How the Orioles Sold

JAMES S. KEAT

August 05, 1993|By JAMES S. KEAT

NEW YORK — New York.--The drama was in the words themselves, not in the way they were spoken.

The voices of the lawyers couldn't have been more blase as they topped each other's bids for the Orioles by a million or two dollars at a time. There were sharp intakes of breath from time to time in the audience, many of them from veteran bankruptcy lawyers representing interested parties. But that was it.

Even the burst of applause at the end was tame, according to one New York attorney, who said he had heard more enthusiasm at the recent auction sale of a $50 million painting. It seemed directed as much at the gracious concession by Jeffrey H. Loria, the losing bidder, as at the astonishing $174 million winning bid for the Baltimore baseball club.

Because the tangled business affairs of Eli Jacobs, owner of the Orioles, wound up in the antique federal bankruptcy court building a five-minute walk from the southern tip of Manhattan, what could have been a very private business transaction was opened to public view. But only a little.

What happened in the packed, sweltering, sixth-floor courtroom of Judge Cornelius Blackshear simply reflected the private, last-minute negotiations in the corridors and borrowed offices.

The hearing scheduled for 2 p.m. was more than an hour late starting as Peter G. Angelos, the Baltimore advocate, continued negotiations with William O. DeWitt Jr., the Cincinnati businessman who thought he had successfully negotiated a sale with Mr. Jacobs. The bankruptcy proceedings intervened, forcing the open auction Monday.

During the long delay in starting the hearing, and the 45 minutes of recesses once it got started, an observer tried to calculate the fees being earned just by the lawyers in the audience representing creditors and other interested parties. One out-of-town bank alone had three there. Perhaps a third of the 100 or so people crowded into the courtroom built for an audience of about 70 seemed to be lawyers -- though some may just have been onlookers who didn't have the meter running, as lawyers sometimes describe billable hours among themselves.

An attempt to get an estimate from some lawyers in the audience on the average hourly fee in the room foundered when one lawyer, representing a New York bank without much at stake in the hearing, was said to collect $600 an hour. "And the clients are lined up at his door," the informant added. In fact, it was said the three best bankruptcy lawyers in New York were in the courtroom, though it wasn't clear how many of them were active in the hearing.

By far the longest argument of the afternoon was over "stalking horses" and "topping fees." In the arcane lingo of Wall Street, a stalking horse is a potential buyer who does all the groundwork for a purchase before other bidders jump in and take advantage of the preparations. Mr. DeWitt, the stalking horse in this case, had been promised $1.75 million for legal and other expenses involved in his negotiating the initial sales agreement with Mr. Jacobs.

When he joined forces with Mr. Angelos, however, Mr. Loria's attorney objected that guaranteeing Mr. DeWitt that payment would give the new partnership an advantage in bidding. It took a half hour recess to sort that one out, with Mr. DeWitt being promised $1 million for his expenses instead of the topping fee.

Mr. Loria's lawyer still did not like that idea, and it was soon evident why. The Angelos-DeWitt group was able to bid $174 million to win the prize, though the $1 million credit meant it would pay no more than the $173 million Mr. Loria had just offered as his final bid. That's why some bankruptcy lawyers are worth $600 an hour.

Judge Blackshear unwittingly caused a fright among The Sun's reporting contingent in the courtroom. No sooner had he taken the bench than he asked whether ''Ken Rosenthal, of The Baltimore Sun'' was in the courtroom.

As Mr. Rosenthal tensely acknowledged that he was, his colleagues braced for trouble. During the delay before the hearing, Mr. Rosenthal had unobtrusively slipped into a meeting between the Angelos and DeWitt groups and an attorney representing Mr. Jacobs. The journalists feared he had unwittingly broken some sort of judicial rule and was about to be reprimanded -- or worse.

Feigning indignation, Judge Blackshear denied he was a secret Yankees fan, announced that he had seen six baseball games, bats right-handed and takes 9.83 seconds to get from his chambers to the bench. In his sports column the previous day, Mr. Rosenthal had facetiously made some slighting references to the judge in complaining that someone unknown to the baseball world would decide the Orioles' fate.

The audience laughed, none more loudly than the Baltimoreans. Judge Blackshear may have been the only relaxed person in the courtroom. Occasionally he joshed attorneys. When the audience was plainly straining to hear the inaudible mumbles of several lawyers, he considerately asked them to speak into the microphones in front of them. Appropriately, an attorney for the secretive Mr. Jacobs managed to stand right in front of a microphone without speaking into it.

During the long argument over the topping fee, Judge Blackshear repeatedly balked at giving the Angelos-DeWitt group an unfair advantage in the bidding. He did not cite some ponderous legal precedent; he just pronounced himself ''a little unsettled'' at the idea. It's not enough, the judge reminded the lawyers, that a bankruptcy proceeding merely do the right thing. It must be seen to do the right thing as well, he said.

And so they did.

James S. Keat is editorial page coordinator of The Baltimore Sun.

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