Sports teams rarely disclose their financial records, but the Dodgers' debt load can be compared to six other baseball clubs — the Angels, Florida Marlins, Pittsburgh Pirates, Seattle Mariners, Tampa Bay Rays and Texas Rangers — whose statements were leaked last week to the website deadspin.com.
The total liabilities for those six teams ranged from $104 million to $234 million, with the Angels at $129 million. Court documents showed that the Dodgers had a debt load well within the range of those teams, a liability of $153 million as of September 2009.
However, the $153 million is but a fraction of the $619 million in total liabilities held by the team's parent company, LA HoldCo LLC. That figure includes $433 million of long-term debt, with both figures obtained from a September 2009 balance sheet.
HoldCo is where revenue and expenses from the Dodgers' assets are consolidated. Court records — including statements by Jamie McCourt, the team's former president and chief executive — show that the company has no significant source of income to service the debt besides the Dodgers and no significant HoldCo operations aside from the Dodgers.
LA HoldCo's net losses for the first 11 months of 2008 and 2009 were $15.5 million and $5.9 million, respectively. Its $20.6 million in cash and liquid assets at the beginning of 2008 had dwindled to $5.5 million as of Nov. 30, 2009 — a 73% decline in less than two years.
The holding company went into technical default on its bank line of credit after the second quarter of 2009, because the cash available to pay its debts was less than required. The banks could have shut down the credit line at that point but did not, financial reports show.
In a court declaration, Wilhelm, the Dodgers' CFO, identified "borrowed funds" as the primary source for the "operation of the business enterprise as well as a source of potential distributions" to the McCourts.
The McCourts took $108 million in personal distributions from the Dodgers from 2004 to 2009, primarily from the borrowed funds, court records show.
For example, in 2006, Blue Land Co. — the McCourt entity that owns the Dodger Stadium parking lots — took out a $60-million loan against the parking lots, according to Wilhelm's declaration. The McCourts invested $10 million in the Dodgers and used about $50 million for personal mortgages and purchases of residential real estate, Wilhelm said.
The money to repay that loan comes from the rent payments the Dodgers charge themselves on land they own, shifting team revenue to the Blue Land entity, according to Wilhelm's deposition.
In his declaration, Wilhelm said he was aware of only two McCourt business assets that had been sold to generate funds for the Dodgers organization in the last six years — the sale of a Boston commercial building for about $3.9 million, and the sale of the minor league Vero Beach Dodgers for about $3.1 million.
In 2008, the McCourts were told that the sale of a minority ownership stake in the Dodgers could raise "a significant amount of money," according to an e-mail from McCourt Group Chief Operating Officer Jeff Ingram.
"If you sell, you also have to be very comfortable with [the] notion of cash in bank buys the peace of mind and is worth taking on the fiduciary responsibility and aggravation of having a partner[s]," Ingram wrote to the McCourts. "That's only a question the two of you can answer."
The McCourts chose to retain full ownership of the team.
Finding new money
Citibank was not the only entity to turn down McCourt in his search for financing last year, according to court documents.
McCourt asked Chinese investors for $150 million, in exchange for a stake in an international sports partnership. McCourt would have run the joint venture, which he hoped would have been made up of the Dodgers, a Beijing soccer team and, later, an English Premier League soccer team. The investors declined.
McCourt also approached Bill Guthy, whose Guthy-Renker firm pioneered the infomercial, for a $25-million loan. Guthy declined.
In addition, Ingram discussed with Bank of America the possibility of obtaining $125 million in financing. McCourt said he abandoned the process because of the tightened credit markets. (In court papers, Jamie McCourt said he postponed the plan so that she could not get any of that money in the divorce proceedings.)
When McCourt bought the Dodgers in 2004, he got $8 million in loans from friends from Massachusetts, an electronics executive named Franklin Weigold and a couple named Paul and Linda Carter.
McCourt had the option to pay back the loans with interest or convert the money into a small ownership share. The Dodgers owed $9.4 million on those loans as of June 2009, according to court filings.
Dodgers attorney Marshall Grossman said full repayment is not yet due. In an e-mail to McCourt last October, Ingram wrote of the "need to extend or pay off carter/weigold."