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Odds & Ends: McCourts, Strasburg, Cotts

By Mark Polishuk [October 16, 2009 at 8:38pm CST]

Some tidbits from around baseball as we enjoy Game One of the ALCS...

Bill Shaikin and Harriet Ryan of the L.A. Times have some ominous news for Dodgers fans surrounding the separation of Frank and Jamie McCourt: his attorneys claim he is the sole owner of the Dodgers, while her lawyers say the team's ownership is split 50-50 between the soon-to-be ex-couple.
On the night of Stephen Strasburg's professional debut in the Arizona Fall League, Jack Magruder of the Washington Times notes that Strasburg won't pitch much in the AFL.
Reliever Neal Cotts doesn't know if the Cubs will non-tender him, but he is just focused on pitching somewhere in 2010 after undergoing Tommy John surgery in July, reports MLB.com's Carrie Muskat.
Tom Haudricourt of the Milwaukee Journal-Sentinel relates a nice anecdote about Craig Counsell to illustrate why he thinks the Brewers should bring back the veteran infielder in 2010.
MLB.com's Mychael Urban praised the young, talented and affordable Oakland bullpen in his ongoing team report card series.
Manny Acta and Bob Melvin "have to be 1-2" for the Houston manager's job thus far, says MLB.com's Brian McTaggart (via Twitter)

Comments

How on earth is this becoming a story while the Dodgers are STILL PLAYING in the post-season? Could there possibly be a legitimate reason for them to make all of this public right now? Or are they just idiots?

Posted by: eck66 | October 16, 2009 at 10:23 PM

I meant the McCourts, sorry I didn't mention it!

Posted by: eck66 | October 16, 2009 at 10:24 PM

I think this has become a story, because one of the biggest media hounds in MLB, Charles Steinberg, the Dodgers and Red Sox ex PR honcho was unceremoniously dumped by the Dodgers, and was already babbling to Peter Gammons about some of the chaos in the Dodgers organization. Frank McCourt decided to address this first so he could at least can shape the message better. Obviously Frank McCourt would like this come out after the playoffs, but I doubt this would had been kept secret, and when Gammons mentioned the "living hell" comment about Torre's job at LA, I am guessing the Dodgers' organization was worried what else Dr. Charlie was going to leaked to other reporters who focused on baseball.

Posted by: okojo | October 16, 2009 at 11:55 PM

Just ignore all the talk that the Dodgers aren't going to be sold. With McCourts' debt load, erratic management, how it appears they can't go above $100 million in payroll, because they need to have some change to pay off their loans and lines of credit, it is not if they sell the team but when. No partner in their right mind is going to buy off one of the McCourts and deal with the flaky management from the top....

Also ignore the Forbes valuation of the club, it is probably worth much less, probably more in the $500 million dollar range, mainly whomever buys the club isn't going to pay the Forbes value, and there aren't going to be many potential investor groups who are get $700 million line of credit.

Posted by: okojo | October 17, 2009 at 12:02 AM

The Dodgers being sold would not it itself be a bad thing (other local parties were interested when McCourt bought the team), but the months if not years of legal turmoil which seems likely to precede a sale would be terrible for the team's future, which is brighter now than it's been in decades. Worst case scenario, the Dodgers could go the way of the Padres. A sickening thought.

Posted by: BlueSky | October 17, 2009 at 01:04 AM

The big problem with any sale of the Dodgers is that they don't own the broadcasting rights, Fox Sports or whomever owns them now, but it isn't the Dodgers.

When Eli Broad offered to buy the Dodgers in 2003/2004, he wanted the broadcasting rights, because it is a steady stream of revenue, besides a way to a package the Dodger brand, with either a sports channel or setting up one. Any savvy business person knows that having the broadcasting rights in the second largest media market in the US, can be a huge revenue stream.

The only chump who bought the Dodgers without the broadcasting rights was Frank McCourt. Fox was so desperate to get out of owning a team they took a lost in the sale, and pretty much co signed many of the financial notes needed to get the sale complete.

