Posted on July - 22 - 2011
Why So Many Sports Franchises Have Filed Bankruptcy
Although bankruptcy filings by sports teams have been historically rare, a recent smattering of filings have turned into a trend. The Los Angeles Dodgers have recently joined the Phoenix Coyotes, the Chicago Cubs, the Texas Rangers and several other sports teams that have filed for bankruptcy within the last 20 years. Why is this becoming more common?
A baseball team files for bankruptcy for the same reason the rest of us do: to get out of a financial hole, and the potential to change the rules a bit. The normal rules of debt can be modified or overruled in bankruptcy. Debt can be discharged, and it can be lowered, or the terms of a loan can be changed. Additionally, the bankruptcy court has the authority to alter the Dodgers’ obligations to Major League Baseball.
The MLB has a series of rules, and the Commissioner, has a lot of power over its franchises. In bankruptcy, however, the Dodgers may be able to change these rules, or exempt the team from observing some of them for a while. Much will be left to the discretion of the bankruptcy court in reorganizing the team in order to make it profitable.
It appears that the combination of a tough economy and a realization of the strategic value of bankruptcy has added up to more strategic filings by sports franchises in recent years.
If you too feel that this economy is causing financial problems and the need for a change contact a Tucson bankruptcy lawyer for a free consultation today.
Stephen M. Trezza, Phoenix bankruptcy attorney .
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