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Monday, June 27, 2011

On the Dodgers Bankruptcy and Deferred Contracts

It will be interesting to see what will become of the deferred payments left to players such as the $21 million owed to Manny Ramirez, who is an unsecured creditor in the Dodger bankruptcy.   Without knowing all the ins and outs of bankruptcy law - I would think that there is a possibility that as an unsecured creditor, Manny may end up getting less than his full amount owed depending on how the Chapter 11 is structured by the court.

I don't know how everything was structured with the Rangers bankruptcy last year when Alex Rodriguez was among the largest unsecured creditors.  I didn't hear anything about any of the players not getting what they were owed in the settlement, but the Dodger case may be an interesting one.

Let's face it, young ballplayers are not expert businessmen.  They're ballplayers.  A major bank would not float an organization a $20 million loan like Manny did without getting a look at their financials.  Their agent is out to get the player the best deal, but they're agents, not bankers.  Now I'm not feeling sorry for Manny in any way, shape, or form, but were Manny to have had a good banker look at the audited financial statements of the Dodgers - I seriously doubt he would have deferred the dough, or at the very least not have had it secured with some type of collateral.

I'm sure he didn't think of it.  Maybe his agent did, maybe he didn't.  But who would have ever expected the Dodgers to go bankrupt?  Up until now, MLB may have been one of the very few industries (maybe along with the NFL) where the businessman could have said "I'll gladly pay you Tuesday for a hamburger today," and never had it questioned.

Essentially, Manny gave them a loan.  The money owed was sitting the Dodger balance sheet as a long term liability that had to be paid.  Now he's going to have to get in line with the other unsecured creditors.

It makes me wonder about other deferred contracts.  Bobby Bonilla should be plenty happy that Einhorn stepped in.  He's owed a lot of deferred money that could have been in serious jeopardy if the Wilpons had to take the team into bankruptcy court.  This also makes me wonder if an agent will be so willing in the future to allow a player to defer some of his contract if there's any question as to the solvency of the organization?

A question for collective bargaining time that will force the owners to open up their books?   Just throwing out the question.  I'm not part of the process and thus, not the one to answer...

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