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As of last week, the Cleveland Indians were worth about $140 million ($9 a share) on Wall Street, roughly 40 percent less than the $231.7 million the team was valued at upon going public June 3 at $15 a share. For investors, maybe that’s not a strikeout, but it is certainly a terrible inning.

Is the Indians’ struggle a bad sign for News Corp.’s planned spin-off IPO of the Fox Group, the company that bought the Dodgers for $311 million?

Not necessarily, said Jeffrey Phillips, a Chicago-based sports business expert and vice president at investment bank Houlihan Lokey Howard & Zukin. First off, the Indians IPO was a “pure play” the team has no real estate and no connections to broadcast groups. “They don’t even own the stadium,” said Phillips.

The Dodgers, by contrast, are mixed in with other Fox Group assets, including the team’s Chavez Ravine stadium property and other facilities. The Dodgers also provide content to cable-broadcast outfit Fox, in one of the country’s largest television markets.

“There’s synergy there,” said Phillips, describing the value Fox receives from owning the Dodgers.

Not so with Cleveland. That team was able to fetch a rich offering price due to recent non-recurring events, and its growth potential is limited.

“They have probably peaked in earnings,” said Phillips. “They got expansion money (money paid to existing teams by last year’s expansion teams), and they were in the World Series last year, against the Marlins. You can’t do better than that.”

There is one similarity between the Fox Group IPO and the Cleveland Indians deal: In both cases, only a minority stake is being offered to the public, something that makes many investors balk. The Indians sold 49 percent. Fox plans 20 percent.

“A controlling interest generally carries a premium when it is up for sale. Typically, minority shareholders can’t exercise any control over dividends, or salaries, or business deals,” said Phillips.

In short, if Fox Group starts running in a way shareholders don’t like, they won’t be able to call in a new manager. And in one way, the Indians may have a leg up on the Dodgers the Indians have a great stadium deal with the city of Cleveland, an ideal reflection of the sports business mantra, “Municipally subsidize your costs, but privatize the gain.”

“You could argue it’s better not to own the stadium, and have all the upkeep,” said Phillips. Indeed, the Dodgers even pay property taxes on their aging house, now one of the oldest baseball stadiums in use.

Phillips said that other sports teams may find going public tougher in the wake of the dismal early performance of the Indians.

“Underwriters and investors are not eager to repeat the experience,” he said.

Are sports teams yet a good investment? “Sports teams are like a piece of art,” answered Phillips. “You hang it up on the wall, but it doesn’t spit cash out at you. They are trophy properties.”

Budding billionaire

It’s almost official: An Angeleno will soon make a billion bucks on one deal. Beverly Hills-based financier Gary Winnick has garnered plenty of attention lately for his Global Crossing Ltd., and various public filings indicated he would make a bundle by taking it public.

Now the size of that bundle is clear. In its initial public offering filing with the Securities and Exchange Commission, Global Crossing reveals that it will issue shares at $19 each, and that Winnick, or entities controlled by Winnick, will own 53 million shares. The quick math: On this deal alone, Winnick has created more than $1 billion in equity value for himself. About $400 million worth of stock will be sold on the open market, arranged by lead underwriters Salomon Smith Barney and Merrill Lynch & Co.

As reported, Bermuda-based Global Crossing will lay undersea cables to carry telephone, fax and Internet traffic between the United States, Asia and Europe.

Tough environment

To march in where angels fear to tread that’s how doughty investors, and the downtown offices of law firm Milbank, Tweed, Hadley & McCloy, plan to make money in Thailand.

A little “political risk insurance” helps. The Southeast Asian nation, like many other Far East countries, has been hammered in the last year, and the Thai currency, the baht, has been sharply devalued since floating last year. Nevertheless, financing was needed to build a 700-megawatt gas-fired power project there, said Karen Wong, project finance partner with Milbank, and 12-year veteran of the international finance wars.

Despite all the tumult, Wong managed to structure a deal to secure $427.5 million from a syndicate of U.S. and international banks, led by Japan-based Sanwa Bank Ltd., and Credit Suisse First Boston. Wong called it the toughest deal of her career.

“From the time we signed on to manage the deal in 1995, to when we actually closed the deal, we weathered the flotation of the national currency, the growing concern of key lenders over the turmoil in Thailand, a restructuring of project sponsorship and the worst economic crisis in Asian history,” said Wong. “We went from elation to dejection on a regular basis for three years.”

In 1995, Thailand selected the Tri Energy Co. Ltd. a consortium of a Thai public power company, Texaco Inc. and Kansas City-based construction company Black & Veatch to build the power plant. The consortium tapped Wong, due to her experience lawyering deals that get financing.

After more than two years of work, it looked like the deal that would flummox Wong lenders were backing out. Banks can tolerate financial risk and can price for it, but the specter of an unstable political situation gives them the willies, said Wong.

(In Los Angeles, some older bankers still speak of the 1930s, when Mexico nationalized operations of U.S. oil companies there. Company shareholders and some bankers lost big.)

Pulling a rabbit out of her hat to save the deal, Wong made trips to Washington, D.C. and Tokyo to secure political risk insurance. The Japanese Ministry of International Trade and Industry insured international banks against political risk on the loan, and the U.S Overseas Private Investment Corp. (the federal agency that guarantees U.S. commercial loans against losses stemming from offshore political upheaval) agreed to safeguard U.S. banks, said Wong.

“That took six months,” said Wong. “Expropriation (assets being seized by foreign governments) has to be covered, too.”

It is the first major project financed in Thailand since the baht devaluation, and one of less than handful in the Far East, said Wong. But for investors in stocks, perhaps there is a red flag flying if banks want to be insured against expropriation, what protections are in place for foreign shareholders?

Contributing reporter Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. His e-mail address is [email protected].