Since buying the Dodgers for $430 million six years ago, Frank McCourt has so heavily leveraged the team — $433 million in debt as of last year — that he has struggled to find additional financing.
The debt load has limited how the Dodgers can pay their players and could affect the team's ability to sign talent.
McCourt was turned down at least three times — by Citibank, by a Chinese investment group and by a Southern California infomercial king — in trying to secure additional financing last year, according to documents filed in the divorce case between him and his estranged wife, Jamie.
In a deposition, Dodgers Chief Financial Officer Peter Wilhelm said Citibank declined even to engage in serious negotiations.
"They did not feel that the Dodger organization had the capacity to take on more debt," Wilhelm said.
Frank McCourt bought the team for $430 million in 2004, according to an approval memorandum from the commissioner's office. Under McCourt ownership, the Dodgers' revenue has nearly doubled — from $156 million in 2003 to $286 million last year, according to court documents.
McCourt pledged on his first day as an owner that the Dodgers would maintain a player payroll among the top quarter of major league teams, but the business plan he submitted to Major League Baseball — revealed in court documents Wednesday — called for cutting the payroll from $100 million in 2004 to $85 million in 2006.
In fact, although the payroll was $98 million in 2006 and a club-record $119 million in 2008, the Dodgers opened this season with a $95-million payroll. That figure ranked 11th among the 30 major league teams, just behind the Minnesota Twins.
"Every dollar he makes is going to pay his debts," said Raman Sain, a principal at Holthouse Carlin and Van Trigt, the largest accounting firm based in Southern California. The firm, with $59 million in annual revenue and 250 employees, analyzed tens of thousands of pages of documents filed in the divorce case for The Times.
Sain calculated that the Dodgers had $29 million in free cash before debt service last year and said virtually all of it went toward interest payments, hampering the team's ability to acquire players.
MLB Commissioner Bud Selig declined to comment, saying through a spokesman that he would not discuss the finances of an individual club.
McCourt spokesman Steve Sugerman, presented with the findings about the lack of available cash and the struggle to find new financing and asked how the Dodgers could continue to field a top-tier team, issued a statement in response.
"The Dodgers have consistently demonstrated a commitment to fielding a team worthy of fan support, and the four division championships in the last six years are indicative of that," the statement read. "There's a commitment to winning, and that continues."
What the documents say
The analysis conducted by The Times and the HCVT accounting firm was limited to documents available in court files, including internal financial documents through 2009 and personal statements of net worth but not including audited financial statements.
The firm concluded that, if the Dodgers were sold today and the McCourts were to split the proceeds, the debt and tax burdens would be so great that each of the McCourts might walk away with about 10 cents on the dollar.
The documents showed:
— The Dodgers generated $72 million in operating revenue last year but had a net profit of $8.4 million, largely because of $28 million in debt service and $34 million in revenue-sharing payments. Baseball requires the teams that generate the most money help support the ones that generate the least.
— The debt is not projected to drop significantly until at least 2013. The Dodgers' business plan is based on selling 3.8 million tickets every season, a number the club has hit once in six years. The team is projected to sell 3.6 million tickets this year, based on current attendance.
— Bank of America, the Dodgers' lead lender, last year restricted the team to $66 million in deferred player compensation at any one time, a provision called "unusual but not unprecedented" by a high-ranking baseball official, speaking on condition of anonymity because of the court case.
The Dodgers have routinely signed players to contracts in which payments are deferred, most notably Manny Ramirez. The Dodgers signed Ramirez to a $45-million contract for the 2009 and 2010 seasons but deferred $30 million through 2013. (The Dodgers saved $3.8 million by sending Ramirez this week to the Chicago White Sox.)
The Dodgers also owed about $30 million in deferred money to Andruw Jones, Rafael Furcal, Hiroki Kuroda, Jason Schmidt and Orlando Hudson at the time the bank capped deferrals.