McCourt Changes Terms

Dodger owner Frank McCourt unveiled a $250-million deal Thursday that replaces his short-term debt with a new 25-year loan -- an arrangement that experts say gives him a strong incentive to stay on as owner and keep the team at Dodger Stadium for years to come.

The new financing was provided by a group of unidentified institutional investors, such as pension funds and insurance companies. It will pay off $150 million in short-term loans from Bank of America that McCourt obtained in last year’s $421-million purchase of the Dodgers from Fox Entertainment Group, and $71 million in seller financing from Fox. The proceeds also will be used to boost the team’s capital.

“The terms ... include provisions specifying that there will be no change in control of the Dodgers or where they play for 25 years,” McCourt said in a statement Thursday.

There has long been speculation that McCourt, who made his fortune in Boston real estate, wanted to move the Dodgers out of Chavez Ravine and develop the land there. While the terms locking the team into Dodger Stadium and barring the sale of the franchise are not insurmountable -- any financial deal is renegotiable -- they give the investors a strong say, if not veto power, over such a move, said Salvatore Galatioto, a New York investment banker who specializes in sports finance.

For Dodger fans, the deal doesn’t guarantee that McCourt will spend more money on players. But by strengthening the team’s financial base, it does enhance his ability to do so.

“I see nothing but positives here for Frank,” said Galatioto, who was not involved in the deal. He called the loan terms -- 5.66% fixed for 25 years -- very attractive.

“He gets a low fixed rate for 25 years so he doesn’t have to worry about refinancing every time his bank loans expire,” Galatioto said. “This takes a lot of the financial pressure off him.”

The refinancing follows a separate deal, announced by McCourt in March, to develop his 24-acre harbor-side land in Boston in a joint venture with New York real-estate developer Related Cos. When that deal closes -- in “a matter of months,” McCourt said Thursday -- it will retire an additional $125 million in seller financing from Fox that also went into the purchase of the Dodgers.

McCourt said that while there are provisions that would allow early repayment of the new debt, the terms are so good that he has no intention of doing so.

“Our ability to design and secure a new capital structure of this magnitude on such favorable terms represents an enormous vote of confidence by the financial community,” McCourt said in a telephone news conference announcing the deal.

It also was a vote of confidence in the 300 acres of land surrounding Dodger Stadium, because that is what McCourt used as collateral for the entire $250 million in new debt.

“This proves what we always knew, that there is significant value to the real estate around the ballpark,” said Smith College finance professor Andrew Zimbalist, who studies the economics of Major League Baseball.

McCourt was asked Thursday if he had any plans to develop the land surrounding Dodger Stadium. The owner said that was something he would be looking at, but offered no specifics.

Before the sale, Fox had legally split its Dodger holdings in two -- the team itself, and the real estate surrounding Dodger Stadium. Although McCourt declined to give specifics, he said the refinancing shifts a “substantial amount” of debt from the baseball franchise to the real estate.

He said that change improves the Dodgers’ ability to comply with financial-strength standards imposed by Major League Baseball to ensure that its teams are fiscally healthy.

Baseball quickly welcomed the deal, which is known as a private placement of debt.

“Over the past year, Frank McCourt has demonstrated his steadfast commitment to building a strong and healthy franchise in Los Angeles,” Commissioner Bud Selig said in a statement. “The success of this private placement is another example of Frank’s outstanding stewardship. It is good for the Dodgers and it is good for baseball.”

McCourt’s debt payments to his investors will come out of team revenues, potentially reducing the amount available for player payroll, but experts said the deal makes the team’s expenses more predictable and thus reduces financial risk.

At 5.66%, the payments on a 25-year, $250-million loan are just under $1.6 million a month. McCourt also must pay an unspecified additional amount for a financial guarantee of the debt by a bond-insurance company, which gained the offering a triple-A rating, enhancing its attractiveness to investors.

BofA’s investment-banking arm, Banc of America Securities, handled the private placement, which closed Wednesday.

Under Fox ownership, the Dodger payroll reached a high of $115.5 million in 2001 and remained as high as $113.2 million in 2003. The next year, McCourt’s first as owner, the payroll fell to $101.7 million. The Dodgers won the National League West, however, and then won their first postseason game in 16 years.

Though McCourt pledged to maintain a payroll in the $100-million range, it has fallen again, to approximately $88 million, and insiders say McCourt intends to lower the payroll again next season.

McCourt reiterated that he expects the Dodgers to turn a small profit this year. He has boosted revenues by raising ticket and parking prices, and installing a high-tech electronic “ribbon board” that flashes advertising and game information.

McCourt also added 1,600 premium seats nearer the field in an off-season renovation. The new configuration has been criticized for creating obstructed sight lines, as has the ribbon board that runs the length of the stadium. McCourt has said he would reconstruct the field-level seating next off-season.

The renovation is the first of three phases. There are plans to replace every seat in the stadium and to develop the areas beyond the pavilions in right and center fields, adding shops and restaurants.

Times staff writer Tim Brown contributed to this report.