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Checketts Lines Up Some Funds in Dodger Bid

Financier George Soros, two major banks are said to be involved. But a shortfall points to tough economics of baseball.

March 03, 2003|Sallie Hofmeister | Times Staff Writer

New York sports executive David Checketts has assembled part of the financial backing for his $620-million bid for the Los Angeles Dodgers and a related cable TV channel, according to Wall Street sources, with his firmest commitment coming from an unlikely baseball investor: financier George Soros.

Soros has agreed to put up less than $100 million in equity in what would be his first investment in a sports franchise, people familiar with the matter said.

Sources said that Checketts, who formerly ran the NBA's New York Knicks and Madison Square Garden, also has lined up two banks and still is looking for a third to secure financing of $300 million. The banks are said to be J.P. Morgan Chase & Co. and FleetBoston Financial Corp.

Yet even with their involvement, Checketts remains more than $200 million short of his financing goal, these sources said. And there is no guarantee that Rupert Murdoch, the chairman of Dodger owner News Corp., would go for such a deal in the end.

So far, Checketts has emerged as the most serious bidder for the Dodgers, but others have expressed at least some interest in the team, sources said. Among them: former baseball commissioner Peter Ueberroth. Real estate mogul Alan Casden's name had surfaced early on, but sources say that his attention may now have turned to the Atlanta sports teams owned by AOL Time Warner Inc., which also are on the block.

Ueberroth said "nothing of a serious nature is going on with the Dodgers." A Casden spokeswoman declined to comment.

The funding gap faced by Checketts, after months of discussions with News Corp., underscores the difficult economics of baseball, in which most teams lose money. The Dodgers, for their part, say they had a $40-million deficit last year.

Checketts' shortfall also highlights the dearth of investors interested in sports at a time when an estimated dozen or more major-league teams, including baseball's Anaheim Angels, are up for sale.

Checketts did not return phone calls. Soros Fund Management would not comment on its investment activities. Officials at the two banks couldn't be reached, and News Corp. would not discuss the negotiations.

Soros, a Hungarian investor and philanthropist whose currency trades often move global markets, has been impressed by Checketts through their involvement with JetBlue Airways, Wall Street sources said. Checketts is a director of the upstart airline and Soros is its biggest shareholder. Through various investment vehicles, Soros owns a 22.5% stake worth nearly $400 million in JetBlue.

Soros' Web site says that his Quantum Fund is one of the best-performing funds ever, with a 31% annual return over its 30-year history. But most sports experts doubt that a Dodger deal could ever yield anything close to such heady results -- and that seems to be making it difficult for Checketts to put a complete funding package together.

Indeed, two other equity investors talking with Checketts have evidently gotten cold feet. In mid-February, Wall Street sources said, Checketts had commitments from the New York buyout firm of Kohlberg, Kravis Roberts & Co. and Rhode Island's Providence Equity Partners Inc.

But KKR is said to have since pulled out, taking about $200 million off the table. Providence, meanwhile, remains on the fence, according to one Wall Street banker familiar with the situation.

Providence is a media and telecommunications investor that already has a small minority stake in Yankees Entertainment and Sports Network, a year-old cable channel that airs games of the New York baseball team. Providence executives "like cable networks, but are not as comfortable with teams," the banker said.

Neither Providence nor KKR returned phone calls seeking comment.

Beyond raising enough money, Checketts faces another huge hurdle in purchasing the Dodgers: He must persuade Murdoch to part with Fox Sports Net 2, which televises games of the Dodgers and Mighty Ducks of Anaheim.

According to sources, Checketts and his partners have made their offer contingent on buying at least 80% of Fox Sports Net 2. Under a revised acquisition proposal submitted to News Corp. in mid-February, Checketts also has proposed managing News Corp.'s second Los Angeles-based regional sports channel, Fox Sports Net, which airs games of the Los Angeles Lakers, Los Angeles Kings hockey team and the Anaheim Angels.

For Checketts, who made an ill-fated attempt last year to buy the Boston Red Sox, owning the cable channel is crucial because it can serve as an insurance policy against any financial losses produced by the Dodgers. But it's far from clear whether Murdoch can be persuaded to give up Fox Sports Net 2.

"The question isn't whether Checketts can come up with the money," said one person with knowledge of the negotiations, who added that several wealthy U.S. individuals and Asian investors have approached Checketts about backing the deal. "It's whether Murdoch will sell the network."

At least for now, the source said, Murdoch remains reluctant to sell Fox Sports Net 2, which is part of a constellation of regional sports channels that forms a powerful rival to Walt Disney Co.'s ESPN. In fact, Murdoch is said to be still looking for a buyer that is interested in only the team and is willing to forgo the Los Angeles cable network. Ueberroth, for one, is interested in just the team, sources said.

News Corp. bought the Dodgers in 1997, paying about $350 million in considerations. But it needs more than $500 million to break even, given the Dodgers' losses over the last five years and its remodeling of Dodger Stadium.

News Corp. is looking to sell the team to raise money to buy DirecTV parent Hughes Electronics Corp. DirecTV would fill a U.S. gap in Murdoch's global satellite empire.

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Times staff writer Ross Newhan contributed to this report.

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