Someone like McCourt, who's background in Real Estate, knows that many companies are willing to do anything to sell distress assets, and Fox Sports/News Corp, was panicky about finding a buyer who willing to buy the Dodgers without the securing the broadcasting rights.

These are some of the reasons that the Angels and the Dodgers are worth less than a team like the Red Sox, or maybe even the Cubs, if the broadcasting rights are maintain with the transfer of ownership.. Even though the Southern California media market is huge, and why the two most valuable teams in MLB are the Yankees and the Mets.

The Dodgers won't go the way of the Padres, unless the McCourts refuse to deal with each other and prolong divorce proceedings for years, and the banks start calling in their loans, or refuse hand out short term paper to the Dodgers to pay for salaries and monthly bills...

They will probably find a buyer in the $ 500 million price range, and the group or new owner, isn't going to get the sweetheart deals that the McCourts got in 2004, including a $75 million line of credit open by MLB to the McCourts.

The McCourts had some astronomical loan payments, because they pretty much bought the Dodgers with little money down, and put their Boston parking lots up for collateral for a Fox loan package. (Fox took over the parking lots when the McCourts defaulted in 2005 or 2006)

McCourt also turned around and got another loan for B of A when they officially bought the team, a $250 million/25 year loan with Dodger Stadium as collateral..

I give the McCourt some credit, I didn't think they would last this long owning the Dodgers...

Posted by: okojo | October 17, 2009 at 01:39 AM

The Haudricourt piece is yet another media love-fest over a mediocre, aging white guy. I'm sure Counsell is a great guy, but we've yet to learn how that helps a team win on the field. You rarely - if ever - see these sorts of pieces written about black and Latino players.

Posted by: JRog | October 17, 2009 at 09:31 AM

I'm just holding out and hoping that Mark Cuban buys the Dodgers.

Posted by: ThinkBlue | October 17, 2009 at 09:52 AM

Bud Selig and Bob DePuy won't allow Cuban to own a major league club.

McCourt was pretty renown in being stubborn and difficult to deal with while being a Boston Real Estate developer, i doubt he will be easy in selling the club, except if the Banks forced him to..

Besides McCourt isn't going to find a chump easily like himself to buy one of the top clubs in MLB at the price he probably wants to save face.

Posted by: okojo | October 17, 2009 at 10:43 AM

The McCourt deal was complicated, but IIRC, the broadcasting rights to the Dodgers were tied up in a note Fox took from McCourt, and were to transfer to McCourt at some point (when paid off?). It's also easy to criticize McCourt for buying the team without these rights, but then he was able to swing a deal to get the team out of the hands of Fox. I don't know a single Dodger fan who wasn't happy to see that happen. Fox didn't have a clue about how to run a ball club.

My best hope that years of turmoil won't result from the McCourts separation is that they'll both realize that the value of the Dodgers (especially when the real estate is figured in) is probably at its lowest point in a decade, due to the crash in the real estate market. If they're smart neither will want to force a sale until values recover. Not that people going through divorces tend to act intelligently.

The first order of business will be determining who in fact owns the Dodgers. As much as we know, Frank McCourt says he's the 100% owner, but it appears that Jamie McCourt will try to make a community property claim. Lawyers, guns and money.

Posted by: BlueSky | October 17, 2009 at 10:58 AM

Under California law, the legal presumption is that assets acquired and debts incurred between the date of marriage and the date of separation are Community property, and will be divided 50/ 50 upon dissolution of the marriage. There may be exceptions where there is a gift made to one of the spouses, or an inheritance. If one of the parties uses their separate property (money earned prior to the marriage) and invests it in a community asset, they are entitled to reimbursement from the community.
There may also be a prenuptial agreement that hasn't yet been made public. But barring that, it looks like the franchise will be divided in divorce court, and will have to be sold unless one of the parties can buy the other one out.
MLB may have their own rules about who is listed as the "owner" of the team, but in terms of the asset, California law will prevail.

