McCourt gets his money, for now: Termporary Financing Agreement reached

The Dodgers and MLB came to an agreement to have temporary Debtor-in-Possession (DIP) financing to keep the teams operation aflot with sufficient cash.  The Dodgers had obtained a committment from a subsidiary of JP Morgan Chase Bank to provide $150 million in financing at 10% interest with a $4.5 million fee.  MLB proposed to offer the Debtor-in-Possession to finance the team at 7% interest with no fee.  Under the agreement the parties agreed to delay the court’s decision on financing until July 20, and if the MLB financing is used the $4.5 million fee will be reduced to $250,000.  The agreement also struck language in the financing agreement requiring the Dodgers to auction their television rights by a date certain. 

According to the Dodgers, they contacted 7 companies about DIP financing and the subsidiary of JP Morgan Chase Bank was the only one to offer financing terms.  In this economy and loan environment, the ability to obtain Debtor-in-Possession financing has been the death toll for many potential large reorganizations including Circuit City and  Meryvn’s.  It is quite difficult for a large enterprise to operate without some credit.