Andrew Ross Sorkin of the New York Times recently wrote an article about the new owners of the Los Angeles Dodgers, and it wasn’t exactly flattering.
Mr. Walter, along with his colleague Todd Boehly, Guggenheim’s president, appear to be living out a childhood fantasy using other people’s money, some of whom may not even realize it.
In addition to their own cash, Mr. Walter plans to use money from Guggenheim subsidiaries that are insurance companies — some state-regulated — to pay for a big chunk of his purchase of the Dodgers. Guggenheim controls Guggenheim Life, a life insurer, and Security Benefit, which manages some $30 billion, among others.
So basically, the inference is that they are taking money from other people and spending it for themselves.
Josh Koblin of Deadspin joins in as well, saying it’s all too good to be true.
Did it seem too good to be true when news hit that Magic Johnson and a series of investors had $2 billion to pay for the Dodgers, to rescue the team from financial ruin? Yup. Two weeks later, it looks too good to be true.
Tom Verducci of Sports Illustrated says others have concerns as well.
Major League Baseball officials have expressed concern that Guggenheim Baseball Management, the winning bidders for the Los Angeles Dodgers, has been slow to produce the details of the bid and the structure of its management team, according to several sources familiar with the sale process.
Several individual owners have joined baseball officials in questioning why the Guggenheim group, led by Mark Walter, Stan Kasten and Magic Johnson, has not filed a more detailed Purchase and Sale Agreement more than a week after the group was selected from among three finalists by Frank McCourt, the outgoing owner who is selling the club through U.S. Bankruptcy Court.
Not good, right?
Well, according to the New York Times, what is the major malfunction?
Using insurance money — which is typically supposed to be invested in simple, safe assets — to buy a baseball team, the ultimate toy for the ultrarich, seems like a lawsuit waiting to happen. Mr. Walters has been somewhat open in acknowledging that Guggenheim’s companies will be tapped, but the investor group has not disclosed how much of the purchase price is coming from individuals.
A lawsuit … why?
How is a baseball team not a simple and safe asset anyway? The only reason Frank McCourt was forced to sell to begin with was because of his divorce, and even then, he ACTUALLY DID steal from Dodgers fans for his own personal use, got away with it, declared bankruptcy, and is now a billionaire. Is there any way to try HARDER to lose everything in a baseball franchise and still not do it?
Yet I’m supposed to panic about the new owners tapping an insurance company under their control for funds, as if the Dodgers are going to go belly up and screw over all those insured by the company under the Guggenheim Partners umbrella?
In fairness, many insurance companies use their premiums to make investments, including private equity and real estate deals, a slice of which can sometimes even be speculative. As long as the insurance companies meet minimum capital requirements as determined by various regulators, they do not run afoul of the law.
Oh, so the big deal here is surely that they haven’t gotten cleared by the regulators, right?
People involved in the process who are close to Guggenheim said that while the company was using its insurance companies to pay for the Dodgers, it was a very good, prudent deal for its investors and policyholders. As long-term investors, these people said, the new owners could afford to be patient to see a return.
One person involved in the deal, as a point of comparison, noted that MetLife had paid $400 million for the naming rights to Giants Stadium. “This is a much better deal,” this person said. As for MetLife, “They don’t own anything.”
In a statement, one of Guggenheim’s regulators, Stephen W. Robertson, the Indiana commissioner of insurance, said: “Guggenheim’s past dealings with the Indiana Department of Insurance have demonstrated to us that the company and its representatives are of the highest integrity, and we have not taken exception to any interest Guggenheim may have in the Los Angeles Dodgers, nor do we plan to do so.”
So the regulators don’t see the problem either. Wait, what am I supposed to be pissed about again?
I’m seriously not trying to be an apologist here. If anything, I’m even more cautious about owners now, which is the only reason I’m even addressing this, but it just seems to me like there’s not even smoke here, just a bunch of people yelling fire.