Posted by: Tigerdog | October 17, 2009 at 11:58 AM

The deal with Fox didn't include the broadcasting rights. I don't know how long that Fox holds on to them, but they weren't part of the sale. One reason why Fox wanted to sell to McCourt, rather to another group. Any other serious bidder, would want the broadcasting rights, and Eli Broad definitely wanted the broadcasting rights in his bid. One reason why Fox wanted McCourt desperately to buy the club, because they find someone as desperate as they were.

What was tied up with promissory note between Fox and McCourt was McCourt's 24 acres of South Boston property. There was a two year limit for McCourt to pay back the note. When McCourt didn't pay it back, Fox/News Corp took over the land, even went as fas as stating it "foreclosed" on it.. Which McCourt denied, but that is what happened. News Corp lost money on the Dodger sale, and lost money on the note they had with McCourt.

Los Angeles is the second largest media market in the nation. There is a reason why McCourt couldn't buy the Red Sox, but could buy the Dodgers at a lower price.

When McCourt bought the Dodgers, he refinanced his $150 million loan with Bank of America into a $250 million/25 year loan with institutional investors that bought the B of A loan at %5.66 annual interest. That may sound fine, but that comes with the other loans, both long term and short term that hang heavily over the McCourts.. The McCourt were leverage to the hilt, and when there is an economic downturn, it makes thing more onerous.

If McCourts owned the broadcasting rights, they would either hoc them as collateral for more loans, or get a media partner to set up a sports channel. The reason why Murdoch bought the Dodgers in the first place, (also as a tactic in fear of then Disney owned Angels, who current owner, Morteno doesn't own the broadcasting rights.

If McCourt owned the broadcasting rights to the Dodgers, the organization would be worth more than a billion dollars...

Posted by: okojo | October 17, 2009 at 12:05 PM

Most pre-nupitials agreements have time limits in them. Even if the McCourts had a bombproof pre-nupitial agreement like Britney Spears had with Kevin Federline, they were married for 30 years, and much of their wealth came after their marriage. So the wealth/assets protected if there is a bona fide pre-nupitial agreement is minimal, The Dodger purchase in 2004 was with little to no money down on the McCourt part, and they have been paying off the loans with Dodger revenue that isn't sucked up by overhead.

Jamie McCourt owns half the team. The McCourts ran the team as a family business, with their son head of marketing, (talk about dual loyalties at this time) They haven't been exactly skin flints on their personal finances, given they have bought some of the priciest real estate in West LA and Malibu at over inflated prices before the World Credit Crisis hit, and hammered all property values both commercial and residential values.

The only way one of the McCourts can buy out the other is getting more loans to pay the other... That isn't going to happened, and I wouldn't be surprise that the main reason for this divorce is financial, instead of infidelity, etc.

Also, no matter what the divorce will finally open the books on how seriously leverage the McCourts were for the past five years, and if they were turning swimming above the water or not.

Posted by: okojo | October 17, 2009 at 12:28 PM

We knew the McCourts were heavily leveraged, but the actual financial details were private, and since this is still a private matter, I don't think we'll necessarily find out more about them through the divorce proceedings. I think it's also going too far to state as though it's an established fact that Jamie McCourt owns half of the team. This is what the lawyers will argue about, and will depend (presumably) on the prenup we're told they have, and California community property law. Jamie McCourt owns several properties under her name. So it's not going to be at all simple.

But any way you cut it, this is a huge mess. As a baseball issue, I have a gut feeling that if the Dodgers don't do it this year, that another shot could be many years off.

Posted by: BlueSky | October 17, 2009 at 01:12 PM

Here is a simple plan of what loans were involved in the Dodgers' purchase by the McCourts...

http://tinyurl.com/yk9w48e

the B of A loan was re-financed to a $250 million/25 year loan with 5.66% annual interest, and it is bonded as AAA rating, which means McCourt has to pay it off annually or else. It wouldn't be a problem unless there are the other loans involved.

McCourts' Brookline estate was sold at a loss to John Henry, the Sox owner, and was most likely part of any collateral to any loan used for the sale.. Which means McCourt have to pay the difference.

