The Bankruptcy Of The Los Angeles Dodgers

You might only think that regular people run into financial difficulties but the truth is that money problems can happen to anyone. There are more stories in the news about wealthy people going bankrupt. More and more athletes are having financial issues with several prominent athletes declaring bankruptcy recently. Now fiscally irresponsible businessmen are finding themselves unable to pay their bills. Tom Hicks drove the Texas Rangers into bankruptcy and now Frank McCourt has done the same thing to the Los Angeles Dodgers

The Bankruptcy Of The Dodgers

The Los Angeles Dodgers declared bankruptcy today because of the personal problems of owner Frank McCourt. McCourt is going through a very public high profile divorce that has left him strapped for cash. He is unable to meet the financial obligations of the Dodgers and needs assistance just making the monthly payroll.  This is shocking because the Dodgers were an iconic baseball franchise with a rich history and lots of potential revenue sources. The only team that can claim to have a superior legacy is the New York Yankees. The Dodgers are on the same level as the Red Sox and Chicago Cubs which are two teams that have no trouble generating revenue.

It is the fault of Major League Baseball and owner Frank McCourt that the team is in such dire financial straits. He never should have been able to buy the team. McCourt used a significant amount of leverage to finance his $430 million dollar acquisition of the Dodgers. He bought the team from billionaire Rupert Murdoch in 2004.

Dodgers bankruptcy

McCourt burned through the cash generated by the Dodgers to finance his luxurious lifestyle. He relied on loans to pay the bills as he kept conning more and more banks into lending him cash. A sign of McCourt’s poor decision making was the terrible deal that the team signed Manny Ramirez too. It wasn’t just that the team paid Ramirez $25 million dollars a season but the fact that they deferred the payments so that Ramirez will keep getting paid millions of dollars for the next few years. The team still owes 40 players money over $75 million dollars that no longer play for the team.

McCourt continually used future Dodger revenues to pay for his current expenses. He bankrupted the team with his wild spending using team money to pay for his own personal mortgages , vacations, recreational activities, private jets, clothes, and other indulgences. According to the Huffington Post, he even paid his two sons $600,000 in annual salaries. That would not have been so bad if they had actually worked for the team! McCourt treated the Dodgers franchise like it was his own personal piggybank.

McCourt’s financial plan was to keep getting loans based on future earnings to pay his monthly bills. He did not understand that you cannot keep borrowing money forever just to stay current. McCourt is a great example of being financially foolish. It doesn’t matter how much income you make if you have no money management sense. At some point you have to reduce your wild spending and live within your means.

Comments

  1. avatar optionsdude says:

    It is sad that this was allowed to happen or that any owner of a business can do that to a franchise. Hopefully, the next owner will be more financially wise.

  2. A similar thing happened when we lost our NHL team. It was a really sad state of affairs. It is amazing how much bad management can affect things.

  3. The sad thing is that I believe he just got a $150 million loan from a hedge fund. I wouldn’t give this guy a fake nickel.

    This guy appears to be a cancer on the organization, and any business in general. The trouble was brewing at the outset. If you’re thinking of buying a professional sports team, you should probably have some serious cash in the bank. Using a high amount of leverage to finance this purchase probably should have been a sign of trouble right from the get-go.

    Hopefully they get someone in there that knows what they’re doing.

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