Orioles owner Eli S. Jacobs, in a move tantamount to acknowledging he cannot pay his debts, entered Chapter 11 bankruptcy in a New York court yesterday.
The action came after seven banks with at least $50 million in claims against Mr. Jacobs petitioned last month to have him placed into involuntary bankruptcy. Yesterday, he consented, which protects him from court actions by creditors. The New York investor owes more than $100 million in secured and unsecured loans, according to bankers familiar with his finances.
With his affairs in bankruptcy court, Mr. Jacobs almost certainly will have to disclose detailed information about his business dealings, and a judge must approve decisions affecting the sale of his assets, including his main one: the Orioles.
A lawyer for Mr. Jacobs said yesterday that the owner will remain involved in negotiations to sell the team. The lawyer, Stephen Shimshak, said an announcement concerning the sale could come in "the next couple of weeks."
He declined to name the investors but said he was aware of only one group being considered to buy the team. He apparently was referring to investors led by William O. DeWitt Jr., a Cincinnati businessman who has been negotiating with Mr. Jacobs for more than six months. The DeWitt group has offered about $140 million for the team, according to sources familiar with the negotiations.
Recently, Baltimore lawyer Peter G. Angelos has said he is leading a group of local investors that hopes to buy the Orioles, but it is unclear how far that effort has progressed.
Mr. Jacobs, whose net worth was once reported at $500 million, has seen his financial empire unravel in the last year. He was sued by four banks in 1992, and in July he notified some creditors that he would not be making interest payments on some loans and asked for patience while he restructured his debt.
In recent months, however, the pressure from creditors has mounted. In January, he was sued for nonpayment of rent at his Manhattan office. And in February, he lost his $2.2 million Baltimore County home after defaulting on a loan from Mercantile-Safe Deposit & Trust Co.
After a group of banks moved to force him into personal bankruptcy in March, Mr. Jacobs could have escaped only by proving that he was paying his bills in a timely fashion.
"While we all would have liked to stay out of Chapter 11, this was the outcome," Mr. Shimshak said. "We hope to go through the process very swiftly."
Mr. Jacobs will be required to submit detailed lists of his assets and liabilities to the U.S. Bankruptcy Court for the Southern District of New York.
When the disclosures are filed, "everybody ought to have a handle on what Mr. Jacobs and his advisors believe his assets are worth and what he owes," said Harvey M. Lebowitz, a former U.S. Bankruptcy Court judge now practicing law in Baltimore.
Mr. Jacobs has four months to submit a plan to parcel out his assets, during which time creditors cannot present proposals of their own. He then has two months to win approval of his plan from the creditors and judge. If that fails, creditors can submit alternative plans, according to bankruptcy lawyers.
An official at one bank involved in the Jacobs restructuring said the bank would be "ecstatic" to recover one-quarter of what it is owed.
Mr. Jacobs, who owns 87 percent of the baseball team, and his creditors probably would be required to take a proposal for any sale of the team to Judge Cornelius Blackshear, who is assigned to the case. Judge Blackshear would then schedule a hearing in open court, according to Mr. Lebowitz.
Anyone opposed to the offer could appear at the hearing, said Mr. Lebowitz, who is not involved in the case.
The hearing "can turn out to be an auction," Mr. Lebowitz said. "Somebody could come in with another $15 million, a better deal. The dollars would be phenomenal."
The bankruptcy judge's chief job is to accept the bid that is the best deal for Mr. Jacobs' creditors. But that might not be easy to determine.
"It's very hard to weigh different sorts of bids, some with financing, some contingent on this or that. It's comparing bananas and grapefruits," said James A. Vidmar, a bankruptcy lawyer in Silver Spring. He is not involved in the case.
Mr. Jacobs is protected from any demands for payments from creditors as long as he is in bankruptcy court. On the same day that he consented to personal bankruptcy, two Jacobs businesses filed for voluntary bankruptcy. Both -- Park Partners Limited Partnership and 375 Park Avenue Associates -- have been the targets of recent lawsuits.