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Nine of 30 teams reportedly in violation of MLB debt service rules

Dodgers' and Mets' issues are well-known but others are said to carry debt 10 times more than annual earnings. McCourts' personal use of redirected funds makes situation different, consultant says.

June 02, 2011|By Bill Shaikin

The Dodgers' financial data is not publicly available for this year or last year, but divorce court records show the team lost $10.3 million in 2006, made $5.7 million in 2007, lost $39.4 million in 2008 and made $8.4 million in 2009.

The Mets announced last week they had agreed to sell a minority share in the team for $200 million. McCourt has said he is not interested in selling a share of the Dodgers.

McCourt last year asked for approval of a $200-million loan from Fox. Selig rejected the deal, in part because the Dodgers' debt load would have increased from $525 million to $725 million, according to a person familiar with the deal.

However, according to the New York Times and ESPN, Wilpon has the option to convert the sale of a minority share into a $200-million loan within three years. Manfred declined to discuss the Mets deal but said it is not similar to the one proposed by McCourt.

"The Mets situation, when you understand it, is an equity infusion," Manfred said. "It has nothing to do with additional debt or pulling future revenues. We see no similarity between the two situations."

The Dodgers have pledged future ticket and parking revenue to satisfy loans, according to court documents. McCourt says a proposed long-term contract with Fox includes an equity stake in Prime Ticket and should count as an equity infusion; Selig has yet to approve or refuse the contract.

"The Dodgers are in compliance with MLB's debt service rule," McCourt spokesman Steve Sugerman said Thursday. "And the Dodgers will continue to be in compliance next year with the Fox media rights deal in place."

Vincent, the former commissioner, said it is difficult to understand the debt service issue without understanding the nature of the debts.

"Debt to an outside party who could assert rights could be very difficult," Vincent said. "Debt to the twin brother of an owner is a different story."

The Rangers' situation before bankruptcy and the Dodgers' current situation grew complicated in part because some debt is held not by the team itself but by related entities. Manfred said the current round of collective bargaining includes proposals to tighten the debt service rules, although he would not be specific.

The players' union has the right to information about team debts and consultation with regard to violations and remedies. Michael Weiner, executive director of the Major League Baseball Players Assn., would not discuss how many teams were in violation of the debt service rule or identify any of those teams, but he said he did not consider the issue a major concern.

"The fact that we're bargaining over potential changes to the rule does not mean it does not work," Weiner said, "any more than the fact that we're bargaining over potential changes to benefit plans or revenue sharing or any other subject."

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