NEW YORK, June 27 (Reuters Breakingviews) - Hedge funds have stepped up to the plate. JPMorgan's Highbridge investment arm is the latest to bail out a struggling baseball team. Its $150 million loan will keep the bankrupt Los Angeles Dodgers on the ballfield. Highbridge follows an investment by Greenlight Capital founder David Einhorn in the New York Mets, as its owners grapple with their ties to Bernie Madoff. Bad finance may be hurting the game's popularity but the involvement of hedgies suggests America's pastime is too big to fail.
The Dodgers hardly look insolvent in the traditional sense. The franchise that once called Brooklyn home lists some $1 billion of assets and around $500 million of liabilities. The biggest creditor, at $21 million, is retired slugger Manny Ramirez, representative of the rather illiquid nature of the team's balance sheet. The bankruptcy filing by the team's owner, Frank McCourt, is less about seeking protection from creditors than from Major League Baseball Commissioner Bud Selig, who has designs on seizing the Dodgers.
Selig knows a thing or two about the process. He gained entry to baseball's exclusive club when a bankruptcy court allowed him to buy the Seattle Pilots, and move them to Milwaukee, for almost $11 million back in 1970. Ironically, Selig himself sold the Brewers in 2005 to a fund manager, Mark Attanasio. In addition to being the game's custodian through an ugly strike and its unseemly steroid era, the commissioner who said of McCourt in 2004 that there was "no doubt in my mind that he will be a good owner," is now facing the fourth bankruptcy in the league under his watch.
Yet for all the league's woes, including several years of tumbling attendance, and the particulars of McCourt's messy divorce and poor management, they haven't restrained the value of the Dodgers. He paid $430 million for the team in 2004 and Forbes magazine now estimates its worth at about $800 million.
Sports franchises remain the ultimate trophy assets, conferring social status and celebrity on their owners. Athlete salaries and fickle fans make them unwieldy investments from an operational standpoint. But baseball has come through all manner of scandal and poor leadership to recapture the hearts, minds and dollars of new generations of adoring fans. Few investments offer that kind of long-term promise. That's why it should hardly be surprising to see some smart money in the mix.
-- The Los Angeles Dodgers filed for bankruptcy protection after Major League Baseball refused to approve the team's television deal. Heavily indebted Dodgers owner Frank McCourt has been struggling to meet payroll and other financial commitments and is locked in a bitter divorce battle that involves the team.
(By Jeffrey Goldfarb, a Reuters Breakingviews columnist. The opinions expressed are his own.)