Dodgers' reorg snagged on Time Warner Cable involvement
A federal bankruptcy court judge in Delaware is holding a hearing on Friday to decide whether to approve a revised reorganization plan by the Los Angeles Dodgers that would put the team on track to exit bankruptcy by April 30.
The team said earlier this week that it expects that during Friday's hearing, U.S. Bankruptcy Judge Kevin Gross will confirm Frank McCourt's plan to sell the team for $2 billion to Guggenheim Baseball Management. Mark Walter, chief executive officer of the financial services firm Guggenheim Partners, would become the controlling owner, and the team would be run by former Atlanta Braves President Stan Kasten.
Several contested matters remain before the court. Among them, Fox, the Dodgers' current broadcaster, wants assurances that competitor Time Warner Cable is not involved in the purchase.
Fox's Prime Ticket subsidiary filed the objection Tuesday in U.S. Bankruptcy Court in Delaware. It asked for written assurance that Time Warner wasn't contributing funds being used for Guggenheim Baseball Management's purchase of the team from Frank McCourt and the incoming owners don't have any formal or informal agreements for the team's broadcast rights starting in 2014.
Fox asked that it be given parts of the purchase agreement that were not filed with the court.
"Our filing today was a routine administrative filing to ensure our rights are protected," Fox Sports spokesman Chris Bellitti said.
Fox, the Dodgers' current broadcaster, has an exclusive 45-day period starting in October to try to negotiate a new contract with the team. The current contract also prohibits the Dodgers from talking to other potential buyers of the media rights before Nov. 30 and gives Fox a limited right of first refusal on competing offers received after that date.
The TV contract that Fox has with the Dodgers is one of the team’s major sources of income.
If the plan for the $2 billion sale is approved, the Dodgers would be on track to exit bankruptcy as planned by April 30.
The Dodgers are being bought by Guggenheim Baseball Management, a group that includes former Los Angeles Lakers star Magic Johnson and longtime baseball executive Kasten.
The $2 billion purchase price includes about $412 million of existing debt financing that will remain in place. The balance, just under $1.6 billion, will be paid in cash from equity financing by the owners and affiliates of Guggenheim, which has provided a cash deposit of about $159 million.
"This agreement is the culmination of an auction process that was conducted over several months and reflects the highest and best bid generated by that process," the team said in a prepared statement.
The April 30 date was included in a settlement that resolved a dispute between the Dodgers and Major League Baseball over the team's bankruptcy. It coincides with the deadline for current owner Frank McCourt to pay $131 million to his ex-wife, Jamie, as part of their divorce settlement.
The judge presiding over the bankruptcy case has scheduled a hearing next Friday to consider whether to confirm the plan.
While the purchase agreement with Guggenheim calls for the sale to close on April 30, it also allows the Dodgers to seek approval from MLB or the court to extend the closing date to sometime next month, if need be.
Court papers indicate that Dodgers chief financial officer Peter Wilhelm will remain in that post with the reorganized company. Kasten, former president of the Atlanta Braves and Washington Nationals, will serve as president and CEO.
"By any measure, the plan is a remarkable outcome for the debtors, their estates and all parties in interest, especially taking into account where these cases began," Dodgers attorneys wrote in a memorandum supporting the revised plan.
The Dodgers sought bankruptcy protection in June after baseball Commissioner Bud Selig refused to approve a new TV deal with Fox Sports that McCourt was counting on in order to make payroll and keep the franchise solvent.
After the bankruptcy filing, attorneys for Selig successfully fought to force the Dodgers to accept bankruptcy financing from Major League Baseball, arguing at the same time that McCourt had looted more than $180 million from the team for his own use and reasons not related to baseball and that he should be forced to sell the team.
The Dodgers, meanwhile, threatened to seek court permission to enter into a new media rights deal without the approval of MLB.
After battling for several months, the Dodgers and MLB reached an agreement last year that authorized a sale of both the team and a process to market the media rights to games starting in 2014.
Fox Sports objected to the settlement with MLB and the proposed marketing of future media rights, saying it violated Fox's rights under its existing telecast contract with the Dodgers.
The Dodgers reached a settlement with Fox in January after a federal district court judge said Fox likely would win an appeal of the bankruptcy judge's ruling authorizing the marketing of the media rights.