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Dodgers bankruptcy: What is Wednesday's hearing about?

Frank McCourt and Bud Selig are heading into court, with each side trying to persuade a judge not to let the other control the Dodgers' finances. Here's some insight into the hearing.

July 19, 2011|By Bill Shaikin
  • Dodgers owner Frank McCourt, left, arranged for a loan from a hedge fund to run the team while it is in bankruptcy; Commissioner Bud Selig prefers that Major League Baseball fund the loan.
Dodgers owner Frank McCourt, left, arranged for a loan from a hedge fund… (Nick Ut, Joe Raymond / Associated…)

Frank McCourt and Bud Selig renew hostilities in Bankruptcy Court on Wednesday, with attorneys representing the Dodgers owner and the baseball commissioner each trying to persuade a judge not to let the other side control the Dodgers' finances through the bankruptcy process. Times staff writer Bill Shaikin offers some questions and answers about the hearing.

What's the main issue?

The question that will be determined is whose $150 million should be used to run the Dodgers while the team is in bankruptcy. McCourt arranged for a loan from a hedge fund; Selig prefers that Major League Baseball fund the loan.

If the amount is the same, what's the difference?

Under McCourt's loan, the Dodgers could owe close to $15 million more in interest and fees, according to a committee of creditors. The U.S. trustee assigned to help represent creditors has asked the judge not to approve McCourt's loan.

The Dodgers aren't spending $15 million on their highest-paid player this season, so why doesn't McCourt want to take the commissioner's loan, and the savings that come with it?

McCourt says the commissioner would be a hostile lender, not a fair one. The loan offered by Selig includes provisions that McCourt says could help the commissioner oust him from ownership.

What is at stake?

Who provides the loan is important because of the control that comes with it. Selig would rather not use the money of 29 other owners to prop up the Dodgers' owner, but the commissioner worries that McCourt would use his loan to take more money out of the Dodgers. McCourt would be happy to save a few million bucks, but he worries that Selig would use his loan to push the Dodgers toward new ownership.

Must the judge pick one loan or the other?

No. He cannot impose the terms of a loan upon a lender, but he could say he would not approve a loan without changes. In theory, the judge could ask McCourt's lender to sweeten his deal, or he could ask Selig to drop the provisions that McCourt believes could accelerate a sale of the Dodgers. The judge is likely to remind both parties that he holds ultimate approval over how the money is spent, and he could establish procedures to ensure all funds go directly into the team. For example, the judge could require McCourt and Selig each to approve major Dodgers expenditures.

If McCourt gets to use his loan, does that mean he keeps the Dodgers? And if McCourt has to use Selig's loan, does that mean the Dodgers will be sold?

No and no. Since McCourt vs. Selig is turning into quite a legal brawl, let's call this hearing the undercard. U.S. Bankruptcy Judge Kevin Gross said he would not "turn this hearing into a trial on the commissioner." Such a trial promises to be the main event, coming soon and probably lasting for months.

If McCourt put the Dodgers into Bankruptcy Court, why would Selig be an issue?

Under bankruptcy law, McCourt is entitled to retain the Dodgers if he can submit a business plan that satisfies the judge and the creditors. If McCourt can auction the Dodgers' cable television rights, he says he could repay all creditors in full and secure the team's financial future. Yet McCourt, like all owners, agreed to grant Selig broad powers — including the right to approve television contracts and strip an owner of his team upon a bankruptcy filing. McCourt needs the Bankruptcy Court to override Selig's authority.

Will Judge Gross consider what fans have to say?

No. The court clerk inserted five letters from fans — all opposing McCourt — into the case file. The judge ordered them removed. "The Court well understands the right and motivation of fans to express their concerns for the baseball team they love and the Court respects their passion," Gross wrote. "Nonetheless, it is not proper for the Court to docket fans' letters."

What's the best way to find out what happens at the hearing?

Follow the Twitter account below for live updates from the hearing, which starts at 7 a.m. PDT. There will be stories on latimes.com/sports throughout the day Wednesday and in the newspaper Thursday.

bill.shaikin@latimes.com

twitter.com/BillShaikin

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