The Los Angeles Dodgers had to pay a previously undisclosed fee of about $5 million to secure the financing package that will allow the team to continue operating through bankruptcy, The Wall Street Journal reported Friday.
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Highbridge Principal Strategies, a hedge-fund unit of J.P. Morgan Chase & Co., is providing the $150 million loan, known as debtor-in-possession financing. But Major League Baseball has asked the US Bankruptcy Court in Delaware to replace the Highbridge loan with a league-provided financing package that has a lower interest rate and no fee.
US Bankruptcy Court Judge Kevin Gross set a July 20 hearing on the matter.
A spokesman for Highbridge declined to comment on the fee.
Robert Siegfried, a spokesman for embattled Dodgers owner Frank McCourt, who filed a Chapter 11 petition for the team Monday, said the payment was a customary commitment fee for securing financing. He declined to confirm the size of the fee, but two other people involved with the Dodgers bankruptcy case said it was about $5 million.
Siegfried said the Dodgers did not disclose the amount of the fee because Judge Gross did not ask for details of the team’s financing deal with Highbridge.
MLB took control of the Dodgers’ day-to-day operations in April amid concerns about the team’s finances and security at Dodger Stadium, where a San Francisco Giants fan was beaten into a coma on Opening Day.
Providing the DIP financing for the Dodgers would tighten the league’s control over the team because the MLB would essentially become its lead creditor.
McCourt sought bankruptcy-court protection for the Dodgers in a last-ditch effort to keep the team. It did not have enough money to cover its payroll and other financial obligations that were due this week. Missing those payments would have allowed MLB to move to seize the team.
Lawyers for the league filed an objection to the Dodgers financing with Highbridge on Tuesday morning before an initial hearing in the case. They argued that the terms of the financing deal were too expensive and restrictive. The deal called for an interest rate of at least 10 percent, a $4.5 million fee once the Dodgers paid off the loan that is separate from the initial $5 million payment, and target dates for the team to secure a new media-rights deal.
Judge Gross approved an initial $60 million in short-term financing from Highbridge for the Dodgers to cover continuing operations.
During a recess in Tuesday’s hearing, the parties agreed to eliminate the target dates for the media-rights deal and to reduce the $4.5 million termination fee to $250,000 if the Highbridge loan is replaced with MLB financing.