The owner of the Los Angeles Dodgers has swung and missed connecting with a $150 million debtor-in-possession loan.

Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware in Wilmington on July 22 denied Los Angeles Dodgers LLC's motion to borrow from affiliates of Highbridge Principal Strategies LLC. Instead, the Dodgers must negotiate an unsecured DIP with Major League Baseball "cooperatively and in good faith."

Gross presided over a lengthy final DIP hearing July 20 but did not issue a ruling. MLB, U.S. Trustee Roberta A. DeAngelis and the official committee of unsecured creditors objected to the loan, although the latter withdrew its objection after Highbridge dropped the interest rate on its DIP by one percentage point.

MLB had offered to provide a $150 million unsecured DIP with no fees, a lower interest rate and a longer term. MLB's loan would be priced at LIBOR plus 550 basis points, with a 1.5% floor on LIBOR, or a base rate plus 450 basis points. The MLB DIP would mature Nov. 30, 2012.

"It is clear that [MLB] needs and wants the Dodgers to succeed and the debtors are best served by maintaining [MLB]'s good will," Gross said in his eight-page order.

The debtor's now-rejected DIP from affiliates of Highbridge Senior Loan Fund II is priced at LIBOR plus 600 basis points, with a LIBOR floor of 3%. The loan carries a 0.5% delayed-draw fee, a $4.5 million deferred commitment fee and a $50,000 annual agent fee. The DIP matures June 27, 2012.

It also carries a $5.25 million closing commitment fee. The fee would have been paid by Dodgers owner Frank McCourt if the debtor had not sought approval of the Highbridge loan, Gross' order said.

"Such potential personal liability clearly compromised debtors'/McCourt's independent judgment," Gross wrote. "Additionally, [the Dodgers] refused to negotiate terms with [MLB] to obtain a better and unsecured loan because of Mr. McCourt's poor relationship with" MLB commissioner Bud Selig.

The Dodgers argued MLB was offering the rival DIP as a way for the league to control the debtor.

Gross did not agree, however, writing that "the court finds that the [MLB] loan is not a vehicle for [MLB] to control debtors. Had debtors negotiated with [MLB], a more economically viable loan may have developed -- but at a high cost to the debtors' decision-maker, Mr. McCourt."

He continued: "The [MLB] loan must be independent of and uncoupled from [MLB]'s oversight and governance of the Dodgers under the Major League Baseball Constitution. The court, if necessary and as always, will provide ready access to debtors in the hopefully unlikely event that [MLB] strays from its obligations to act in good faith as debtors' lender."

"Today's court ruling places the Dodgers in a position to achieve a debtor-in-possession financing from Major League Baseball ... that is both economically favorable and consistent with the Dodgers' objective of maximizing the value of the estate in the Chapter 11 process," debtor counsel Bruce Bennett of Dewey & Le­Boeuf LLP said in a statement.

"We are very pleased with the Court's thoughtful decision," MLB counsel Glenn Kurtz of White & Case LLP says. "MLB looks forward to finalizing a DIP loan."

Bradley I. Ruskin of Proskauer Rose LLP, also counsel to MLB, says the two sides would submit the resulting credit agreement to the court for approval. He does not expect any further hearings on the DIP to be necessary.

The Dodgers filed for Chapter 11 on June 27, blaming Selig's refusal to approve a television deal with Fox Sports Network, as well as underlying cash flow issues.

In contrast, MLB has faulted McCourt for the bankruptcy case, alleging he "siphoned off well over $100 million in club revenues," which spurred a "liquidity crisis."