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Dodgers Forced to Borrow : Baseball: Club blames strike for necessitating $20-million loan to cover operating expenses.

October 29, 1994|ROSS NEWHAN and MARYANN HUDSON | TIMES STAFF WRITERS

The financial impact of the players' strike has prompted the Dodgers, long considered one of baseball's most stable and profitable franchises, to borrow $20 million from the club's line of credit with a Los Angeles bank, The Times learned Friday.

The loan takes effect Tuesday.

"I cannot deny it," owner Peter O'Malley said. "We have an ongoing line of credit with a major bank and expect to draw on it next month to meet the overhead and annual expenses we have."

O'Malley said the Dodgers have borrowed before, "but not for a long time." He said it would be inaccurate to characterize the club as being in financial trouble, although he cited the loan in recent staff meetings, a source said, as a response to the strike's impact.

Asked on Friday whether the loan might have been necessary in part because the Dodgers have money tied up elsewhere and viewed it as a strategic hedge against an uncertain future, O'Malley refused comment. However, Bob Graziano, the club's vice president/finance, stressed that the loan was necessary to cover operating expenses, "to fund the payroll for people still working here and to make sure the grass gets watered."

Graziano said the Dodgers had been debt-free since the construction of Dodger Stadium, which opened in 1962, and would not have taken the loan if not for the strike.

"I don't think anyone is saying the club is on the ropes," he said. "This club has operated debt-free and we have not had to borrow to cover operating expenses. The fact is, now we are borrowing to cover operating expenses. It's not uncommon (for a team) to borrow for capital expenses, but it's rare to borrow to fund operations."

Said O'Malley: "I hope this can help get the organization through a very difficult time. We're going through a very, very stormy period as an industry, and I'm concerned about the future of the game. However, this franchise will survive, and I'm very confident that the involvement of Mr. (William J.) Usery (as a special mediator in the bargaining negotiations) will prove to be very positive.

"He's the best in the business. He's resolved hundreds of cases more complicated than this. I think he's the right man in the right spot at the right time. I look for him to help identify a common ground and reach an agreement within the next few weeks."

It has been estimated that the Dodgers lost $12 million because of the strike, which began Aug. 12. A source said the team, despite averaging 41,444 in attendance through 55 dates, would have lost about $2 million this year even if the season had played out, though that loss would have been reversed, it is believed, if the Dodgers had reached the playoffs. O'Malley refused to discuss the profit and loss aspect or to project a time frame that the $20 million is designed to cover.

"That's difficult to say because I'm hoping there will be an agreement with the players within a few weeks," he said.

The Dodgers previously had eliminated 20 full-time and five part-time positions, cut the salaries of management personnel by 15% and non-management by 10% and offered early-retirement opportunities to employees 55 and over.

In addition, Executive Vice President Fred Claire said recently that the club's $37-million player payroll of 1994 will drop significantly next year.

Said Graziano: "These moves are too drastic to take for PR purposes. The borrowing was not for PR purposes. There's a lot of misconception about the cash flow of this ballclub. There's a misconception that our vaults are filled with cash. It was necessary (to take the loan)."

Twelve of the 28 major league teams were approved by a consortium of New York banks for a line of credit estimated at $360 million in 1992. Each of the 12 has since borrowed from the line, a source said, "and I would feel confident in saying that most of the other 16 clubs have borrowed from their own banks in that time, particularly since the strike started."

O'Malley, who has been critical at times of acting Commissioner Bud Selig's leadership, bristled somewhat when he said of the labor situation: "It never should have reached this point. Both sides are at fault. Both had time to resolve their differences and reach an agreement before Aug. 12. Now we're all paying the consequences."

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