Los Angeles Dodgers File for Bankruptcy Protection

By Ryan C. Wood, Attorney at Law

On June 27, 2011, the Los Angeles Dodgers, LLC (11-12010-KG), and Los Angeles Dodgers Holding Company, LLC (11-12011-KG), filed for bankruptcy protection in the United States Bankruptcy Court, District of Delaware under Chapter 11 of the Bankruptcy Code.  After weeks of speculation, reports that the Dodgers would not be able to make future payroll obligations, and numerous complications due to the McCourt divorce, the Dodgers have sought the same bankruptcy protection millions of Americans have sought over the last five years.

Like so many people struggling with burdensome debt, the Dodgers finally succumbed to their mounting debt and uncertain future.  Hopefully the Dodgers have made a sound business decision to file for bankruptcy protection.  Just like individuals who file for bankruptcy protection, bankruptcy provides structure and certainty when finances are stretched too thin.  Millions of Americans have filed bankruptcy to get a fresh start and obtain relief bankruptcy can provide.  What many critics of bankruptcy do not understand is that financial turmoil can happen to anyone.  Look at the Dodgers now.

According to Court documents the single largest creditor of the Dodgers is Manny Ramirez.  Mr. Ramirez is still owed a whopping $20,992,086.  The next largest creditor is Andruw Jones, who is owed $11,075,000.  The Dodgers petition for bankruptcy protection also listed the following creditors and amounts owed at the time of the filing: Hiroki Kuroda $4,483,516; Rafael Furcal $3,725,275; Chicago White Sox $3,500,000; Theodore Lilly $3,423,077; Zach Lee $3,400,000; Kazuhisi Ishii $3,300,000; Juan Uribe $3,241,758; Matthew O. Guerrier $3,090,659; Juan Pierre $3,050,000; Marquis Grissom $2,719,146; Jon S. Garland $1,211,538; Levy Restaurants $588,322; Andre E. Ethier $559,066; Jamey Caroll $508,791; Alexander Santana $499,500; Jonathan R. Broxton $423,077; Chad Billingsly $379,258; Continental Airlines $339,403; Vincent E. Scully $152,778.

Frank McCourt originally purchased the Dodgers from Fox Entertainment Group, Inc. in 2004 for $350 million.  Mr. McCourt purchased the Dodgers stadium, the land under the stadium and some 250 acres around the stadium including the parking lots.  Part of the purchase price was financed by Fox Entertainment Group, Inc. totaling some $125 million.  Mr. McCourt secured the financing by using 24 acres of undeveloped land in Boston as collateral.  In an early signed of what was to come, Mr. McCourt had to transfer the 24 acres to the Fox Entertainment Group, Inc. to repay the $125 million in financing.

In 2005 and then in 2007, Mr. McCourt and the Dodgers refinanced debt and obtained an additional $140 million in funds to improve and upgrade Dodger Stadium.  The refinance of existing debt in 2005 and the funds obtained in 2007 were secured by the income stream from future tickets sales.  The main problem forcing the Dodgers into bankruptcy was the falling attendance numbers this year following their success during the 2008 and 2009 seasons.  The fact that the collective bargaining agreement is ending did not help either.  Given that the collective bargaining agreement is ending, certain cash reserves have to be kept to pay deferred compensation and other compensation, which would not normally have to exist.  The Dodgers also cite the appointment of a monitor by Major League Baseball as a cause for decreased ticket sales.

The Dodger’s story is not much different than many stories of Americans around the United States.  Due to layoffs, reductions in pay and reductions in hours worked many Americans are facing the same cash crunch the Dodgers experienced when attendance fell in 2011.  The bottom line is bankruptcy can happen to anyone depending upon the circumstances.  The perfect storm of financial struggle is unfortunately waiting for many.  For more information about bankruptcy from an experienced San Mateo bankruptcy lawyer or San Jose bankruptcy lawyer, call toll free 1-877-9NEW-LIFE.