Baltimore investors move to bid on Orioles Jacobs' crumbling finances force sale

March 31, 1993|By Mark Hyman | Mark Hyman,Staff Writer Staff writers Jon Morgan and Ian Johnson contributed to this article.

Baltimore lawyer Peter G. Angelos said yesterday that some Baltimore investors plan to begin negotiating to buy the Orioles, hoping to beat out a Cincinnati group that has made an offer for the team.

"We have every intention of making contact with all parties and advising them there is a local group ready, able and willing to purchase the team," said Mr. Angelos, who heads the group. The other investors are Henry Knott Sr., the Baltimore contractor and philanthropist, and two others Mr. Angelos declined to identify.

Mr. Angelos' comments came a day after seven banks seeking to recover overdue loans from Orioles owner Eli S. Jacobs filed petitions in a New York court in an effort to force him into involuntary bankruptcy. That could result in a bankruptcy judge deciding the fate of the baseball team, Mr. Jacobs' chief asset.

Mr. Angelos said two weeks ago that Baltimore investors were interested in the team but would defer to the Cincinnati group, headed by William O. DeWitt Jr. The Ohio businessmen have been negotiating with Mr. Jacobs' creditors for months and made an offer of about $140 million, according to banking sources.

However, the "picture has changed considerably" with the bankruptcy filing, Mr. Angelos said yesterday. "The DeWitt group does not have an exclusive with respect to the purchase of the team," he said. "Other bids, if higher and better, will certainly be entertained. That's good news."

It's unclear, though, how much time is left for a competing bid.

'Very far along'

A lawyer involved in the sale discussions who asked not to be identified said another buyer could be considered but pointed out that "DeWitt is very far along -- he's a bird in the hand."

An agreement between Mr. Jacobs and Mr. DeWitt's group is essentially complete and nearly ready for signatures, the lawyer said. But it contains a clause that requires a higher bid to be accepted, should it come along, with some payment to Mr. DeWitt's group.

Documents filed this week in U.S. Bankruptcy Court for the Southern District of New York indicate that Mr. Jacobs owes at rTC least $50 million to seven banks -- holding loans that are unsecured, meaning they are not backed by collateral. But a source familiar with the lawsuit estimated the full amount of those debts at about $100 million. All but one of the loans was taken out by Mr. Jacobs during the past two years, according to court papers.

In addition to that debt, Mr. Jacobs owes tens of millions of dollars more in other loans, both secured and unsecured, according to bankers familiar with his finances.

The New York financier has 20 days to respond to the filing, during which he and creditors might be able to reach agreement on the sale of the team. If they don't make a deal, a sale is likely to come more directly under the control of a bankruptcy judge, who would have to approve any transfer of Mr. Jacobs' 87 percent interest in the franchise.

Even though creditors have been working closely with the DeWitt investors, Mr. Angelos hopes that the judge and creditors can be persuaded to sell the team to the Baltimore group.

"I think we waited a very reasonable period of time," the lawyer said. "If the DeWitt group is able to close a transaction, we wish them well. But if we wait longer, there will be no local effort to buy the team -- and that's absolutely necessary."

Mr. Knott was more outspoken in his support of local investors for the team. He said all parties, including Mr. Jacobs' banks, should rally around his group, and he questioned why local lenders, including Mercantile-Safe Deposit & Trust, had not actively supported their efforts.

Mercantile lent Mr. Jacobs $47.5 million to buy the Orioles in 1989. The bank sued him in August for defaulting on a $21.3 million loan to restructure his finances and auctioned off his Owings Mills mansion last month after he failed to make monthly payments of nearly $20,000.

Mercantile watching talks

Seeking to recover its money, the bank has closely watched the negotiations with Mr. DeWitt.

"My opinion of Mercantile is that they have a license to do business in Baltimore City," Mr. Knott said. "And if they pick an out-of-town owner over us, somebody ought to lock them up, throw away the key and put them out of business."

A spokesman for Mercantile could not be reached for comment late yesterday.

The bankruptcy filing ended months of talks between Mr. Jacobs and creditors who had been attempting to agree on a workout of the Orioles owner's financial problems. By avoiding bankruptcy court, the creditors hoped to be spared the high cost and slow pace of the court-supervised proceeding. But they landed in bankruptcy court anyway after serious rifts developed among Mr. Jacobs' lenders. Some banks sought preferential treatment by filing lawsuits and attempting to enforce judgments, while others were developing a plan to compensate all creditors.

Manufacturers & Traders Trust Co. precipitated the bankruptcy filing Monday when it refused to extend a deadline that would have allowed it to seize part of Mr. Jacobs' assets.

Now, the Chapter 11 filing means that a judge must consider all the banks' claims equally, according to lawyers. The judge must establish a hierarchy for payment and determine how to divide Mr. Jacobs' remaining assets among all creditors.

For Mr. Jacobs, bankruptcy offers protection from creditors who cannot sue him or attempt to collect debts. But the filing could expose details of his business dealings. A man with a passion for privacy, he could be forced to respond to questions about his finances and find his living expenses monitored by a judge.

One person active in the restructuring of the Orioles owner's finances said he expected the process to take three to six months. Other participants said the sale of the Orioles could be completed even sooner, perhaps early in the season.

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