In a bid to move the bankruptcy process along for the Dodgers, the MLB has agreed to allow current owner Frank McCourt to solicit competing bids for the team’s media rights as long as he agrees to sell the baseball team.
The structure of the auction was the biggest of several concessions MLB made to get Mr. McCourt to agree to sell the Dodgers. They were designed to allow Mr. McCourt to reap as much money as possible from the sale of the team, the people said.
The Dodgers owner desperately needs to wrest all the proceeds he can from the sale of the Dodgers and their assets. The team is carrying about $500 million in debt, according to a person familiar with the team’s finances. It owes MLB another $150 million in bankruptcy financing.
If the unique auction structure is approved by the bankruptcy court, McCourt will have the right to look for bidders interested in buying the team and media rights. But such a deal is destined to cause opposition from Fox/Prime Ticket which holds media rights through November 2012.
“We fully support a change in ownership of the Dodgers,” a Fox spokesman said in a statement. “In that process, Fox has rights that cannot be violated, as MLB has stated. We have rights that we negotiated and paid for. We will take all necessary steps to aggressively protect and defend those rights.”
But despite their willingness to fight for their rights according to the agreement which was created before the bankruptcy filing, the bankruptcy judge in the case has the power to modify certain agreements. It’s plausible that the bankruptcy judge in this case will agree to allow competing media rights bids because it could be more lucrative for the Dodgers and by extension their creditors in the bankruptcy case. As was the case with the Texas Rangers, competing bids can garner a higher selling price given creditors the opportunity to get paid a larger portion of debt owed.