McCourt nightmare no surprise - LABJ called it in 2004

Please forgive this former Business Journal editor for a bit of bragging from yesteryear: Reporters Danny King and Jonathan Diamond turned up all kinds of red flags about the debt that McCourt was taking on at the time of the Dodger sale. You can't access the piece because of the Business Journal's recently imposed pay wall, but here's the lede from March 1, 2004:

It's the kind of deal that gives hope to the Everyman who has always dreamed of owning a major league sports franchise--especially those who watch late night "no-money-down" infomercials.

And more:

Fox Entertainment Inc.'s $421 million sale of the Los Angeles Dodgers to real estate investor Frank McCourt, finalized last month, isn't really a $421 million sale. The number is actually $371 million because under terms of the deal, Fox, which is controlled by Rupert Murdoch's News Corp., agrees to refund $50 million by Feb. 13, 2006. But that's just for openers. In classic real estate leveraging, the rest of the financing comes through what amounts to a seller-financed deal. The difference is that instead of securing the debt with the property being sold, Fox is looking to McCourt's other real estate holdings, mostly in Boston. It is a lesson in how a motivated seller will do almost anything to unload an asset and a savvy real estate investor may barely dip into his pocket to pay for it. "It's very common in real estate, especially if you're buying from a financial institution," said Jim Thomas, the L.A. real estate developer and investor who owned a majority stake of NBA's Sacramento Kings from 1992 to 1999.


Ever since reports surfaced that McCourt was interested in purchasing the Dodgers, there have been questions raised about his ability to both finance the deal and operate the ball club, which had a payroll last year of $106 million, fourth highest in the league. In the end, Major League Baseball Commissioner Bud Selig said McCourt was a qualified owner. "The banks were satisfied. We were satisfied," Selig said. "There's no doubt in my mind that he will be a good owner of a very storied franchise."

Even then, there were strong indications that McCourt had violated baseball rules that capped owner debt levels at 40 percent of total assets. Which of course begs the question: Why did Commissioner Bud Selig approve a sale that he had to know was suspect?

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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