Magic Johnson's $2 Billion Dodger Purchase Plan Under Scrutiny
The group poised to buy the Los Angeles Dodgers for about $2 billion said Tuesday that they “anticipate confirmation of the Debtors’ Plan of Reorganization (will proceed) on schedule.”
The statement was by issued the Guggenheim Baseball group, which includes Magic Johnson, in response to four objections that were filed with the bankruptcy court in Delaware to the reorganization plan they had submitted. The objections came from Major League Baseball, Fox Sports, the bankruptcy trustee and a creditors group. (Guggenheim Partners is an owner of New York-based Prometheus Global Media, parent company of The Hollywood Reporter.)
There is a hearing on Friday in Wilmington, Delaware before federal judge Kevin Gross at which he could approve the new buyers, or ask for more information, or take other action. The buyers clearly hope that the process will go quickly and that they will pass this hurdle and be able to take ownership by the end of April, 2012.
The most pressing objection is by News Corp.’s Fox Sports Net West 2, which operates as Prime Ticket. It holds the rights to telecast Dodger games under a contract which runs through the 2013 season. Fox also has an exclusive right to negotiate a new deal through November.
In its filing, Fox is contending that there is not sufficient information for them to determine if their rights are “being impaired,” Fox wants to be assured that Time Warner Cable is not part of the purchase group, that there are no agreements relating to media rights in the deal which would violate their contract and that the buyers disclose the buyers group and other details it needs to determine if its rights are impacted.
Separately, a spokesman for Fox said it looks forward to continuing its “positive and productive relationship with the Dodgers under their new ownership.”
Fox has made it clear it is ready to make a deal before its exclusive window to negotiate ends in November. Fox had offered a 20-year contract to Frank McCourt, when he was in control of the team as owner, for an amount reported to be about $175 million a year for the TV rights. Major League Baseball stepped in and stopped McCourt from making that deal when they took control of the team. McCourt later put the Dodgers into bankruptcy.
The objection from Major League Baseball is that the reserve for future claims against the team is too small. According to their filing, the planned reserve is $322,065.43. They say that is insufficient to cover all claims, including the legal bills that MLB has incurred. They want a reserve from the sale of at least $8 million.
The creditors group is also unhappy wit the plans for a $100,000 reserve to cover all of their claims, present and in the future. They are asking that $1 million be set aside as a reserve against future creditors claims.
Finally the bankruptcy court trustee, U.S. Bank NF, wants language inserted into the agreement that insures other investors besides McCourt are protected. They appear to believe there is a risk McCourt will take the money he gets from the sale, pay off his ex-wife and then keep the rest without satisfying all other claims and investors.
None of this seems likely to be enough to take the proposed sale off track completely but it could force the judge to extend the time until the closing to make sure everyone who needs to be satisfied is dealt with in an appropriate and legal manner.