What is secret are the true numbers of overhead and revenue, and income. Much like the attendance figures are heavily cooked by MLB teams like the Yankees, the revenue, after tax income can be highly manipulated. I think there is some guessestimate on how much of the income is used to pay off annual and monthly loan payments, besides how they are doing with short term loans, aka commercial paper

What isn't secret is the McCourt business plan. We known they leverage the buying of the Dodgers, We know the their revenue streams, like their annual income from their TV and radio contracts. Ignore the Attendance figures, as much as how much attendance revenue fluctuates year to year.

If the McCourt had a prenuptial agreement that the Court rules as bona fide and binding, Jamie McCourt, MBA grad from MIT can still argued that she was a major part of increasing the Dodgers' market value, given she was in charge of major operations, and she is entitled to be compensated for increasing that value.

The Malibu properties of Jamie McCourt are way way overvalued, and are probably worth less now than the mortgages to secure them. If they are specifically in her name and with contractual clause that she is financial responsible for them, they may be shielded from the divorce settlement, because the court may rule they are not part of community property, (even the money to pay for it is part of community property)

Do the Dodgers make money? yes they do, but with any labor intensive business, overhead tends to suck up revenue at huge rates, that profit margins are small. Why owning a MLB team can be difficult, or an owner need some wealth to handle down years.

Posted by: okojo | October 17, 2009 at 01:59 PM

Thanks for the detailed info. The reservation I have is that they don't cite any sources for this information so we don't know how much was based on speculation and how much is verified. I understand the part about Jamie McCourt's claims against half of the increased value of the Dodgers (which I believe is how community property law works in California), but I think the issue for the Dodgers could be same as the value of her residential properties. The Dodgers might be more valuable as a baseball franchise today, but is Chavez Ravine worth what it was five years ago? Almost certainly not. In the end a baseball team is worth only what someone will pay for it, which unfortunately argues for forcing a sale, since any appraisals made by either side are bound to be disputed.

Posted by: BlueSky | October 17, 2009 at 03:22 PM

The Dodgers will be put on the sale block!! There is no way that Current Dodgers Owner Frank McCourt has the
finances to buy Jaime's shares. My prediction is that
Eli Broad/Michael Eisner pack would look nicely in Chavez Ravine.. The Dodgers would be able to pick-up key free agents, instead of The B players. I think that The Dodgers need to get Cliff Lee who is a free agent and if there is more spending cash,
disgruntled Arizona Diamondback Pitcher Brandon Webb would fit perfectly with a rotation of Kuroda-Billingsley-Kershaw-VPadilla-
-CLee and or Brandon Webb.
Go Dodgers!!

Posted by: cdatzker | October 17, 2009 at 09:38 PM

We don't know if Jamie McCourt has a share of the Dodgers. That's exactly what the lawyers will be arguing about for the next however many years it takes. Selling the team would be all but impossible at this point. Nobody would touch it, because they know they whole thing would probably end up in court.

Posted by: BlueSky | October 18, 2009 at 12:14 AM

Eisner won't go near a Dodger sale without the broadcasting rights. Eli Broad is turning more into a red herring than a serious buyer.

There are not going to be many serious business people lined up to buy the Dodgers straight up. There will probably be more like Jeff Morad types, who have a background in owning or running a team. Another gadfly like Frank McCourt may be interested in purchasing the club, but MLB has the final say in the matter, but there isn't going to be a white knight in shining armor to swoop down and buy the Dodgers at $700 million. It will be probably a group of investors buying it around $500 million.

Posted by: okojo | October 18, 2009 at 08:54 AM

I agree, but I think a number of buyers could be found, with our without broadcasting rights, if the price is right. Besides, who is going to want to negotiate simultaneously with Fox and two sets of lawyers? I don't know about Eisner, but the southland is full of very wealthy entertainment people who could swing the deal for cash, if they were interested. The dispute over ownership seems like the main obstacle.

Posted by: BlueSky | October 18, 2009 at 11:11 AM

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Odds & Ends: McCourts, Strasburg, Cotts

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