Eli S. Jacobs has agreed to sell the Orioles for about $140 million to investors led by Cincinnati businessman William O. DeWitt Jr., but the deal is on hold while Mr. Jacobs' creditors consider the offer, according to sources familiar with negotiations about the team.
Mr. Jacobs has relinquished control of the sale to his creditors, who are pressing for repayment of overdue loans. The team owner's business empire is deeply troubled, with debts far exceeding assets, according to two banking sources knowledgeable about Mr. Jacobs' finances.
It was unclear yesterday whether the DeWitt offer involved only Mr. Jacobs' 87 percent share of the team, or whether it also included the minority shares held by Orioles President Larry Lucchino (9 percent) and Sargent Shriver (4 percent).
Mr. DeWitt, who leads a group of five businessmen, met about two weeks ago with some of Mr. Jacobs' creditors in New York to discuss the offer, according to sources close to the discussions.
So far, the bankers have neither accepted nor rejected the proposal, the sources said.
It's unclear what would happen if Mr. DeWitt's offer for the Orioles was rejected.
One option would be for the creditors to take over Mr. Jacobs' majority ownership of the team and sell it later, hoping for a higher sale price.
They could do that by claiming his share of the team in the event of a loan default, forcing him into bankruptcy court proceedings or by relieving him of some debt in return for the team, according to bankers and bankruptcy lawyers.
Mr. Jacobs, through a spokesman, declined to comment for this article yesterday.
Mr. DeWitt, who has been negotiating with Mr. Jacobs for months, has said he would not comment until there was something to announce.
Should the DeWitt group's bid be accepted, the money could help repay at least some of the loans acquired by Mr. Jacobs, a New York financier whose holdings were estimated at $500 million just three years ago.
His investments in computer equipment, kitchen cabinet and beef companies were battered by the recession and burdened by debt.
The baseball team is considered to be one of Mr. Jacobs' few attractive assets at the moment.
The offer of about $140 million, one source noted, might include a promise by Mr. DeWitt to assume debts acquired by the team or Mr. Jacobs.
When Mr. Jacobs bought the Orioles for $70 million four years ago, the deal was financed by at least three banks.
The loans include $47.5 million from Baltimore's Mercantile-Safe Deposit & Trust Co. Citibank, N.A., and a second New York-based bank were the other lenders, according to a banker who asked to remain unidentified.
These secured loans -- with the team pledged as collateral -- are likely to be at the top of the list for repayment.
For creditors whose loans with Mr. Jacobs or businesses he controls are not secured, the situation is less favorable.
They could be left with a fraction of the money they are owed. Those banks include Manufacturers & Traders Trust Co., Berkshire Bank, Mercantile, Union Bank of Switzerland and Bank of New York, where this month's creditors meeting was held.
The loans from Bank of New York and the Swiss bank reportedly total about $80 million.
At their meeting with Mr. DeWitt, the creditors were split over whether to accept the offer, with more-secured creditors favoring acceptance of the offer and some of those holding unsecured loans opposing it, the sources said.
Creditors opposed to the proposal are said to be disappointed with the price tag, which is dramatically lower than the $200 million that Mr. Jacobs is understood to have been seeking when he began considering offers in 1991.
Even though full repayment for some lenders may be unlikely, observers say, creditors may be working with Mr. Jacobs instead of trying to force him into bankruptcy court proceedings because they see it as the best option available.
"Banks may perceive that -- in a cooperative arrangement -- they can get more money than if they battle him and battle one another," said James A. Vidmar, a bankruptcy attorney at Linowes & Blocher, a Silver Spring law firm.
Mr. Vidmar has no direct knowledge of Mr. Jacobs' financial dealings and is not involved in the negotiations for selling the Orioles.
Mr. Vidmar added that bankruptcies usually result in high fees for lawyers and accountants, among others, and less money at the end of a long negotiation with which to satisfy bank debts.
"A lot of creditors like to avoid the significant cost," he said.
A decision by creditors regarding the offer by Mr. DeWitt's group is likely to come in the next four to six weeks, the banking sources said.
There is no deadline, but many creditors are said to be eager to obtain their money as the result of a sale of the team.
BTC Major league baseball officials are said to be asking the creditors to have the ownership question resolved by Opening Day, April 5.
Mr. Jacobs has been under increasing pressure in the last year from banks and other creditors seeking repayment of unpaid loans and personal guarantees.
Tomorrow, his house in Owings Mills, for which he paid $2.25 million, is scheduled to be sold at public auction.
Mercantile began foreclosure proceedings on the house last month after Mr. Jacobs stopped making his monthly payments of almost $20,000.
He also was sued last month for failing to pay rent on the New York office of his investment company, E. S. Jacobs & Co.
His landlord, ICN Pharmaceuticals East, has charged that Mr. Jacobs stopped making rent payments last August, and that it is owed $543,000. The Orioles owner has until March 10 to respond that suit.
Last July, Mr. Jacobs notified some unsecured creditors that he would not be making interest payments on loans received from them. He asked that the creditors refrain from suing him while he attempted a financial restructuring.
In the last year, four banks, including Mercantile, filed separate suits seeking repayment of loans.
In all, he is accused of defaulting on more than $44 million in loans and personal guarantees to various banks, investors and companies. Mr. Jacobs has contested those claims.
Should the DeWitt group buy the Orioles, Mr. Lucchino, the Orioles president, reportedly would join the group.
The other members include three men from Cincinnati: Robert Castellini, who owns a wholesale produce company; Dudley Taft, an executive with Taft Broadcasting Co.; and Mercer Reynolds, who is in partnership with Mr. DeWitt in an investment company.
The four men own minority shares in the Texas Rangers baseball team.