The McCourt divorce: messier than you could possibly imagine

I may dabble, but Josh Fisher is the go-to source for all of your McCourtly goodness. Today, Josh talks about just how much of a clusterf*ck the Dodgers’ sale was, and why it will make the McCourt divorce an even bigger hassle than most of us currently realize:

So, if you’re counting at home, the above adds up to $421 million in financing…for a $371 million purchase. That, friends, is a little scary. And there’s more. In May 2005, McCourt announced a new, $250 million 25-year note which took out B of A and what remained of the debt to Fox (after the foreclosure on the Boston property). This increased the debt load to $521 million on a $371 million purchase. This financing, known as a private placement, was provided by an unidentified group of institutional investors, such as pension funds and insurance companies. The terms of the loan–5.66% fixed for 25 years–are relatively favorable to McCourt. The collateral for this new loan was reportedly the 300 acres of real estate surrounding Dodger Stadium–not the club itself. Importantly, one of the provisions of the private placement was that control of the Dodgers would not change hands.

In April 2009, Forbes estimated the value of the franchise (including surrounding land) as $722 million with a debt total a little shy of $420 million. Where does that $420 million come from? We don’t know the status of the $75 million debt to major league baseball. My guess is that the McCourts further leveraged the land around Dodger Stadium, bringing the private placement debt to at least $345 million.

That is just a snippet of an insanely fascinating (at least to people like Josh and me) post about Dodgers, Inc. The upshot of which is that the McCourts don’t have nearly as much money as Jamie McCourt’s filings would have you believe, and that unwinding all of this is going to be a monster headache. So much so that if I were one of the McCourts, I’d consider some kind fo truce as soon as possible that would keep joint ownership to some degree rather than risk all of the creditors calling in the notes.

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Comments

  1. MooseinOhio said...

    Apparently my wife and I saddling ourselves with massive student loan debt to begin our married life was a wiser choice than the McCourt’s saddling their divorce with massive debt.

  2. obsessivegiantscompulsive said...

    Somehow I don’t see that happening.  This reminds me of BearingPoint’s problems with their financing and operations (I know, obscure), where the fall of one domino started a chain of events that eventually led to them being sold.  I don’t see how that doesn’t happen here with the Dodgers.

    And if it is true that Jamie was screwing around with team personnel, it is not unknown for the CEO to be removed, it happened at my previous company when our IT department showed the board of directors a video captured in the CEO’s office (though officially he left for one of those inocuous corporate reasons, you know, for family, looking for a new challenge, taking some time off for family, blah blah blah).

    So it was within the Dodgers rights to fire her like that.  It was her pushing in the press regarding the firing and divorce that forced the Dodgers to discuss why she was fired, I think.

    And neither side is looking to be amicable, so it should be quite a mess as both sides seek to do maximum damage with each move they make, at least judging from the way they have been doing things thus far.

  3. Josh Fisher said...

    I think that while somehow maintaining joint ownership would be an admirable goal, too much has happened. I don’t believe either would consent to fading into the background while the other controls the Dodgers. The only real solution, then, is for actual control of the Dodgers to shift to an entity detached from ownership. I’m not sure the club’s creditors or MLB would be cool with that.

    Josh

  4. Jim C said...

    Does this mean the Dodgers are going to start dumping salary and players like the Padres? If so the Nats would love to give them Elijah Dukes for Andre Ethier, just for starters.

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