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Big surprise: Frank McCourt to keep the Dodgers running with a crappy loan

Jun 27, 2011, 4:30 PM EDT

File photo of Los Angeles Dodgers owner Frank McCourt speaking at a news conference about increased security at Dodger Stadium in Los Angeles

Frank McCourt, who knows from crappy loans, received one for $150 million in order to meet payroll on the 30th and to keep the team running while the bankruptcy proceeds through its paces, reports the Wall Street Journal.  Some basic questions you may have, followed by the best answer I have (again, bankruptcy types, feel free to correct me if I’m wrong):

First question: How in the hell did Frank McCourt get a loan? I thought he was tapped out!

Answer: It’s a special bankruptcy loan for debtors in possession. These things happen frequently. The moment the bankruptcy goes down, the lender of such a beast goes to the front of the line for payment. It would not have been available before a filing, as a lender would then be behind all of the other creditors. The idea: better to favor a post-bankruptcy lender than to have no one get paid.

Second question: What makes this a crappy loan?

Answer: The interest rate for starters, which at 10% is higher than your usual debtor-in-possession financing. Even Borders bookstore, which is basically in a dying industry, got a better deal. Also the fact that McCourt had to pay the lender a $4.5 million fee on top of it all. Also because McCourt had to put a lien on Dodger Stadium and offer personal guarantees on the load too.

Third question: Why such bad terms?

Answer: Apparently because no one else would lend him the money, preferential treatment aside.  According to the Wall Street Journal, a J.P. Morgan-affiliated hedge fund — Highbridge Principal Strategies — was the only entity willing to do business with Mr. McCourt. Maybe next time he should call Moneytree, where lenders compete for your business!

What? You mean he called Moneytree already?  And they pretended they weren’t home?  Awwwkwaaard.

  1. dlevalley - Jun 27, 2011 at 4:33 PM

    You know, I’ve always thought debtor’s prisons were bad things. Beginning to re-think my position…

  2. Brian Murphy - Jun 27, 2011 at 4:36 PM

    (in a tired, dejected, whimpering voice)

    Just go away.

  3. yankeesfanlen - Jun 27, 2011 at 4:39 PM

    Maybe the lender is named Highbridge because that’s where they take you when you default.

  4. whitneymuse - Jun 27, 2011 at 4:39 PM

    The Stadium is worth a bunch; then the team is still a McCourt property.

  5. itsacurse - Jun 27, 2011 at 4:40 PM

    Moe: Sure, Homer, I can loan you all the money you need. However,
    since you have no collateral, I’m going to have to break your
    legs in advance.
    Homer: Gosh, Moe, I use these all the time. Couldn’t you just bash my
    head in?
    Moe: Hey, hey: are you a loan shark? Do you understand how finance
    works? [grabs a sledgehammer] Now let’s do this thing.

  6. scareduck - Jun 27, 2011 at 4:45 PM

    As Mike Petriello of the delightful Mike Scioscia’s Tragic Illness blog once wrote, “Die in a fire.”

  7. kopy - Jun 27, 2011 at 4:47 PM

    So whoever eventually buys the Dodgers from McCourt, whether it’s MLB or an auction winner, is going to have to pay extra millions in interest just to remove this British bank’s claim to the team? Am I thinking this through correctly?

    • jwbiii - Jun 27, 2011 at 5:00 PM

      No, whoever buys the Dodgers will pay what they are worth. Highbridge/J. P. Morgan Chase will get a piece of the purchase price and Frank McCourt will get a bit less.

      • bigbbfan - Jun 27, 2011 at 5:58 PM

        That’s not how it works in Chapter 11 bankruptcy proceedings. As Craig pointed out this lender is making the loan to the “debtor in possession” and they will get paid without any “haircut” in most instances. It is the creditors in the pre bankruptcy Dodgers who will end up with very little.

        The reason the bankruptcy laws work that way is to encourage lenders to loan money to a company in Chapter. Otherwise none would ever survive and emerge from Chapter 11 proceedings.

