a pony.

I do think Franko has been exposed as the Emporer with no clothes. We faithful must be patient. Franko won't give up the pretense until people start laughing at his insufficient member. Excessive debt plus exceessive greed plus a bad economy plus splits-ville may well be the perfect storm.

If Frank sells this team, this year, I will buy you the freakin' pony. But, I ain't feeding the beast.

One would say this picture was painted last October when the paperwork was getting filed. Even a complete cretin like Frank could see the writing on the wall. The crash you are hearing is Bud Lite doing a header though a table. You know that the owners who do not toe Bud's edicts are gonna be asking some hard questions. After all, didn't Bud basically co-sign for the club using MLB's pen.

Not sure where to post this link, so this is as good a place as any.

Weisman has a most excellent column up today based on an interview with Frank McCourt. It's long, detailed and well-written.
A must-read.

Weisman McCourt Interview

grabarkewitz:

I read that, yesterday, and my only quibble with Weisman is that he shied away from the hard questions. It almost sounded like he was tossing up softballs. He kind of broached the subject of the lack of money being spent of development, but then let Frank run wild with some kind of slop about Glendale. While Frank did mention the lack of international signings, he conveniently laid the blame on Ned and his staff. Never once did Frank mention that money talks in the international market. I realize that if the interview gets confrontational, no more Frank talking to Weisman, but Frank needs to be honest with the team and it's fans. Money is obviously an issue and not confronting him on the issue is akin to making this spin in Frank's behalf.

Yeah but being "nice" is always Weisman's MO. I didn't believe half of McCourt's answers.

grabarkewitz:

I read that, yesterday, and my only quibble with Weisman is that he shied away from the hard questions. It almost sounded like he was tossing up softballs. He kind of broached the subject of the lack of money being spent of development, but then let Frank run wild with some kind of slop about Glendale. While Frank did mention the lack of international signings, he conveniently laid the blame on Ned and his staff. Never once did Frank mention that money talks in the international market. I realize that if the interview gets confrontational, no more Frank talking to Weisman, but Frank needs to be honest with the team and it's fans. Money is obviously an issue and not confronting him on the issue is akin to making this spin in Frank's behalf.

Yeah, Weisman is kinda a pushover. Frank was just basically lying, deflecting, and spinning like he always does. I forget which part, but on one tough question, I think Carlos Santana being given up for cash, Frank claimed ignorance. Really, Frank? Really?

And the Glendale thing was pathetic ... our focus and goal is to be #1 in player development! But you spend the least on that of any team? Yeah, but we built a huge new ST complex so that we can make more money! But you didn't even pay for that ...

So annoying. Reading this article just made me want to punch him more.

Appreciate the critique. If I might defend myself, I do feel that I asked several "hard questions." Challenged him on Wolf/Hudson, Santana, payroll, farm system, etc. And I asked follow-up questions, and in the article itself, I challenged some of his responses. For example, when he spoke about Camelback Ranch as evidence of his commitment to the farm system, it wasn't like I said, "Okay, case closed." Same thing when he said payroll was in line with ticket sales - I challenged his assumptions there.

No, I didn't get a quote from Frank saying "I'm the worst owner in history and here's a list of reasons why," but that's an unrealistic expectation and very different from saying someone didn't ask the hard questions. The conclusion of the article is "Do the Dodgers know what they're doing?" I don't quite see how that's a puff piece. I'm sure T.J. might make Frank look worse, but I doubt he'd get more substance in the story.

Jon Weisman:

Appreciate the critique. If I might defend myself, I do feel that I asked several "hard questions." Challenged him on Wolf/Hudson, Santana, payroll, farm system, etc. And I asked follow-up questions, and in the article itself, I challenged some of his responses. For example, when he spoke about Camelback Ranch as evidence of his commitment to the farm system, it wasn't like I said, "Okay, case closed." Same thing when he said payroll was in line with ticket sales - I challenged his assumptions there.

No, I didn't get a quote from Frank saying "I'm the worst owner in history and here's a list of reasons why," but that's an unrealistic expectation and very different from saying someone didn't ask the hard questions. The conclusion of the article is "Do the Dodgers know what they're doing?" I don't quite see how that's a puff piece. I'm sure T.J. might make Frank look worse, but I doubt he'd get more substance in the story.

Very well written Jon, however as far as McCourt goes, actions speak louder than words (i.e. the whole Wolf situation), so at this point I don't give a crap what he says, only what he does. He needs to do a lot more for me to ever spend a dime on the Dodgers again. I'm dreading the day (if he still is owner) that Kemp, Ethier, Broxton, Kershaw, and Bills will have to be traded because they make too much and not because they can improve the team by trading them.

DoppelgangBang:

First off, thanks for posting to defend yourself. While, I do have reservations and issues with the interview, it still was a terrific, in-depth interview. I certainly applaud you for asking the tough questions, which you clearly did. I think you did an excellent job of summarizing fans' concerns and not making it easy on Frank.

What upset me in this article was how much Frank squirmed and weaseled out of your questions. When he said that he was unaware of what went into the Santana decision, you discussed plausible deniability. Very appropriate, since this schmuck is tantamount to a politician. Did you press him on why he was distanced from such a vital organizational decision? If he's not involved in the day-to-day, what type of strategic oversight and direction does he provide?

Same with Wolf and no arb. "I can see both sides." Well, no shit, but we're asking you to defend your decision, which nearly everyone in the baseball world sees as a complete misstep and most likely attributable to financial restrictions.

It felt like you had this putz nailed on multiple issues, and I don't have first-hand knowledge, but it seems like he dodged/deflected/spun his way out of explaining the perceived shortcomings of his stewardship. You had the guy exactly where many of us fans wished we could have had him, but didn't pull the trigger. That's my real issue. I understand that actually calling him to task might affect your future ability to get interviews with the guy, but your bullshit meter had to be off the charts. How could you not laugh in the guys' face?

What he said.

In any case, my only points of contention are with the idea that the hard questions weren't asked, and that the interview was a puff piece. The first point is a little subjective, but I can offer you a list of the hard questions that were asked. And I feel the piece had more than a sufficient supply of skepticism about McCourt. The piece certainly doesn't demand that you believe everything McCourt says. But some of these critiques seem to be about me not leaving McCourt tarred and feathered in the middle of the square, and I just feel that's an unfair expectation.