Briefly, when a corporation files for Chapter 11, the aim is to restructure the business so that it can remain in business. When a corporation files for Chapter 11 in Federal Bankruptcy Court, an automatic stay comes into play. This ensures the corporation (the debtor) that the creditors will not come after the corporation for money owed to them. In other words, the corporation gets some breathing space and is saved from any litigation while it plans to reorganize and pay off its debts.
The corporation then has many options to restructure. Usually, with the aid of attorneys, corporations create a reorganization plan to restructure the business so that it can bring in revenue, pay off its creditors, and continue to operate. The plan usually entails negotiating favorable leases, finding new lenders and/or negotiating further funding from current creditors. The court hears from the creditors and the corporation, and ultimately decides if the corporation’s plan of reorganization complies with bankruptcy law and provides adequate protection to the creditors. The corporation aims to convince the court that the reorganization plan is viable, and that the creditors will receive payment within a reasonable time period.
The Dodgers are asking for a $60 million dollar loan from lenders. The hope is to use this money to turn things around. Additionally, the aim is to land some sort of television deal to get the Major League Baseball (MLB) team out of debt.
This is definitely a step in the right direction, but what the news is failing to realize is that money cannot solve everything. The team went bankrupt because of financial issues, which stemmed from mismanagement. McCourt’s divorce brought about havoc to his personal life, which in turn led to the mismanagement of the team. The $60 million dollar loan, if attained, may help the team function on a day-to-day basis for a while, but a significant change needs to occur to clear the team’s debt and bring in profit.
One of the best things for this team, at this point, is to replace McCourt with an owner who is able to separate his personal life from his professional responsibilities. Realistically, every professional being has a duty to not bring their personal lives to work. McCourt is no exception.
A new owner will bring on better management. Better management will make it more likely that any money loaned will be used effectively. This in turn will help the team in many ways. They will be able to assure lenders that they can stay afloat and bring in profit, making it more likely to receive money to function. With money coming in, a more-skilled owner will be able to manage the finances to ensure that the debt will be paid in time, and eventually profit can come in. Lastly, a new owner will bring about better publicity for the team. Bankruptcy never shines a favorable light on a person or entity. With rumors of the McCourt’s mismanagement and the team in debt, fans may lose faith in the Dodgers and choose to be loyal to other teams. A new owner can instill faith in fans that the team will be alright, and will successfully rise out of this mess.
All in all, I hope that the Dodgers see better times. The team has done a great deal for Los Angeles and MLB in general. For the sake of Los Angeles and the Dodgers, I hope that the attorneys are counseling the team to replace their owner, and not only focusing on getting money from lenders.