      • jwbiii - Jun 27, 2011 at 8:10 PM

        I understand, bigbbfan, I’m sorry if my comment implied otherwise. Highbridge will get their money back and interest (and LIBOR +700, Yikes!). kopy’s question was whether the Dodgers’ eventual purchaser will have to pay more because of this loan. The answer to that is, “No, Highbridge will be reimbursed and the McCourts will receive less.”

      • jwbiii - Jun 28, 2011 at 12:42 AM

        Let me also mention that LIBOR is published as a monthly rate. Annualized, it’s a shade under 8% right now. LIBOR +700 is 14.92%. My Visa card charges 12%.

  8. cup0pizza - Jun 27, 2011 at 4:58 PM

    Nightmare. Someone kill this cockroach already.

  9. tellyspop - Jun 27, 2011 at 5:22 PM

    You want this to go to the bankruptcy court. Its like crossing the river Styx, or better yet, opening Pandora’s jar. With all the evil that comes out of that, the last item is Hope: still there. We weather Prometheus’ fire and contempt for civilization, we perverse. It will take some time and effort, but end result will be the end of the man whose name shall never be mentioned, will be long gone, and Dodgers will be whole again.

    • paperlions - Jun 27, 2011 at 5:28 PM

      Hey, for Pandora’s Jar, you can be damned sure that I’ll find a way to perverse.

  10. kate91016 - Jun 27, 2011 at 5:48 PM

    I feel sorry for the players – they have had to play with this B-S hanging over their heads – How hard it must have been – still is – to play with the thought “will the boss be able to make payroll?” – How is it that this – individual – convinced lenders that he had the collateral to back this up? Is there no oversight? Maybe MLB should mandate that they have to sign off on all team buy-ups / buy-outs – So sad that now, the players have to live with / play under the stain of McCourt and his using the team for personal gain – and from me personally – I hope they both end up on the corner with a tin cup – I’m just sayin –

    • JBerardi - Jun 27, 2011 at 10:53 PM

      It’s not just the players, it’s everyone. The front office, the grounds crew, Vin Scully… everyone.

    • goforthanddie - Jun 27, 2011 at 11:31 PM

      The players will get paid. Everyone else has to worry.

  11. ditto65 - Jun 27, 2011 at 6:04 PM

    Hello. I’m Phil Rizzuto for the Money Store…

    • jimbo1949 - Jun 27, 2011 at 7:22 PM

      Scooter, how could ya sell yerself so cheap?

  12. kooldog1 - Jun 27, 2011 at 8:47 PM

    McCourt should be out period! and MLB should seize the dodgers and say McCourt has fail in his obligation to MLB. its been done before i believe?

  13. omniusprime - Jun 27, 2011 at 8:54 PM

    How sad that flim flam man McCourt got a loan, the misery of the Dodgers and us fans will continue until McCourt is thrown out of MLB and the Dodger organization. Not surprising that some scummy hedge fund is riding to McCourt’s rescue. Also sad that this hedge fund gets first dibs on being paid back. The whole problem with robberbaron McCourt is that he looted the Dodger organization for all it was worth and then wasted that money he stole. McCourt is the epitome of what’s wrong with America – rich and greedy thieves who steal everything of value, won’t pay their fair share of taxes and never pay the consequences of their illict ways!

    • Joe - Jun 28, 2011 at 9:05 AM

      The hedge fund isn’t really riding to McCourt’s rescue. It’s making 7% on a $150 million loan ($10.5 million annually) on top of $4.5 million in up-front fees. And because they move to the front of the creditor line, there is practically zero risk that they will lose the principal, because the Dodgers will certainly be sold for more than $150 million. They’re still scummy profiteers, and they might be picking the pocket of unsecured creditors in the process, but it’s really only a temporary reprive for McCourt.

  14. schmedley69 - Jun 27, 2011 at 9:44 PM

    I was walking by McCourt’s house the other day and he stuck is head out the window and yelled “It’s my money … and I wan’t it now!!!”

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