The Inside Slider

When Frank McCourt bought the Dodgers in 2004 from Fox Entertainment Group he did so for $430 million. Obviously he did not have $430 million stuffed into his mattress for a rainy day so in order to make this purchase he arranged financing that was convincing enough for Major League Baseball to approve the deal. In hindsight that turned out to be ill advised.

Flash forward to 2012. Enter Magic Johnson (and partners) with a whole lot of cash. Buying a baseball team with cash is almost unheard of. Now keep in mind, I don’t mean that Magic Johnson walked in dressed in his Lakers uniform with duffle bags of $100 bills. By “cash” I mean funds that were not borrowed against something else. This made a lot of people very happy because it was the exact opposite of McCourt’s purchase. The New York Times, however, sees things a little differently:

“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. Using insurance money — which is typically supposed to be invested in simple, safe assets — to buy a baseball team, the ultimate toy for the ultra-rich, seems like a lawsuit waiting to happen.”

Now I am no finical genius by ANY means but the Times article draws quite a few questions about this purchase. Essentially they are using other peoples money to buy a baseball team right?

“The transaction seems even more questionable when considering Mr. Walter’s own words to The New York Times two weeks ago: ‘I don’t want to realize a return on investment on buying the Dodgers. I want to have a multigenerational relationship that changes my life, Magic’s life, Magic’s grandchildren’s lives and all of our lives.”

So what does all of this mean? Well, maybe nothing at all. Maybe everything will be fine. Maybe Magic and his cohorts will trot off into the sunset 20 years from now as the guys who saved the Los Angeles Dodgers. But maybe, just maybe, things are not quite as they seem.

Read the full NY Times article here.